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Valley bankruptcies fell again in May
Filed under: General, Finance
Posted by: Lillian Wong @ 10:22 pm

by Russ Wiles The Arizona Republic Jun. 9, 2010 12:00 AM

Metro Phoenix’s bankruptcy trend improved for a second straight month in May, but it’s too early to conclude the picture has brightened.

The 2,763 filings in the metro area still were up 35 percent from May 2009.

“We hear politicians saying the recession is over, that all is well, but we’re not seeing it,” said Mark Winsor, a bankruptcy attorney at Winsor Law Group in Mesa.

Soft housing prices, a bleak employment scenario and other financial issues continue to plague many residents.

Chapter 7 filings, which provide a fresh financial start for debtors, accounted for 83 percent of the Valley total - the third straight month they’ve been over 80 percent. With ongoing employment problems, more people apparently are able to meet the Chapter 7 income-eligibility limits, attorneys say.

Chapter 13 debt restructurings, geared to people with regular job income who can’t qualify for Chapter 7, accounted for most of the rest.

Winsor said he’s noticed more owners of upscale homes seeking bankruptcy protection, yet many of these people have too much debt to qualify for either a Chapter 7 or Chapter 13 filing.

To qualify for Chapter 13, for example, a person can’t have more than $1,081,500 of secured debt or $360,525 in unsecured debt, he said. These people would have to go the Chapter 11 route, he said.

Bankruptcy attorneys elsewhere around the state also are singing much the same tune.

“I don’t see a slowdown (in the number of filings) for a while,” said attorney Daniel Rylander at law firm Robinson & Rylander in Tucson. “We’re about as busy as we’ve been.”

Tucson-area filings haven’t shown quite the same large year-over-year percentage increases as in the Phoenix area. They’re up just under 30 percent so far in 2010, compared with 47 percent here.

Rylander said that’s mainly because Tucson-area home prices didn’t rise so much during the bubble a few years ago.

“We had less far to fall,” he said.

In contrast to the situation in Arizona, the bankruptcy picture for the nation as a whole does appear to be improving.

The 136,142 U.S. consumer bankruptcies reported by the American Bankruptcy Institute and National Bankruptcy Research Center were down 6 percent from April and up just 9 percent from May 2009.

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Regulators more aggressive about enforcement orders for banks
Filed under: General, Finance
Posted by: Lillian Wong @ 3:50 pm

by Russ Wiles The Arizona Republic Jun. 6, 2010 12:00 AM

As weakness lingers in real estate and the economy overall, more Arizona banks are being told to get their operations in order.

Federal and state regulators are marking up banks for infractions ranging from poor management and unsound lending to low capital.

Regulators, including the Federal Deposit Insurance Corp. and U.S. Office of the Comptroller of the Currency, won’t disclose the names of financial institutions on problem lists. They don’t want to incite a run by depositors that could trigger a failure.

But regulators spell out their concerns in various obscure directives such as “cease-and-desist orders,” the most common version.

Since mid-2007, about the time when financial problems really began to surface, regulators have publicly reprimanded 22 Arizona banks, up from just one citation in 2005 and 2006 combined.

The true number is almost certainly higher because regulators don’t always make their orders public.

While some orders get terminated as banks work out their problems or merge with healthier firms, 19 of the 22 remain, fluttering like warning flags in the breeze.

“Every bank that goes under an order doesn’t fail or is expected to fail,” said Tanya Wheeless, head of the Arizona Bankers Association. “A lot of the orders include issues managements might already have addressed.”

But there’s enough of a connection to raise concerns. Of the 22 Arizona banks cited since mid-2007, eight have failed and others continue to struggle.

Many of the dozens of small financial institutions that serve metro Phoenix and outlying communities are saddled by high exposure to real estate. More than 80 percent of the small banks based here are losing money. Their debilitated status could curb lending in general and blunt the economic recovery.

And no Arizona banks have failed in the current down cycle without first having been on the receiving end of an enforcement action.

Growing problem

Nationally, enforcement activity is on the rise.

The FDIC cited 113 banks from January through March of this year. That compares with 57 in the first quarter of 2009, 19 in the first quarter of 2008, 12 in the first quarter of 2007 and five over the first three months of 2006. Of those 22 Arizona banks, nearly all have been cited since the start of 2008.

Also alarming: Banks are having a harder time clearing up problems.

In 2006 and 2007, the FDIC and OCC terminated roughly nine orders for every 10 they issued. So far in 2010, they’re terminating just 1.5 for every 10 issued.

For those Arizona banks with state charters or registrations, the FDIC cooperates with local officials.

“We, like all other states, have a close working relationship” with federal regulators that includes collaboration on exams and supervision, said Lauren Kingry, superintendent of the Arizona Department of Financial Institutions. “We make every effort to agree on final supervision recommendations and guidance.”

Regulators say the sharp uptick in enforcement orders reflects widespread bank problems.

The most vexing issue now for banks is the need to raise more capital, as happens when loan portfolios disintegrate.

This is critical because regulators don’t want to see bank capital dropping too low relative to the value of loans on their books, as capital provides a cushion against bad loans.

Yet it isn’t easy for bankers to lure new investors.

“It’s difficult to raise capital under any scenario but particularly when a bank is given a period of (perhaps only) four months,” Wheeless said.

James Miller, of JPM Consulting in Scottsdale and a former Valley bank executive, said investors are reluctant to ante up cash when regulators can take over a bank at any time, once a cease-and-desist order has been issued.

“That’s a legal document that allows a bank to go into receivership,” said Miller, who also worked as a national bank examiner.

When the FDIC issued a cease-and-desist order for Scottsdale-based Copper Star Bank earlier this year, it didn’t come as a surprise to management.

“Banks need capital - we were well aware of that,” said Romain Voeller, senior vice president at Copper Star. “We certainly knew our loan portfolio had issues, and we were aware of where the problem loans are.”

Voeller said the bank is making progress addressing regulator concerns while also trying to work with its loan customers.

“Our intent is not to take anything back,” he said, referring to collateral. “We want them to keep their businesses going.”

Problem loans

Other key issues cited in enforcement orders include low levels of liquid assets and high concentrations of problem loans - especially those tied to commercial real estate.

Also, high levels of “brokered” deposits, obtained by banks through intermediaries, are worrisome because this money isn’t deemed to be loyal to a bank and thus could be withdrawn suddenly.

Regulators are prodding Arizona banks to diversify their loan portfolios, but that can take years.

And there can be other issues. For example, orders for several banks owned by Phoenix-based Capitol Bancorp, including Sunrise Bank of Arizona and Central Arizona Bank in Casa Grande, require the directors of these banks to divest themselves from the parent company - an unusual stipulation.

Executives at Capitol Bancorp declined to comment publicly for this article, as did officials at many other banks cited recently by regulators.

Some progress

Some bank officials report they’re making progress in complying with regulatory orders.

The OCC signed a directive known as a “formal agreement” with Heritage Bank in Phoenix nearly two years ago.

“We’ve been working through the problem loans and have had success getting them off the books,” Troy Hutton, Heritage’s president, said.

“We’re not out yet, but we can see light at the end of the tunnel.”

Significantly, Hutton said low capital hasn’t been a problem for Heritage, which is owned by a bank-holding company in the Kansas City area. “We’re actually looking (to make) new loans,” he said.

Similarly, Scott Schaefer, president of Meridian Bank, said his firm has made progress reducing its exposure to commercial real-estate loans while boosting its capital positions. Meridian and the OCC last year entered into a formal agreement, which Schaefer called the “least intrusive” type of enforcement action.

“It doesn’t impact our daily business,” he said. “We continue to lend money and attract deposits.”

More latitude?

A common plea by bankers is for regulators to give them more time to solve problems, especially since so many loans and the assets backing them are long-term in nature.

Yet regulators also have been feeling the heat from critics who charge they were late to foresee problems. As such, they’re reluctant to appear soft.

“The swiftness and depth of the financial crisis caught everyone off guard, and it was not surprising that bank regulators are under strong pressure to enhance their oversight actions,” said James Lundy, president and CEO of Alliance Bank of Arizona, during a Phoenix meeting on bank lending hosted by a congressional oversight panel.

“Recently, compliance exams have an increasingly hard edge to them.”

Among various suggestions, Lundy called on regulators to phase in higher capital requirements gradually and to differentiate between real-estate loans extended shortly before the bubble burst from less-risky loans made later.

Necessary oversight

Regulators say these and other concerns aren’t falling on deaf ears, but they also need to protect depositors when banks start to teeter.

Analysts see regulators staying tough in two ways - by pursuing more enforcement actions and by holding off on the formation of new banks.

Miller said, “Regulators don’t want to be opening new bank charters while closing so many others.”

Kingry said he knows of no policy against starting new banks but notes the “probability of success is uncertain” in this environment.

Meanwhile, bankers will keep working to comply with regulatory orders while hoping for help from investors and better economic conditions.

“Maricopa County is our business, the place where we originate 95 percent of our loans,” said Voeller at Copper Star.

“Looking at our (enforcement) order and those of other banks, they’re largely driven by the state of the economy.”

Bank regulators have been issuing a lot more enforcement directives, including “cease-and-desist orders” and somewhat less-severe “formal agreements” over the past year or so, directing banks to raise more capital, revise operating practices, hire new management or take other actions. In some cases, these orders have come prior to an eventual bank failure. Here are the Arizona-based banks affected over the past five years. Three orders have been terminated.

Bank Location Regulatory actions Status
Arrowhead Community Bank* Glendale FDIC order November 2009; order terminated February 2010 Operating
Bank USA Phoenix OCC order September 2009 Failed October 2009
BNC National Bank Phoenix OCC agreement January 2010 Operating
Central Arizona Bank Casa Grande FDIC order February 2010 Operating
Community Bank of Arizona Phoenix FDIC order July 2009 Failed August 2009
Copper Star Bank Scottsdale FDIC order January 2010 Operating
CrediCard National Bank Tucson OCC agreement April 2009 Operating
Desert Hills Bank Phoenix FDIC orders December 2006, July 2009, March 2010 Failed March 2010
First National Bank of Arizona Scottsdale OCC order June 2008 Failed July 2008
First National Bank of Scottsdale Scottsdale OCC agreement January 2010 Operating
First State Bank Flagstaff FDIC order May 2009 Failed September 2009
Heritage Bank Phoenix OCC agreement September 2008 Operating
Legacy Bank Scottsdale FDIC order November 2009 Operating
Meridian Bank Wickenburg OCC agreement June 2009 Operating
Mesa Bank* Mesa FDIC order July 2009; order terminated February 2010 Operating
Mission Bank Kingman FDIC order August 2007; order terminated June 2008 Operating
Mohave State Bank L. Havasu City FDIC order February 2010 Operating
Sunrise Bank of Arizona Phoenix FDIC order January 2010 Operating
Towne Bank of Arizona Mesa FDIC orders March 2008, February 2010 Failed May 2010
Union Bank Gilbert OCC order August 2008 Failed August 2009
Valley Capital Bank Mesa OCC order October 2008 Failed December 2009
Western National Bank Phoenix OCC agreement July 2009 Operating

Note: Arrowhead Community Bank and Mesa Bank now operate as part of Sunrise Bank of Arizona within the Capitol Bancorp network.

More on this topic

Regulators’ most common orders

It’s not uncommon for regulators to order banks to change 15 to 20 aspects about their operations. Here are a dozen fairly prominent issues.

New management. Regulators might ask the board of directors to hire a new CEO or other officers.

Raise capital. This is a common one when a bank’s loan portfolio declines in value.

Capital ratios. Regulators may order banks to raise their capital-to-asset ratios to specific targets.

Sale or merger. Sometimes, regulators want to see the board find a white knight to rescue the bank.

Prohibited lending. Regulators might direct a bank to make no further loans to certain customers.

Liquidity. A bank might be ordered to convert more of its assets into cash equivalents.

Dividend restrictions. Regulators often prohibit banks from paying dividends or bonuses during times of stress.

Plans and budgets. A bank might be ordered to draw up new plans for returning to profitability.

Credit concentration. Regulators now worry about Arizona banks with high loan stakes in commercial real estate.

Allowance for losses. Banks might be ordered to provide more of a cushion to offset possible loan and lease losses.

Growth controls. Sometimes banks get into trouble when they grow too quickly, so regulators watch for signs of stress.

Brokered deposits. When a high proportion of a bank’s deposits comes through intermediaries, that’s a red flag because the money could be prone to quick withdrawals.

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Derivative reform offers its own risks
Filed under: General, Finance
Posted by: Lillian Wong @ 7:54 pm

Financial-reform legislation being debated in Congress aims to rein in the wild use of derivatives on Wall Street. Yet if certain proposals become law, everyday companies, including many in Arizona, also could get hog-tied.

Provisions involving derivatives are among the most contested parts of the legislation. They could open up the nebulous derivatives market to more scrutiny, force banks to spin off a lot of their business and push more trading onto exchanges.  more…

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Valley bankruptcies spiked in March
Filed under: General, Finance
Posted by: Lillian Wong @ 6:20 pm

Valley area bankruptcy filings hit a new cyclical high in March, despite some encouraging national numbers suggesting that the strains on consumers might be easing.

Filings in the Phoenix metro area rose to 3,063 in March, up 59 percent from a year earlier and an increase of 999 filings from the February 2010 total.  more…

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Fed may monitor top financial houses
Filed under: General, Finance
Posted by: Lillian Wong @ 2:32 pm

WASHINGTON - The Federal Reserve, still dusting itself off from a fight that threatened to trim its powers, could emerge from a congressional overhaul of banking rules as the top cop over the nation’s largest financial institutions.

Senate negotiators are considering giving the Fed the authority to supervise non-bank financial institutions that are so large and intertwined that their failure could pose a risk to the entire economy, according to people familiar with the evolving legislation.  more…

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Bernanke: Rates to stay low
Filed under: General, Business, Finance
Posted by: Lillian Wong @ 4:27 pm

WASHINGTON - New signs emerged Wednesday that the economic rebound is sputtering. Sales of new homes hit a record low last month and mortgage giant Freddie Mac said it will need more federal aid and might never repay it.

Against that backdrop, the government is trying to prop up the housing and job markets. Federal Reserve Chairman Ben Bernanke reiterated the need to continue record-low interest rates for “an extended period.” And the Senate passed a bill to give tax breaks to companies that hire the jobless.  more…

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Arizona banking industry continues to struggle
Filed under: General, Finance
Posted by: Lillian Wong @ 4:01 pm

Economic recovery is a ways off for Arizona’s beleaguered banking industry. Stung by more bad loans, Arizona-based banks continue to suffer from rising delinquencies, declining capital and poor earnings.

About 84 percent of the state’s mostly small banks ended 2009 with a loss, up from 74 percent in 2008 and 39 percent in 2007, according to the latest progress report issued this week by the Federal Deposit Insurance Corp.  more…

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Patience is key to filing your taxes
Filed under: General, Business, Finance
Posted by: Lillian Wong @ 1:18 pm

If you felt like devising a slogan for the coming income-tax season, a good one might be: “Patience required.”

Filing a tax return can be a daunting exercise even in normal years, but Congress has added several new wrinkles that undoubtedly will confuse people. These include everything from new tax breaks for college expenses to those for energy-efficient home improvements and new-vehicle purchases.  more…

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Remember basics as your 401(k) rebounds
Filed under: General, Finance
Posted by: Lillian Wong @ 12:12 pm

Millions of 401(k) accounts have made up lost ground over the past 10 months. Helped by a stock-market surge and continued contributions, the question now is how to keep from backsliding when market momentum slows or reverses.

With the market up significantly since it hit its low in March, the rapid rise in stock prices has many believing that a sharp downturn is likely. The last thing investors can stomach is the market reversing itself and snatching more of their retirement money.

What to do now?  more…

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Credit-card reform law has caveats
Filed under: General, Finance
Posted by: Lillian Wong @ 6:09 pm

Big-time credit-card reform legislation kicks in soon and, on balance, should prove helpful to consumers.

Final rules from the Federal Reserve, stemming from legislation enacted last year by Congress, will give cardholders more control, greater protections and enhanced disclosures when dealing with card issuers.

“A lot of the ‘gotcha’ rate practices are coming to an end,” said Odysseas Papadimitriou, chief executive officer and founder of Cardhub.commore…

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LifeLock seeks new ventures, partners
Filed under: General, Finance
Posted by: Lillian Wong @ 4:55 pm

LifeLock Inc. is looking to expand beyond its core identity-theft prevention products that have made the Tempe-based startup a darling among venture capitalists and the target of lawsuits from customers and competitors.

In the process, the private company is expected to go public this year.  more…

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Personal Bankruptcy Filings Rising Fast
Filed under: General, Finance
Posted by: Lillian Wong @ 4:50 pm

The number of Americans filing for personal bankruptcy rose by nearly a third in 2009, a surge largely driven by foreclosures and job losses.

And more people are filing for Chapter 7 bankruptcy, which liquidates assets to pay off some debts and absolves the filers of others. That is significant because a 2005 overhaul of federal bankruptcy laws aimed to encourage Chapter 13 filings, which force consumers to sign onto debt-repayment plans in exchange for keeping certain assets.  more…

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What makes a market thrive?
Filed under: General, Finance
Posted by: Lillian Wong @ 7:54 pm

Ever wonder if the stock market performs better with a Republican or a Democrat in the White House?


Don Luskin makes the case that the economy and stock market prosper with a divided government.

“If the electorate were really smart, it would elect a Democratic president and a Republican Congress,” he says.  “Under that deal, stocks have averaged a 20.2 percent total rturn, and real GDP averaged 4 percent. That tells us that economic and stock-market success isn’t really about partisan politics at all.”

But analysis of this type omits time lags.  When a president takes oath in January 20, his policies can’t have an immediate impact on the economy and the stock market. The same holds true for a new Congress.  New policies don’t impact things for six to 12 months after an election.

–Investors Guide

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Real estate investors coming to Valley for REITWorld 2009
Filed under: General, Real Estate, Finance
Posted by: Lillian Wong @ 3:24 pm

Phoenix Business Journal - by Jan Buchholz Friday, November 6, 2009


About 1,000 of the world’s most savvy corporate real estate investors will be in Phoenix next week for REITWorld 2009, the annual conference of the National Association of Real Estate Investment Trusts.


The three-day event at the JW Marriott Desert Ridge Resort & Spa will cater to the issues surrounding REITs, public and private entities that pool individual investors’ money to purchase large commercial and residential portfolios.


Some of the largest publicly traded REITs will be represented at the conference, including Macerich Co., Prologis and Camden Property Trust.


According to NAREIT, its members represent about $500 billion in commercial real estate assets.


“The key themes will be capital market activities, in particular equity offerings, debt markets and the (initial public offering) outlook. We’ll also take a look at acquisitions and how REITs can avail themselves of those opportunities,” said NAREIT spokesman Matt Bechard.


While REIT­World attendees represent huge pools of investment money, there’s no telling if any of them will slip away to scout out distressed commercial properties.


“I can’t say for sure if anyone will be looking at acquisitions while in Phoenix, but REIT executives are smart managers, many of which have a diverse geographic portfolio,” Bechard said. “The industry as a whole has strengthened its balance sheets through issuing equity and debt and (is) in a position to make acquisitions when opportunities arise.”


But Gary Linhart, managing partner of Phoenix-based Via West Properties LLC, said he doubts Phoenix will be foremost on the minds of the REIT heavy hitters. He’s one of just 15 people from Arizona registered for the event.


Via West traditionally has acquired local commercial properties, but recently started a new division that invests in REITs.


“REITs buying distressed opportunities in this market will be difficult for them,” Linhart said.“Once the fundamentals in Phoenix stabilize, the (REITs) may change their perspective.”


Reitworld 2009

Where: JW Marriott Desert Ridge Resort & Spa, Phoenix
Who: 1,000 REIT executives expected
When: Nov. 11-13

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Disputes: A market slump’s hangover
Filed under: General, Business, Finance
Posted by: Lillian Wong @ 12:39 pm

Investor complaints are rising again; there must have been a stock-market slump recently.

As surely as leaves and branches litter the ground after a strong windstorm, financial shocks trigger a jump in the number of arbitration cases.  more…

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Bankruptcies up 85% from Sept. 2008
Filed under: General, Finance
Posted by: Lillian Wong @ 3:28 pm

Valley-area consumers are on a roll, but it’s in the wrong direction.

For the fourth consecutive month, bankruptcy filings for the Phoenix metro area hit a yearly high. The 2,472 filings, mostly by consumers, in September marked an 85 percent increase from the same month a year ago, according to the U.S. Bankruptcy Court in Phoenix.   more…

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Consumer and bank relations strained
Filed under: General, Finance
Posted by: Lillian Wong @ 1:28 pm

The honeymoon between banks and customers is over, cut short by last year’s credit crunch.

Banks are done wooing customers. Customers have given up on the idea that banks will always be there for them. The thrill - of cheap, easy-to-obtain money, that is - is gone.   more…

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Some firms find banks willing to lend again
Filed under: General, Business, Finance
Posted by: Lillian Wong @ 2:14 pm

Business credit conditions still aren’t where they were a few years ago, when loans flowed as freely as beer at a fraternity party, but the nation’s borrowing hangover is starting to clear up.

Talk to business owners and managers, and you’ll discover that some still can’t move past the rejection stage. But others have been able to secure new loans and lines of credit in recent months.  more…

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Next BofA chief must help polish reputation
Filed under: General, Business, Mortgages, Finance
Posted by: Lillian Wong @ 1:47 pm

NEW YORK - Ken Lewis’ legacy as CEO of Bank of America Corp. will likely be determined by whether his successor can do what Lewis couldn’t: prove that the bank’s messy acquisition of Merrill Lynch & Co. was worth the money.  more…

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ING Direct exec offers tips
Filed under: General, Finance
Posted by: Lillian Wong @ 1:07 pm

When savings bank ING Direct made its debut in the United States in 2000, company leaders faced a specific challenge: How could they get a spend-happy nation hooked on socking money away?  more…

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