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Bank Beat--Asian-American Bank Fails--Another Bank in Georgia Fails

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The two branches of Premier Bank, Wilmette, Illinois, were closed with International Bank of Chicago, Chicago, Illinois to assume all deposits.

Like Premier Bank, International Bank is Asian-American-owned. October 18, 2011 International also acquired All American Bank, Des Plaines, Illinois. International is owned by IBC Bancorp, Inc., which has received money through the TARP program

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $64.1 million.

International Bank of Chicago Mission:

“Our objective is to be a primary contributing member of the diverse communities of Uptown, Chinatown, Bellwood, Stone Park and their neighboring communities. Our goal is to serve their consumer, commercial and retail needs while serving all racial and ethnic backgrounds. By offering a varied staff of officers and employees we strive to provide services in related languages in a friendly, efficient and personal manner. Soundness, service and integrity are paramount.”

http://inbk.com/

Premier Bank was founded February 14, 2000 by Dr. Zulfikar Esmail and his friends. The bank had 21 full time employees as of December 31, 2011 at their two offices, Chicago and Wilmette. They had a high of 31 full time employees year-end 2007.

Reportedly the major stockholder Dr. Zulfikar Esmail is described on the internet as a family doctor with 37 years experience, is affiliated with St James Hospital & Health Center-Olympia Fields, and graduated in 1967 from King’s College Medical School, Wilkes-Barre, Pennsylvania. He is the former Chairman of the Aga Khan Foundation (philanthropy in the Ismaili Muslim community under the leadership of the Aga Khan), plus Chairman of the Leader’s International Forum.

As a side note, according to Chicago newspapers, George Dernis, who owns Michael’s Fresh Market grocery stores, owes $22 million in total to Premier Bank and on March 14 filed a $20 million lawsuit in Cook County Circuit Court against the bank, alleging fraud and misrepresentation. Now in bankruptcy because Premier was his prime line credit. The lawsuit alleges that Dr. Esmail pressured Mr. Dernis to give Dr. Esmail a 25 percent equity stake in one of his stores and Dr. Esmail’s three children a 50 percent equity stake in another of the stores as a condition of obtaining credit.

http://www.chicagobusiness.com/article/20120323/NEWS01/120329862

Dr. Esmail and his board of directors were served with two Consent and Desist orders, one August 31, 2010 and one April 18, 2011. As seen below the losses started in 2009, and went to $12.7 million in 2010 and $9.1 million in 2011.

The Charge Offs tell most of the story:

(in millions, unless otherwise noted)

(Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.)

2006 $170,000 ($167,000 commercial/industrial loans, $3,000 lease financing receivables)
2007 $886,000 ($430,000 commercial/ind., $262,000 nonfarm nonres., $194,000 1-4 family res.)
2008 $1.8 ($700,000 nonfarm-nonres., $641,000 commmercial/ind., $300,000 construct./land,
$170,000 multifamily residential)
2009 $6.1 ($4.7 construction/land, $908,000 commercial/ind., $197,000 consumer, $131,000 nonfarm.)
2010 $10.8 ($5.5 1-4 family res., $2.3 nonfarm nonres., 1.2 commercial/industrial, $75,000 other)
2011 $104,000 ($550, 000 nonfarm nonres., $243,000 1-4 family, -$619,000 construction/land, -$70,000 commercial/industrial loans)

Note: Non-Current Loans end of 2011: $52.6 million.

(in millions, unless otherwise)

Net Equity

2006 $15.4
2007 $18.7
2008 $17.8
2009 $23.1
2010 $11.4
2011 $5.5

Profit

2006 $2.4
2007 $2.6
2008 $1.8
2009 -$1.7
2010 -$12.7
2011 -$9.1

Non-Current Loans

2006 $2.1
2007 $1.4
2008 $6.5
2009 $4.5
2010 $21.0
2011 $52.6

As of December 31, 2011, Premier Bank had approximately $268.7 million in total assets and $199.0 million in total deposits. In addition to assuming all of the deposits of the failed bank, International Bank of Chicago agreed to purchase essentially all of the assets.

http://www.fdic.gov/news/news/press/2012/pr12033.html

The two branches of Covenant Bank & Trust, Rock Spring, Georgia, were closed with Stearns Bank, National Association, St. Cloud, Minnesota to assume all deposits. Founded June 12, 2006, the bank had 21 full time employees at their two offices, Dalton and Rock Spring.

 

“$100 minimum to open account
No minimum balance
No monthly service charge
Unlimited check writing
Free online banking
Free debit card
Free first order of Covenant Bank & Trust standard checks
$5.00 discount on first order of other style checks
24-hour telephone banking
Real-time deposits (deposits received by 5 p.m. on business day will be credited same day)”
(Bank Web site)

Despite coming from Georgia, a state with 77 failures since 2008, Atlanta-based State Bank Financial was found to be the “Best Performing Community Bank between $500 million and $5 billion in assets for 2011 by SNL Financial. (1) Nevertheless, the number of troubled banks in Georgia jumped by more than 20 percent to 78 in the first quarter of this year. It appears the state has many more banks have troubles with loans to real estate developers, home builders, and others being affected by the real estate bust. Georgia continues to lead the nation in terms of total banks with high Texas ratios, possibly pointing to more problems ahead.

Covenant’s Tier 1 risk-based capital ratio 1.91%.

Note the growth of non-current loans and charge offs, including the bank lack of profit for the last six years:

(in millions, unless otherwise)

Net Equity

2006 $8
2007 $7.6
2008 $9.6
2009 $7.8
2010 $4.1
2011 $1.9

Profit

2006 -$1.1
2007 -$775,000
2008 -$602,000
2009 -$2.3
2010 -$3.7
2011 -$2.4

Non-Current Loans

2006 0
2007 0
2008 $3.7
2009 $7.1
2010 $6.8
2011 $8.8

Charge Offs

(Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.)

2006 0
2007 0
2008 $22,000 ($13,000 construction and land, $9,000 commercial and industrial)
2009 $2.2 ($1.4 construction/land, $527,000 1-4 family, $197,000 commercial and industrial)
2010 $2.7 ($1.2 construction/land, $1.37 loan to depository institution, $97,000 nonfarm nonres.)
2011 $3.9 ($2.5 construction/land, $613,000 nonfarm nonres, $566,000 1-4 family, $242,000 commercial and industrial)

(Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.)

As of December 31, 2011, Covenant Bank & Trust had approximately $95.7 million in total assets and $90.6 million in total deposits. In addition to assuming all of the deposits of the failed bank, Stearns Bank, National Association agreed to purchase essentially all of the assets.

The FDIC and Stearns Bank, National Association entered into a loss-share transaction on $71.6 million of Covenant Bank & Trust’s assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $31.5 million.

(1) 100 Top Community Banks $500M to $5B Assets
http://leasingnews.org/archives/Mar2012/3_19.htm#bank_beat

http://www.fdic.gov/news/news/press/2012/pr12032.html

List of Bank Failures:
http://www.fdic.gov/bank/individual/failed/banklist.html

Bank Beat:
http://www.leasingnews.org/Conscious-Top%20Stories/Bank_Beat.htm



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