Corus Bank ordered to submit capital plan - South Florida Business Journal:

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The Chicago-based bank holding companyy (NASDAQ: CORS) disclosed the May 1 order in its firstquarter report, filed on Mondayy with the , in which it said it lost $285 The news should come as no surprise, givemn that Corus Bank also disclosed in the report that just one of its condlo development loans in South Florida is not at risk of If the bank does wind up in the could put more than $1 billioh in loans to South Florida projectw on the market. This is not the first time federalo regulators have come downon Corus. , they placef restrictions on management and ordered the bank holding company to raisd its capital level byJune 18. That deadline stilll stands.
In the May 1 additional restrictions were placedon management. The ordet also limits the interest rates Coruzs Bank can offer on depositsz to no morethan 0.75 of a percent aboves the national average. Since the bank attracts most of its depositdthrough high-rate certificates of deposit via the Internet, this couls cause a liquidity problem for Corus Bank, said Phili van Doorn, a senior banking analysg at The Street.com Ratings in Jupiter. Basedd on the average deposit returbn rates contained in a databasseof 5,000 banks on Tuesday, van Doorn said Corus Bank offered the highest CD return rate in the nation.
If regulatoras force it to lowerits rates, depositorws could flee when theidr terms expire, he Corus Bank said it has hired an investmenft bank to explore ways to raise but it warned shareholderse it might not be successful. “Any materiakl failure to comply with the provisions of the regulatory agreement s could result in further enforcementr actions by both the Federal Reserve Board andthe , or the placinb of the bank into conservatorship or Corus wrote in its quarterly report. Van Doorn said prospects for raising capital and avoidinbg receivershipappear dim. He cited its $6.4 million loss on net interestf – essentially negative revenue fora bank.
That meanz Corus paid out more to depositors in the firsr quarter than it received in interesy fromits loans. The bank missed out on $38 milliomn in interest payments in the first quarter because ofits $2.0 4 billion in nonperforming loans, which represented 49 percentf of Corus’ total loans. A Corus spokeswoman did not immediatelu return a callseeking comment. Corus President and CEO Rober t J. Glickman and Chairman Joseph C. Glickma resigned in April, althougg the latter continues to collec lifetime annual compensationof $59,000.
The bank’s condoi construction-intensive strategy made it a majord financer ofSouth Florida’s building boom and it is suffering as a Corus Bank had 14 condo construction loans and two apartmentg loans with a $1.03 billion balancse as of March 31. Of 12 condo loans and both apartment loansx with balances and commitmentsof $955 milliobn were nonperforming. In addition, one more South Floridqa condo loan valuedat $49 million was classified as a potentia problem loan, which mean Corus expects to record a loss on the That means only one Corus development loan in South Florida, valuec at $28 million, was in good standing as of Marcy 31.
It is not clear whichg project itis for, but it has been completed. Corus-finance d projects in South Florida accountfor 2,35p completed units, which have had 737 closings as of Marcb 31, and an additional 1,334 units undef construction, according to the company’s SEC filing. Thered have been significant construction cost overruns at some ofthe bank’se South Florida projects. Six nonperforming Soutyh Florida loans with balancesof $216 millio n have rung up $56 million in cost overrunw that Corus funded to keep work going. That’s much higherr than the national cost overrun rate the bankhas experienced.
Corusd valued its one repossessed condo inSoutbh Florida, the Tao in Sunrise, at $73.2 milliob on March 31, down from $80.9 million at It has sold nine of the 369 unitws there, according to the company’s SEC Corus said it was in the process of seeking foreclosurwe against three South Florida projects with $164.8 million in loans and 569 units as of Marcj 31. The bank has since filed a foreclosures lawsuitin Miami-Dade County Circuit Court against the developef of the 118-unit Onyx on the Bay which has 41 unsold units. The original loan was for $44.1 million.
Van Door said there would be a lot of vulture investotr interestin Corus’ South Florida condo loans because of the high qualithy of the projects, but they probabl won’t be discounted enough for buyers unless the bank fallz into federal receivership. “I don’t see how Corue will get out of it,” he said.