Time ran out on Corus Bank late Friday as regulators closed the once-high-flying Chicago condominium lender and sold its operations to another institution.
The closure, along with two smaller ones in Washington and Minnesota, brought the year's failure total to 92. In total, Friday's failures were estimated to cost the government just over $2 billion.
Corus, a $7 billion-asset national bank shuttered by the Office of the Comptroller of the Currency, was snatched up by $8 billion-asset MB Financial Bank.
The Federal Deposit Insurance Corp. said MB Financial, also based in Chicago, will pay a 0.2% premium to assume all $7 billion of the failed bank's deposits, and will also acquire roughly $3 billion of Corus' assets. The FDIC will commence a private offering in the next 30 days to sell most of the bank's remaining assets, the agency said.
The failure was estimated to cost the agency $1.7 billion.
Corus, once an aggressive lender in condominium markets outside of its region that expanded during the boom, hit heavy losses as those markets tanked. In 2008, construction loans from states like Florida, California and Arizona were 83% of the bank's portfolio, and it reported in January that 40% of its total loans were in nonaccrual status. As early as April, Corus had disclosed that its auditors doubted the bank could survive.
Under regulatory orders issued in February from the OCC and the Federal Reserve Bank of Chicago, the bank had attempted to get approval for various proposed plans to raise capital, including a proposal to sell off all of its assets over the next two and a half years. But all of its capital plans were rejected by regulators.
To add to the bank's problems, a series of lawsuits had alleged the institution tried to inflate asset values by buying condominium units in projects where it held loans.
The bank's parent, Corus Bankshares Inc., said at the end of July that its capital was in the red, registering a $157 million deficit as the bank suffered a $487 million loss in the second quarter. Its Tier 1 risk-based capital ratio was negative 3.1%.
With the failure, the strains on the FDIC's insurance reserves only increased. It is the third costly failure of a substantially-sized institution in less than a month. On Aug. 14, regulators closed $25 billion-asset Colonial Bank in Montgomery, Ala. That was followed by the Aug. 21 failure of $13 billion-asset Guaranty Bank in Austin. Both of those failures cost roughly $3 billion each.
Regulators also announced the closures of $970 million-asset Venture Bank in Lacy, Wash., and $72 million-asset Brickwell Community Bank in Woodbury, Minn.
Venture's 18 branches will reopen starting tomorrow as part of First-Citizens Bank & Trust Co. The Raleigh, N.C.-based acquirer will assume all of the failed bank's $903 million in deposits, and will also acquire roughly $874 million of its assets. The FDIC and First-Citizens agreed to share losses on roughly $715 million of those assets.
The failure of Venture was estimated to cost $298 million.
The FDIC said CorTrust Bank in Mitchell, S.D., will pay a 0.1% premium to assume all of Brickwell's deposits, and will also acquire virtually all of the failed bank's assets.
The acquirer and the FDIC agreed to a loss-share transaction on roughly $65 million of those assets. The agency said the failure was estimated to cost $22 million.