Archive for February, 2010

FDIC shuts down banks in Nevada and Washington (AP)

Friday, February 26th, 2010 | Finance News

NEW YORK – Regulators shut down banks in Nevada and Washington on Friday, marking the 21st and 22nd failures this year of federally insured banks.

The Federal Deposit Insurance Corp. was appointed receiver of Carson River Community Bank, based in Carson City, Nev. and Rainier Pacific Bank in Tacoma, Wash.

Carson River Community Bank had $51.1 million in assets and $50 million in deposits as of Dec. 31. Rainier Pacific Bank had $717.8 million in assets and $446.2 million in deposits as of Dec. 31.

The FDIC said that Carson River's deposits will be assumed by Reno, Nev.-based Heritage Bank of Nevada. Carson River's lone branch will reopen Monday as an office of Heritage Bank.

Heritage Bank will purchase $38 million of the assets. The FDIC and Heritage Bank agreed to a loss-share agreement on $28.5 million of Carson River Community Bank's assets.

Rainier Pacific's deposits will be assumed by Umpqua Bank in Roseburg, Ore. Rainier Pacific's 14 branches will reopen during normal business hours as offices of Umpqua Bank.

Umpqua Bank will purchase $670.1 million of Rainier Pacific's assets. The FDIC will retain the rest. The FDIC and Umpqua Bank agreed to a loss-share agreement on $578.1 million of Rainier Pacific's assets.

The pace of bank seizures this year is likely to accelerate in coming months, FDIC officials said this week.

As the economy has weakened, with unemployment rising, home prices tumbling and loan defaults soaring, bank failures have accelerated and sapped billions of dollars out of the federal deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.

Carson River Community bank's failure will cost the FDIC's insurance fund about $7.9 million. Rainier Pacific's failure will cost the insurance fund about $95.2 million.

Banks have tightened their lending standards. U.S. bank lending last year posted the steepest drop since World War II, as the volume of loans fell $587.3 billion, or 7.5 percent, from 2008, the FDIC reported this week.

The number of banks on the agency's confidential "problem" list jumped to 702 in the fourth quarter from 552 three months earlier, even as the industry squeezed out a small profit. Banks earned $914 million, compared with a $37.8 billion loss in the fourth quarter of 2008, at the height of the financial crisis. Still, nearly one in every three banks reported a net loss for the latest quarter.

The 140 bank failures last year were the highest annual tally since 1992, at the height of the savings and loan crisis. They cost the insurance fund more than $30 billion. There were 25 bank failures in 2008 and just three in 2007.

The FDIC expects the cost of resolving failed banks to grow to about $100 billion over the next four years.

The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.

Depositors' money — insured up to $250,000 per account — is not at risk, with the FDIC backed by the government. Apart from the fund, the FDIC has about $66 billion in cash and securities available in reserve to cover losses at failed banks.

Banks have been especially hurt by failed real estate loans, both residential and commercial. Banks that had lent to seemingly solid businesses are suffering losses as buildings sit vacant. As development projects collapse, builders are defaulting on their loans.

Smaller banks are more vulnerable to the losses than their bigger Wall Street counterparts, because commercial real estate makes up a larger portion of their portfolio.

If the economic recovery falters, defaults on the high-risk loans could spike. Many regional banks hold large concentrations of these loans. Banks face as much as $300 billion in losses on loans made for commercial property and development, according to a recent report by the Congressional Oversight Panel, which monitors the government's efforts to stabilize the financial system.

President Barack Obama recently promoted a $30 billion plan to provide money to community banks if they boost lending to small businesses. The program, which must be approved by Congress, would use money repaid by banks to the $700 billion federal bailout fund.

But many lawmakers want the $30 billion sent directly to the federal Small Business Administration. It would then decide which businesses should get loans.

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AP Business Writer Marcy Gordon in Washington contributed to this report.

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Shows to go on at SeaWorld, king of orca business (AP)

Friday, February 26th, 2010 | Finance News

ORLANDO, Fla. – Shamu is big business at SeaWorld, which owns more killer whales than anyone else in the world and builds the orca image into its multimillion-dollar brand, and the killing of a trainer this week won't change that.

Shamu shows will resume Saturday, three days after a six-ton bull orca dragged Dawn Brancheau underwater to her death at the end of a show in Orlando, SeaWorld Parks and Entertainment President Jim Atchison said Friday. But staff at the for-profit parks in Orlando, San Antonio and San Diego won't get back in the water with the hulking ocean predators until SeaWorld and a panel of outside experts complete a top-to-bottom review of how the company handles orcas.

"We have created an extraordinary opportunity for people to get an up-close, personal experience and be inspired and connect with marine life in a way they cannot do anywhere else in the world," Atchison said as orcas swam behind him on the other side of an underwater window, "and for that we will make no apologies."

The timing of the killer whales' return to performances reflects just what the sleek black-and-white mammals mean to SeaWorld, which the private equity firm The Blackstone Group bought last fall for around $2.7 billion from Anheuser-Busch InBev in a deal that included two Busch Gardens theme parks and several other attractions.

"SeaWorld operations are built around Shamu and the orca. So quantitatively they mean literally hundreds of millions of dollars to that company," said Dennis Speigel, president of International Theme Park Services, a consulting firm.

No animal is more valuable to that operation than Tilikum, the largest orca in captivity, which now has been involved in the deaths of two trainers and requires a special set of handling rules, which Atchison wouldn't specify. Captured nearly 30 years ago off Iceland, Tilikum has grown into the alpha male of captive killer whales, his value as a stud impossible to pin down.

Killer whales — actually part of the porpoise family — aren't endangered; estimates of their worldwide population range from 50,000 to more than 100,000.

But it is illegal to capture killer whales in the U.S. and several other countries, and while a few have been caught in recent years in Russia and Japan, U.S. import laws make it difficult to acquire an orca caught in the wild.

"Really, you can't buy them," said Speigel, who put the market value of an individual whale at up to $10 million.

That makes breeding the best way to build a collection of killer whales to draw in visitors at up to $78.95 apiece to sit in the splash zone or take pictures of their kids petting Shamu, the stage name SeaWorld gives all of its adult orcas in shows.

And no one is better at breeding killer whales than SeaWorld.

The company owns 25 of the 42 orcas in captivity, and other theme parks sometimes come to SeaWorld to get theirs.

At the heart of it all is Tilikum, bought in 1992 from a now-defunct Canadian park where he was one of three orcas that battered and submerged a fallen trainer until she died. After the woman slipped into the water, she became like a plaything to the three whales, said Adam Hellicar, a former diver at Sealand of the Pacific near Victoria, British Columbia.

"They were towing her around by her clothing," said Hellicar, who helped recover the woman's body.

SeaWorld got an emergency permit to buy Tilikum and the other two whales less than a year after that attack, and he became the company's go-to sire. Of the 20 calves born at SeaWorld parks, Tilikum has fathered 13, the company said. SeaWorld has only one other breeding male at the moment.

Before SeaWorld improved its artificial insemination methods, males were more commonly crated, put on planes and lent to various theme parks for breeding, part of the reason that only a handful of parks worldwide have successfully birthed calves. The practice continues despite outcry from animal rights groups.

Keeping a whale is an expensive proposition. When Keiko, the orca that starred in the movie "Free Willy," came to the Oregon Coast Aquarium in the 1990s, it cost $7.8 million to construct his habitat.

Maintaining an aquarium for killer whales can cost $10,000 to $12,000 a month in electric bills, including keeping the water at 50 to 55 degrees.

Some parks have mortality insurance on the animals and can use them as collateral.

Feeding is the cheapest part, requiring about $35,000 a year for roughly 100 pounds of fish a day.

Like many amusement parks, privately held SeaWorld doesn't release attendance figures or say whether it charges other facilities stud fees or other fees for the right to buy or borrow orcas. Nor does it disclose what chunk of its revenue comes from killer whales.

But that's what everyone goes to see.

The Oregon Coast Aquarium saw its largest crowds during the few years that Keiko lived there before he was released into the wild.

"He was a superstar," said Judy Tuttle, curator of marine mammals at the aquarium, who worked extensively with Keiko. "Some people think he's still here. A woman came up to me recently and asked where Keiko was."

Mitchel Kalmanson, a marine mammal appraiser in central Florida who has brokered the sale of two killer whales, agreed that parks such as SeaWorld aren't the same without Shamu.

"Without killer whales, the rest are ancillary shows," he said.

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Kelli Kennedy reported from Fort Lauderdale, Fla. Associated Press writers Brian Skoloff in Orlando, Melissa Nelson in Pensacola, Fla., and Anna Varela in Atlanta contributed to this report.

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Fannie Mae seeks $15.3B in gov’t aid after 4Q loss (AP)

Friday, February 26th, 2010 | Finance News

WASHINGTON – Fannie Mae needs another $15 billion in federal assistance, bringing its total to more than $75 billion. And worse, the mortgage finance company warned its losses will continue this year.

The rescue of Fannie Mae and sister company Freddie Mac is turning out to be one of the most expensive aftereffects of the financial meltdown. The new request means the total bill for the duo will top $126 billion.

And the pain isn't over. Fannie warned Friday that it will need even more money from the Treasury, as unemployment remains high and millions of Americans lose their homes through foreclosure.

Fannie Mae reported Friday that it lost $74.4 billion, or $13.11 a share, last year, including $2.5 billion in dividends paid to the government. That compares with a loss of $59.8 billion, or $24 a share, a year earlier.

Fannie Mae, which was seized by federal regulators in September 2008, has racked up losses totaling $136.8 billion over the past three year.

Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie, lifting an earlier cap of $400 billion.

Earlier in the week, Freddie reported a loss of almost $26 billion for last year. The company didn't request any more money, but expect to do so later this year.

Fannie and Freddie play a vital role in the mortgage market by purchasing mortgages from lenders and selling them to investors. Together the pair own or guarantee almost 31 million home loans worth about $5.5 trillion. That's about half of all mortgages.

"Through this prolonged stress in the housing market, we are helping homeowners across the country, supporting affordable housing, and providing financing to keep the residential markets functioning," the company's chief executive, Mike Williams, said in a statement.

The two companies, however, loosened their lending standards for borrowers during the real estate boom and are reeling from the consequences. At the end of last year, nearly 5.4 percent of Fannie Mae's borrowers had missed at least one payment — dramatically higher than historic levels.

During the most recent quarter, Washington-based Fannie suffered $11.9 billion in credit losses and a $5 billion write-down for low income tax credit investments.

That led to a fourth-quarter loss of $16.3 billion, or $2.87 a share, including $1.2 billion in dividends paid to the Treasury Department. It compares with a loss of $25.2 billion, or $4.47 a share, in the year-ago period.

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