Real Estate Pain on Tap for Smaller Banks

Of course, Corus and its concentration on condominium construction and rehab loans have received wide coverage throughout the real estate crisis, since the institution came to the fore when March 2007 financial results were announced. At that time, Corus Bank, with less than 1% of the nation's bank assets, had 17% of nonperforming multifamily mortgages for the entire industry on its balance sheet.

As TheStreet.com reported in August 2007, despite the alarming rise in nonperforming loans, Corus's management felt at that time it was in a strong enough capital position to pay a special $1 dividend to shareholders -- a $56 million hit to its capital. This came despite the fact that the bank appeared under-reserved by traditional measures.

As time went on and loan quality worsened, and Corus finally eliminated its dividend in April, when announcing its first-quarter results.

While Corus Bank's leverage ratio of 10.28% and risk-based capital ratio of 15.09% would be high for a bank with strong asset quality, capital is the institution's number one concern. The holding company recently announced further efforts to conserve capital, this time deferring interest on $405 million in trust-preferred securities. Corus said the trust indentures allowed interest payments to be deferred up to 20 quarters.

National Bank of Arizona

Second on the list is National Bank of Arizona, a subsidiary of Zions Bancorp (ZION Quote), a multibank holding company with $54 billion in assets and seven bank charters in the Southwest.

National Bank of Arizona's ratio of nonperforming CRE and CCL to total assets was 3.53% as of Sept. 30, and its total nonperforming assets ratio was 5.99% -- an alarming increase from 3.62% in June and 2.32% in March. The necessary increase in the quarterly provision for loan loss reserves led to a third quarter loss of $16.7 million. Despite the loss, a reduction in assets kept the bank's capital ratios from dropping significantly.