Corus Capital Situation Increasingly Dire

Corus Bank, NA ($Mil) Highline Financial, Inc.

While the company was carrying a high level of nonperforming loans all through 2008, net charge-offs for Corus Bank NA (actual loan losses) for the first three quarters totaled only $147 million. Charge-offs accelerated during the fourth quarter, to $211 million, for a total of $358 million for 2008, or 8.14% of average loans.

Corus Bank NA was still well-capitalized under the normal regulatory guidelines as of Dec. 31, with leverage and risk-based capital ratios of 7.87% and 12.29%. But the holding company also warned that because it was likely to have its capital standards raised by regulators, the bank "may no longer be considered well-capitalized and may be required to identify additional sources of capital."

Indeed, it appears the company can easily run out of capital over the next quarter or two. Corus Bank NA's total equity capital was $678 million as of Dec. 31. The fourth-quarter net loss for the bank (not the holding company) was $262 million and net interest income dwindled to just $4.5 million.

With nonperforming assets nearly doubling just in the fourth quarter, a probable rejection of its TARP application, further increases in quarterly net charge-offs likely and no way to achieve positive earnings on reduced interest income, Corus needs to immediately raise significant new capital on its own, or face failure.