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Corus Loan Portfolio Deteriorating

Corus Bankshares (CORS) expressed substantial doubt about its viability in a regulatory filing Tuesday, saying more than 50% of its loan portfolio was now considered nonperforming.

Chicago-based Corus reported nonperforming loans of $2.0 billion in its delayed 2008 10-K report, filed with the Securities Exchange Commission after the market close Monday, up from the $1.5 billion reported in its Jan. 30 earnings release.

TheStreet.com noted the company's dim prospects as far back as August 2007, when the company paid a special dividend to shareholders. We noted the threat to the company's dividend on common shares in light of its high exposure to nonperforming condominium loans in some of the areas hit the hardest in the boom-and-bust real estate cycle.

The following shows the holding company's nonperforming assets ratios for the past five quarters:

Corus Bankshares ($Mil)
2008 10-K report, SNL Financial

Based on the revised figures, nonperforming loans reached 50.25% and nonperforming assets rose to 29.28%. Loan loss reserves covered 13% of nonperforming loans. The company's tier-1 leverage ratio was 4.4%, its tier-1 risk-based capital ratio was 6.2% and its total risk-based capital ratio was 12.3%.

While ordinary regulatory guidelines for capital ratios apply to banks themselves and not to holding companies, that 4.4% tier-1 leverage ratio was lower than the 5% required for a bank to be considered well-capitalized.

According to a regulatory order the company entered into with the Office of the Comptroller of the Currency on Feb. 18, Corus was required to achieve and maintain a tier-1 leverage of at least 9% and a tier-1 risk-based capital ratio of at least 12% within 120 days. The company said there could be no assurance it would meet these and other requirements of regulatory agreements with the OCC and the Federal Reserve Bank of Chicago, in which case the company and Corus Bank NA would be subject to other enforcement actions, and "even the placing of the bank into conservatorship or receivership."

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