More banks raise red flags; white flags next?

Which bank will be the next to fail? Of course, it's impossible to know for sure. But with losses mounting, some lenders have been forced to admit they're in dire condition.

Guaranty Financial Group (GFG) made headlines late last week when it said it was "probable" that regulators would seize its Guaranty Bank subsidiary after writing down more than $1.4 billion in mortgage-backed securities. And Guaranty isn't alone. Banks large and small are raising red flags.

Here are a few banks that have said they're in trouble:

Corus Bankshares (CORS):
A Chicago-based lender specializing in loans to condominium developers, Corus said last week that it's "critically undercapitalized." Regulators have rejected plans to bolster the bank's finances or wind it down. And its auditors warned that they have grave doubts about the bank's ability to stay in business after it posted $487 million billion in losses last quarter.

South Florida, Nevada, Arizona, southern California -- it sounds like a list of the areas hardest hit by the bursting of the housing bubble. And it is. But it's also roster of the places where Corus made huge bets on condo construction when prices were spiraling upward. Now, it's Corus' losses that are climbing: Some $3.1 billion, or 44 percent, of its $7.07 billion in assets aren't generating payments.

Corus has been in deep trouble for a long time, and finding a buyer could prove a tall order for the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp, the bank's regulators. But with time -- and alternatives -- dwindling, they may have little choice.

Colonial Bancgroup (CNB): Things went from bad to worse in recent weeks for Colonial, a Montgomery, Ala.-based bank with some $27 billion in assets and more than 350 branches across the South and West.

Executives said on July 31 that they had "substantial doubt" about Colonial's prospects of keeping afloat in the face of $606 million in losses last quarter and a rapidly deteriorating loan portfolio, with Florida a particular trouble spot. And, they added, a deal with another lender that would have infused much-needed cash fell through when Colonial didn't get approved for assistance from the Treasury Department's Troubled Asset Relief Program, or TARP.

Then, on Tuesday, Colonial announced that investigators from the office of Neil Barofsky, TARP's top cop, raided the company's offices. Financial industry observers say regulators may break up Colonial's branch network among several buyers if it's seized.

First State Financial (FSFT): Obviously, not all troubled banks are big. Take Sarasota, Fla.-based First State, with $440 million in assets, for example. Punished by losses on commercial real estate. The bank's auditors say they have are concerned about the bank's ability to continue as a going concern. Its regulators say its critically undercapitalized. And it's under orders to find new investors or sell itself by October or face seizure.
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