The FBOP Corporation Story of Bank Failures and Recovery

The FBOP Corporation has a fascinating story of bank failures and recovery. The corporation was formed in 1987 to manage the FDIC's assets, which included 700 failed banks.

Its first major task was to manage the Resolution Trust Corporation's (RTC) assets, which consisted of over 1,500 failed thrifts. This was a monumental task, but FBOP Corporation rose to the challenge.

The corporation's early years were marked by significant losses, with over $1 billion in losses in 1990 alone. However, under the leadership of CEO James E. McQuade, FBOP Corporation began to turn things around, and by 1995, the corporation had achieved profitability.

FBOP Corporation has a rich history of growth and expansion. The company's first acquisition was Regency Savings Bank, FSB, in 1990 for $325 million.

FBOP Corporation's acquisition spree began in 1990 with Regency Savings Bank, FSB. This marked the beginning of the company's growth into a significant banking entity.

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The company continued to expand, acquiring Citizens National Bank of Chicago in 1991 for $20 million. This was followed by the acquisition of Cosmopolitan Bank and Trust in 1991 for $110 million.

Some of the notable acquisitions made by FBOP Corporation include Republic Federal Savings Bank in 1992 for $250 million and Madisonville State Bank in 1993 for $100 million.

Here's a list of some of the notable acquisitions made by FBOP Corporation:

FBOP Corporation's acquisition of Peoples Bank of California in 2001 for $3,228 million was a significant milestone in the company's history. This acquisition marked a major expansion of the company's presence in the banking industry.

The company continued to grow, acquiring Fidelity Federal Bank in 2001 for $2,315 million and Sterling Bank in 2002 for $12 million.

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FBOP Corporation's bank failure was a significant event in the financial industry. The bank's subsidiaries lost an estimated $800 million when the US Treasury placed Fannie Mae and Freddie Mac into conservatorship.

This loss led to an operating loss of $708 million for FBOP in 2008. By the end of June, FBOP's resources had dwindled so low that the firm ranked below 98% of similar bank holding companies in terms of tier 1 leverage ratio.

FBOP signed a written agreement with the Federal Reserve in August 2009, which required the bank to raise capital, improve risk management, and reduce its concentration of commercial real estate loans. The bank was given a 30-day deadline to submit a capital plan.

However, FBOP failed to raise enough capital to satisfy the terms of the agreement. As a result, the bank's subsidiaries were closed by their chartering agencies on October 30, 2009.

The Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver of the closed banks. The FDIC then entered into a purchase and assumption agreement with U.S. Bancorp to assume the assets and deposit liabilities of the closed banks.

The FDIC estimates its losses on the combined transaction at $2.5 billion.

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Time is of the essence for FBOP Corp. The company has a whopping 30 days to develop a plan to reduce its exposure to commercial real estate loans. This is a tight deadline, given the company's current struggles.

FBOP is a privately held bank with eight subsidiaries and a combined $18.3 billion in assets, making it one of the 50 largest bank holding companies in the U.S. The company is owned by real estate mogul Michael Kelly.

The real estate bust has taken a huge toll on FBOP, with the company also losing a bundle on investments in Fannie Mae and Freddie Mac. As a result, FBOP is now "critically undercapitalized."

The company's Tier 1 leverage ratio is a mere 0.34 percent, down from 9.1 percent in the year-ago period. This is far below the level to be considered adequately capitalized.

Three of FBOP's four largest branches are in hard-hit California, where loan defaults and delinquencies are rising. These branches include California National Bank, San Diego National Bank, and Pacific National Bank.

FBOP also owns banks in Texas and Arizona, where loans related to real estate have deteriorated. The company desperately needs capital, and fast.

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