Inside Financial Services

OneUnited Needs to Go

What's the FDIC waiting for?

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I hate to keep harping on this, but I’m still at a loss to understand how in the world it can be that OneUnited Bank-the Boston institution that’s been kept afloat by the machinations of, among others, Maxine Waters and Barney Frank-is still in business.

You likely remember that OneUnited saga. (For a thundering recap of the whole tawdry business, click here.) Quick summary: OneUnited is the county’s largest minority-owned bank, but doesn’t do much in the way of actual lending to minorities. Rather, its assets have tended toward Porsche SUVs, beach houses in Malibu, and residential mortgages on properties in places like Martha’s Vineyard and Brookline. The company also, unfortunately, owned $52 million in GSE preferreds. When the government seized the GSEs in 2008 and stopped paying dividends on the preferred, OneUnited’s balance sheet took a massive shellacking. That should have been enough to do the bank in. But when the government rolled out the TARP program later in the year, Maxine Waters (whose husband is a shareholder of OneUnited and once sat on its board) couldn’t resist intervening. The matter is now before the House Ethics Committee.

Meanwhile, OneUnited is the very picture of a zombie bank. To get a sense of just how zombiesque it is, let’s put it side by side with a bank that really is a goner: First Chicago Bank & Trust, out in Illinois, which was seized by regulators earlier this month. Let’s look at some key capital ratios, first:

First Chicago OneUnited

Tier 1 Common Ratio 1.01% -7.43%

Tangible Common Equity to Tangible Assets. 0.88% -2.52%

Your eyes are not deceiving you. At the end of the first quarter, OneUnited’s Tier 1 Common Ratio was minus-7.43%. Next to that, the late, lamented First Chicago’s 1.01% makes the bank seem like a financial colossus. OneUnited hasn’t ended a fiscal year with a positive Tier 1 ratio, I hasten to add, since 2007. And yet somehow it’s been allowed to keep limping along, for years.

Shall we compare credit metrics? At the time of First Chicago’s demise, the bank’s nonperforming assets came to 15.5% of total assets. At OneUnited, by contrast, they were just 3.46% of assets. So clearly, you might be saying to yourself, OneUnited isn’t the credit train wreck that First Chicago was.

But wait! Chargeoffs at OneUnited last year came to all of 46 basis points. That is suspiciously low. For reference, at the end of 2007 (which is to say, at the start of the nationwide collapse in real estate prices) real estate loans at OneUnited accounted for 97.5% of its loan book. At the end of the first quarter, real estate accounted for 99.5% of loans. So the bank’s strength and profitability is based entirely on what happens in the real estate market. Yet since the end of 2007, cumulative NCOs have amounted to just 83 bp. During the worst real estate downturn in anyone’s memory.

That is, literally, unbelievable. It’s not too much to wonder, given OneUnited’s bodacious political connections, that its examiners have been have gone out of their way through the years to treat the bank extremely gingerly and give its iffy loans every benefit of the doubt. Which is to say, its credit numbers should not be taken at face value. A reality-based examination at OneUnited is long overdue–especially given the bank’s precarious capital position.

OneUnited should have been shuttered long ago. Its capital is a disaster and its credit metrics by all appearances are fictitious. One of the first things Marin Gruenberg, the new head of the FDIC, should do is put this dog down, or explain why the shareholders of other institutions have been totally wiped out but the same has not occurred at OneUnited. .

What do you think? Let me know!

12 Responses to “OneUnited Needs to Go”

  1. Credit man

    When I read this and recall our bank’s exam in December of last year and how the regulators forced us to charge off loans that WERE PERFORMING but were tied to the real estate market, it really makes me angry that our wondrous government, and its agencies, its transparent honest agencies and the like could allow this to not only happen but let it continue.
    I will volunteer to go up there and examine their portfolio. Pay my own way just to get a look at that apparently pristine real estate portfolio.

  2. Idaho Banker

    Well we have tonight to watch and wonder how this bank stays open.

  3. Idaho Banker

    Well we have tonight to watch and wonder how this bank stays open.

  4. Rick

    it is very sorry to someone use there connections to improperly use an institution for personal gain. It is worse when they are having their sins washed away by the government. Bankers used to be trusted members of the community. Now they are in the same place as the politicians. Where is our country going.

  5. marty

    yes, tom clown knows exactly what he’s talking about. in september 2010 he called synovus a “bank stock on steroids”, when the share price was $3.31. today, 10 months later, the price is $1.84 – down 44%! tom please bless us with more of your opinions and prognostications!

  6. bobp

    Marty, you’re an idiot. This is not about Synovus. If you have something to say on the subject please do so. If you want to bs do it at home with your wife. Tom, you got this one right.

  7. Agoodbroker

    Equal treatment under the law is a cornerstone of democracy. This travesty undermines not only our confidence in regulatory oversight, but our also our faith in government as a whole.

  8. He Can Pick Em

    bob p, you are the idiot. Tom Brown has made bad call after bad call over the past 4 years. He certainly doesn’t talk about his mistakes, so why not discuss it on the message board.

    All of you idiots that idolize Tom should learn to think for yourself. After massive losses in FMD, NTBK, ABK, BAC and SNV, you really should consider anything tom says with a grain of salt. If you took the other side of his trades over the past 4 years you would be very wealthy.

  9. bobp

    he can pick em, i repeat you can leave your bs in your wife’s bed if you don’t have anything on the subject.

  10. marty

    bobp is clearly tom clown or someone else that writes for this website. there is no way any impartial reader that reads this site on a regular basis could ever defend tom clown after his last dozen stock picks have all turned out to be terrible calls. i come back to the site purely for the entertainment value.

  11. Why?

    Marty and Lol,
    Why do you revisit this site? Why blame Tom for your losses? It’s your responsibility to sell when prudent. Tom has made me much more than I lost on any of the companies he comments about. Do your own research and quit scapegoating. I value Tom’s opinions. Let me share a 4 letter word with you : SELL. Oh and move on

  12. lol @ bob p

    like marty, i enjoy the entertainment value here as well. Question for the board. Why is Vernon Hill’s mug still featured on this site? When was the last time he wrote an article, a year ago?

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