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alstry (35.87)

How weak is banking????

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August 21, 2008 – Comments (0)

Exchange Bank's top executive, J. Barrie Graham, resigned unexpectedly as president and chief executive officer of Sonoma County's oldest and largest commercial bank.

Colleagues inside and outside the bank were stunned by the news as it spread rapidly Tuesday across the county's business community.

Overall, 5 percent of the bank's $1.2 billion loan portfolio is 90 days or more overdue or not accruing interest -- about 10 times what the bank aims for, DeCrona said.

http://www.pressdemocrat.com/article/20080820/NEWS/808200374/1350&title=Exchange_Bank_CEO_quits_suddenly

Exchange Bank has a excellent reputation with over 50 history of not losing money....until now.

Banks lever up over 10X......in this case, 5% of the outstanding loan portfolio is 90 days or more overdue and not accruing interest.....what percentage of the bank's portfolio is 30 or 60 overdue?????  We all know that the debt markets have deteriorated materially over the past 60 days....you think this may have contributed to the CEO's "unexpected" departure?

This is a bank with a long history of "intelligent" intelligent risk taking.  But the current environment is new.....never before has so much real estate lost so much value so quickly.  Few were prepared for such a rapid reversal.

My guess is that there are thousands of other banks in much more difficult financial condition.  The question is when banks mark their portfolio's to market?  When that happens, things may get very interesting.....much more intestesting than most are currently anticipating.

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