by Calculated Risk on 2/04/2009 09:23:00 AM

From the WSJ: Condo King Corus Weighs Its Options (hat tip James)

Corus Bankshares ... reported a $260.7 million quarterly loss late Friday and said that more than one-third of its $4.1 billion in outstanding loans were nonperforming. Amid what it called a "precipitous decline" in property values, the Chicago lender also warned that banking regulators may soon strip Corus of its standing as a well-capitalized bank and impose higher cash requirements.
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Corus is one of the few lenders to report that the Treasury Department intends to reject the bank's application for funds from the ... TARP.
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While it has been clear for months that thousands of condo projects were doomed, the full impact on financial institutions is only now being felt. Construction loans were structured with "interest reserves," provisions that gave developers funds to pay interest until the projects were complete. Now that projects are completed and failing to sell, the loans are going into default.
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Corus has about $2 billion in unfunded construction commitments and that in the event of a federal takeover, regulators wouldn't be obligated to fund these commitments.

Another candidate for Bank Failure Fridays. Corus is heavily exposed to condos and Construction & Development (C&D) loans. When the interest reserves run dry, these deals blow up. And down goes the lender ...