Regulators seize construction lender Corus Bank

CHARLOTTE -- Federal regulators on Friday said they seized Corus Bancshares, a major Chicago-based lender to condominium, office and hotel projects, adding it to the long list of banks that have succumbed this year to the recession and waves of loan defaults.

The Federal Deposit Insurance Corp. took over Corus Bank, which had $7 billion in total assets, and its deposits. The deposits will be assumed by MB Financial, which is also based in Chicago.

Corus Bank's 11 branches will open on their next normally scheduled business day as branches of MB Financial Bank. Regular deposit accounts are insured up to $250,000.

The closure of Corus Bank, one of the largest banks to fail this year, will cost the FDIC $1.7 billion.

Corus made construction loans nationwide, specializing in condominium, office and hotel projects. The bank has staggered for weeks under the weight of bad real estate loans and its collapse had been anticipated.

Already in February, the bank said losses on condo construction loans in a gutted housing market had forced it to hunt for new sources of capital.

The bank had cited "a rapid and precipitous decline" in the value of collateral securing its condo loans, mainly in Arizona, southern California, southern Florida and Nevada. It acknowledged that its capital was critically eroded.

Earlier this year, the Federal Reserve Bank of Chicago and the office of the Comptroller of the Currency, a Treasury Department agency, put Corus under special monitoring. Regulators rejected the bank's proposed plans for restructuring and shoring up its capital.

The Treasury Department rejected Corus' application for aid under the $700 billion financial bailout program.

Besides assuming the deposits of Corus Bank, MB Financial agreed to buy about $3 billion of its assets. The FDIC will retain the rest for eventual sale.

The FDIC, an independent agency that seeks to maintain stability and public confidence in the financial system, said Friday it also shut down Brickwell Community Bank in Woodbury, Minn., with $72 million in assets and about $63 million in deposits.