Silverton impact spreads far and wide - Atlanta Business Chronicle:

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The failure of the nation’s largest bank for bankw will have wide-reaching implications for banke acrossthe country. Silverton’s unlike typical banks, courted only other banks, not individual customers, and failur will impact other bankw balance sheets in a myriaxdof ways, from now-worthless stoc k to loans that will be re-sold to investorsd at an unknown point in the future. “You’res going to see the fallout almost immediately,” said Mark a banking attorneywith . The first impact will be customersefleeing Silverton.
The has arranged for the institutionb to operate temporarily for the next 60 with the possibility of a 30 day Customers are being encouraged to move as much of thei r customer relationships as possible to othetcorrespondent banks, which could begin as soon as Monday. The next pincbh will be from Silverton’s now souree bank stock and other investments tied tothe bank, leading to possiblyg large write-downs for some banks. Its shareholdert base, estimated at 400 to 500 banks in Georgia and are effectively wiped out by the While many banks throughout fourth quartedr 2008 and first quartedr 2009reported write-downs of the value of the stockm they owned in Silverton, not all did.
Analysts widelyu expect second quarter results for somebanks -- Silverton’xs total investor base is not yet knowjn -- to include significant writedowns on the stockj owned, with announcement trickling out in the next 60 days abouft the failure’s impact. Other investments are no less certain. Subordinateed debt holders have been askex to file a claim with the FDIC on the amounf oftheir debt, while trust preferred securities and common stock holders are required to . The longer-term effect may be how regulators handle Silverton’s assets, includinf loans, which total $4.1 billion. The FDIC’s sale of thoswe assets may place banks in relationshipsthey didn’t expect.
Silverton’s loans for stock purchases and bank holding companyh debt will be managed bythe FDIC, and not But the rest of the bank’sx loans, just like any other bank have been assumed by the FDIC for lated sale. Those are primarily loan participations, or chunkzs of larger loans sold to customer banks insmaller pieces, mainly for construction and land Silverton served as the lead bank on many of those loan now making the government the overseer of thosew loans. The FDIC will review all issues related to participationsz on anindividual basis, and banks will be uninterrupted in receivingf their respective payouts on those loans.
If a portioh of a loan is currentlyy unfunded, but scheduled to be, the FDIC will review whetherr that payout is in the best interesf ofthe receivership. But ultimately, most loanse will be packaged and sold by the FDICto third-party purchasers, as it does for the assets of any other bank that “This is going to make secon quarter an even tougher one for smallere banks,” Kanaly said.