Corus Bank, a major commercial real estate lender, disappeared over the weekend after the Chicago-based bank was seized by federal regulators and its offices reopened as part of MB Financial Bank, also based in Chicago. The failure indicates a growing role of soured commercial real estate loans in bank distress.

MB Financial bought $3 billion of Corus assets and regulators are arranging the sale of another $4 billion in commercial real estate assets through private placement channels, says LaJuan Williams-Dickerson, a spokeswoman for the Federal Deposit Insurance Corp. (FDIC), which was appointed receiver after the closure on Friday.

“We’re going to sell those through a marketing firm that will look at all the assets, market them and tell us who they think would be the best buyers,” Williams-Dickerson said today. The assets sale is expected within the next 30 days.

Meanwhile, the failed bank’s 11 branches are functioning and the institution has assumed MB Financial’s name. Federal officials are assuring depositors that all their funds are protected and available. “It is business as usual. The only thing the customer would notice is that the sign on the door has changed,” says Williams-Dickerson.

Corus ranked 19th on National Real Estate Investor’s list of the nation’s top 25 direct lenders with $1.2 billion in financing provided to the commercial real estate industry in 2008. At the time of its closure, the bank had assets of $7 billion and deposits of about $7 billion, according to FDIC.

The Chicago bank was one of three lending institutions seized by state and federal authorities on Friday. The State of Washington closed Venture Bank while Minnesota regulators shut down Brickwell Community Bank in Woodbury, Minn.

To date in 2009, a total of 92 banks have failed across the country, compared with 25 for all of 2008, according to the FDIC.

“For the most part, it’s been the overall economic downturn,” that contributed to the failures, says Williams-Dickerson. However, she adds that’s not the whole story. “The regulators could give you more reasons why these banks are closing, but I think they all have been impacted by commercial real estate issues.”

Condo loans posed a problem

For Corus, construction loans contributed to the failure. “The bank had a high concentration in condominium loans. That was the main area that they had the problems,” says Dean DeBuck, a spokesman for the U.S. Comptroller of the Currency, which administers national banks and ordered the closure.

The problem loans mainly originated in Florida, Southern California, Washington, D.C., Las Vegas, Atlanta and Chicago.

“We consider these condominium loans part of commercial real estate. They were condominium construction and rehabilitation loans,” says DeBuck.

In addition to loans for condo construction, Corus was a major player in other commercial real estate sectors. For instance, it was the primary lender for a $300 million loan for the W Austin Hotel and Residences in Austin, Texas.

Shareholders may suffer losses

While depositors are protected in the payout of dividends, the same does not hold true for shareholders. “Depositors would come first in terms of the payout of dividends of the asset to make them whole. Shareholders really aren’t likely to recoup any of their money. They’re down the list in terms of the group of people who will be paid out by the FDIC,” says Williams-Dickerson of the FDIC.

Corus Bank had no publicly owned stock. Equity shareholders were invested in the holding company, Corus Bankshares Inc., and not in the bank itself, according to FDIC. After depositors, the priority for paying claims includes general unsecured creditors, subordinated debt, and finally, stockholders.

MB Financial is paying the FDIC a premium of 0.2% to assume all the deposits of Corus Bank. The $3 billion in assets that it agreed to buy are mainly in the form of cash and marketable securities, according to FDIC.

The FDIC insures deposits for the nation’s 8,195 banks and savings and loan institutions.