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The Mortgage Graveyard
Failed, closed and a c q u i r e d mortgage-related entities.

1st Bank Failure in More than Month

Recent bank and credit union failures

Jan. 21, 2012

By staff

It had been more than a month since a federally insured bank had failed. But that streak ended Friday with a trio of bank failures. Costs from one of the three banks are expected to exceed $200 million.

The nation's first bank failure in 2012 was Central Florida State Bank.

The Belleview, Fla.-based bank firm was seized by the Florida Office of Financial Regulation on Friday. It was established in 2002 and employed around 22 people at the time of its demise.

The Federal Deposit Insurance Corp. was named receiver of the failed institution. Following a secret bidding process, CenterState Bank of Florida, N.A., assumed all of Central Florida's $78 million in deposits as of Sept. 30 and acquired all of its $79 million in total assets including $11 million in home loans, $10 million in commercial real estate loans and $12 million in construction-and-development loans.

After agreeing to share in losses on $54 million of the assets, the FDIC -- which issued a consent order against the failed bank in April 2011 -- expects to lose $24 million on the failure of Central Florida.

Prior to Central Florida's demise, the last bank failure was Western National Bank in Phoenix, which was seized by the Office of the Comptroller of the Currency on Dec. 16.

The Georgia Department of Banking and Finance followed up Florida's action on Friday by closing down The First State Bank. The FDIC, as receiver, awarded the winning bid to Hamilton State Bank.

The failed bank was based in Stockbridge, Ga., and had been around since 1964. As of the end of September, the bank employed 107 people. Residential mortgage holdings were $47 million, while another $168 million was invested in CRE assets and $128 million was tied up in C&D loans.

First State had a hefty $528 million in deposits, which were assumed by Hamilton for an 0.50 percent premium. Hamilton also picked up total assets of $537 million with the FDIC agreeing to a $420 million loss-sharing arrangement.

The Deposit Insurance Fund is projected to be depleted by $216 million because of First State's demise.

The OCC, which is the federal regulator of banks that aren't regulated by a state agency, closed down Friday American Eagle Savings Bank in Boothwyn, Pa.

"The OCC acted after the institution had experienced substantial dissipation of assets and earnings due to unsafe or unsound practices," the statement said. "The OCC also found that the institution is likely to incur losses that will deplete its capital and that the institution is critically undercapitalized, and there is no reasonable prospect that it will become adequately capitalized without federal assistance."

The three-employee shop had just $18 million in deposits and $20 million in assets. Its entire real estate portfolio, $10 million, was tied up in residential loans. The Office of Thrift Supervision issued a cease-and-desist order against the bank in July 2010.

Capital Bank, N.A., assumed all of the deposits and acquired all of the assets of the 95-year-old bank.

The FDIC projected a $3 million loss from the failure of American Eagle, the third federally insured bank to close this year.

People Community Development Credit Union was taken over by the National Credit Union Administration on Jan. 6. The credit union, which had only $1 million in assets, is the only credit union failure so far in 2012.

U.S. Central Bridge Corporate Federal Credit Union was created from the assets of U.S. Central Federal Credit Union after its March 2009 failure. After a bidding process for the payment services business failed to yield any interest, the NCUA on Dec. 22 said it would begin an orderly wind down of other services provided by the bridge institution.

The Government Accountability Office issued a Jan. 4 report indicating that poor investment and business strategies contributed to the failure of five corporate credit unions between January 2008 and June 2011.

"The failed corporates over concentrated their investments in private-label, mortgage-backed securities and invested substantially more in private-label MBS than corporates that did not fail," the report said. "GAO also found that poor management was the primary reason the 85 credit unions failed. In addition, NCUA's Office of Inspector General has reported that NCUA's examination and enforcement processes did not result in strong and timely actions to avert the failure of these institutions NCUA took multiple actions to stabilize, resolve, and reform the corporate system."

The GAO said NCUA should provide its inspector general with documents needed to verify loss estimates. In addition, the credit union regulator should consider additional triggers for prompt corrective actions that would require "forceful regulatory action" early on.

Birmingham Financial Federal Credit Union was placed it into conservatorship by the NCUA in October 2011. On Dec. 19, the regulator liquidated the $1 million Birmingham, Ala.-based institution following a determination that 429-member credit union was insolvent with no hope of recovering.

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