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

No. 25 Fails

Recent financial institution failures

March 14, 2011

By staff

Friday's bank failures brought to 25 the number of federally insured banks to collapse this year. In all, 34 mortgage-related closings have been recorded so far during 2011.

The Office of the Comptroller of the Currency cited a "substantial dissipation of assets and earnings due to unsafe and unsound practices" in its decision to seize and shut down The First National Bank of Davis Friday. The OCC said there was no chance that the Davis, Okla., institution could become adequately capitalized without government assistance.

First National was founded in 1895. As of the end of last year, 25 people were employed there. Residential loan holdings were $8 million, while another $10 million in commercial mortgages was owned.

The failed institution was handed over to the Federal Deposit Insurance Corp. as receiver. The Pauls Valley National Bank assumed the First National's $68 million in deposits, paying a whopping 7.5 percent premium (premiums generally range from 0.0% to 1.5 percent).

But Pauls Valley only picked up $29 million of the failed bank's $90 million in total assets.

The Deposit Insurance Fund is expected to be depleted by $27 million as a result of First National's failure.

In Milwaukee, the Wisconsin Department of Financial Institutions stepped in to take control of Legacy Bank.

On the closed bank's balance sheet were $49 million in home loans, $100 million in commercial real estate loans and $1 million in construction-and-land-development loans.

A prompt corrective action was issued against the 12-year-old bank last year by the FDIC pursuant to Section 38, 12 U.S.C. § 1831o, while the 37-employee institution entered a formal agreement in April 2010 with the Federal Reserve Bank of Chicago and the State of Wisconsin Department of Financial Institutions.

The FDIC, which stepped in as receiver, awarded the winning bid for the failed bank to Seaway Bank and Trust Co., which acquired around $166 million of Legacy's $190 million in assets with the FDIC retaining liability for losses on $120 million of the assets. Seaway assumed all of Legacy's $183 million in total deposits.

The FDIC predicted that Legacy's insolvency will cost $44 million.

Legacy was the 25th FDIC-insured bank to fail this year.

On March 4, the Wisconsin Office of Credit Unions seized Wisconsin Heights Credit Union, and appointed the National Credit Union Administration as liquidating agent. The NCUA noted that the credit union was closed because of its declining financial condition.

Co-Vantage Credit Union acquired the Ogema, Wis., institution from the NCUA. Its assets were less than $1 million and it had a little more than 500 members.

Three days later, the NCUA threw Land of Enchantment Federal Credit Union into liquidation with the goal of continuing operations for the company's 1,593 members.

Santa Fe, N.M-based Land of Enchantment was founded in 1951 to serve employees of the New Mexico Department of Public Welfare. Its $9 million in assets were acquired by Guadalupe Credit Union of Santa Fe.

Mortgage Daily has tracked the failure of six credit unions so far during 2011. Including banks, credit unions and non-bank firms, Mortgage Daily has reported on a total of 34 mortgage-related operations to close down or fail this year.

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