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

2 NY Banks Fail

Recent mortgage-related company closings

March 15, 2010

By Mortgage Daily staff

Among four bank failures last week were two institutions in New York City. Both were scooped up by a big New Jersey-based bank.

On Thursday, New York's Banking Department closed LibertyPointe Bank and -- as is done when any federally insured bank or thrift fails -- appointed the Federal Deposit Insurance Corporation as receiver. The failure of the New York City bank was the result of its inability to meet the requirements of a July 2009 cease-and-desist order by the state and the FDIC. It also faced an FDIC prompt corrective action in October.

Valley National Bank won its bid to assume the four-year-old bank's $210 million in deposits as of Dec. 31, 2009, at an 0.15 percent premium. Valley National also acquired the 37-employee firm's $210 million in assets -- which included $8 million in home loans, $128 million in commercial mortgages and $26 million in construction-and-land-development loans. With the FDIC sharing in losses on $182 million of the assets, the expected cost to the Deposit Insurance Fund is $25 million.

Closing LibertyPointe on Thursday was an unusual regulatory move for a bank failure; most institutions -- with an occasional exception for huge firms -- are closed on Fridays.

But New York's banking department, which hasn't had to seize a bank since July 2009, apparently had its hands full last week with the additional closing of The Park Avenue Bank on Friday. Another possible factor was that resources at Wayne, N.J.-based Valley National Bank -- which also assumed all of Park Avenue's $495 million in deposits for an 0.15 percent premium and acquired all of its $520 million in assets -- were stretched thin as it took over two banks in one week.

The state cited Park Avenue's "ineffective management and inadequate capital" in its decision to seize the 22-year-old bank -- also based in New York. A cease-and-desist order was issued by New York and the FDIC against the 66-employee firm in February 2009, and management was unable to address the problems outlined in the order.

Residential loans accounted for $48 million of Park Avenue's assets, while commercial real estate loans represented $159 million and construction-and-development loans made up $39 million. Factoring in a $380 million loss-sharing agreement as well as an equity appreciation arrangement, the FDIC put projected losses at $51 million.

"The acquisitions of Park Avenue Bank and LibertyPointe Bank are expected to provide us with immediate earnings accretion and an opportunity to leverage our capital base while deploying some of our excess liquidity caused, in part, by the current economy and low level of interest rates," said Gerald H. Lipkin, chairman, president and chief executive officer of Valley National -- which claims to be "the largest commercial bank headquartered in New Jersey."

Friday's second failure was Old Southern Bank in Orlando, Fla., which was closed by the Florida Office of Financial Regulation. The bank, which was only established in 2006, faced an FDIC prompt corrective action in January while it entered a formal agreement with the state and the Federal Reserve Bank of Atlanta the previous September.

Centennial Bank assumed the 62-employee bank's $320 million in deposits as of the end of December for a 1.00 percent premium and acquired all of its $316 million in assets. Home loan assets were $17 million, commercial mortgages were $99 million and C&D assets were $119 million. After factoring in a $283 million loss-sharing arrangement, the FDIC expects to lose $95 million.

In Covington, La., the state's Office of Financial Institutions closed Statewide Bank. The institution was founded in 1926 and employed 65 people. It was hit with an FDIC cease-and-desist order in March 2009.

Home Bank stepped in to assume all the failed bank's $209 million in deposits as of Dec. 31 at par and acquire all of its $243 million in assets with the FDIC sharing in losses on $164 million of the assets and projecting its own costs at $38 million. Assets included $41 million in residential loans, $54 million in commercial mortgage and $41 million in C&D loans.

Statewide was last week's fourth bank failure, the 30th FDIC-insured failure during 2010 and the 40th mortgage-related closing tracked by so far this year.

The on-again-off-again closing of Vancouver, British Columbia-based Abode Mortgage Holdings Corp. is on again. Abode announced in December that it was closing its mortgage origination business, Abode Mortgage Corp. The company subsequently said it might not close the unit. But a March 5 statement said the company was permanently closing.

"In the end, pressures from the global credit disruption and corresponding actions taken by our financiers and secured creditors proved too challenging for the company," Abode Chairman David Nelson said in the statement.

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