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

2011 Death Toll Jumps to 50

Recent mortgage-related businesses to close

April 18, 2011

By staff

Six bank failures on Friday are expected to cost the country more than a half billion dollars, and one of two credit unions that were seized had $1.6 billion in assets. Including a wholesale lender that called its quits -- this year's casualty list for banks, credit unions and non-bank mortgage lenders has grown to 50.

Almost a year to the day after it was served with a cease-and-desist order, Bartow County Bank failed.

The Georgia Department of Banking and Finance seized control of the Cartersville, Ga., bank and transferred it to the Federal Deposit Insurance Corp. as receiver -- as was the case with all of Friday's bank failures. Hamilton State Bank won its bid to acquire all of the $330 million in assets, with the FDIC retaining liability on $248 million of the assets. Hamilton also acquired all of the $304 million in deposits at a 1 percent premium.

The FDIC projects that its Deposit Insurance Fund will be depleted by $70 million as a result of Bartow County Bank's demise.

A much smaller institution, New Horizons Bank, was also closed by Georgia's banking department. The East Ellijay-based bank, which had $111 million in assets, is expected to cost the FDIC  $31 million.

The next bank failure -- Nexity Bank in Birmingham, Ala. -- is expected to cost the FDIC $175 million. Nexity, which was hit with an FDIC cease-and-desist order in March 2009, had $794 million in assets with $97 million concentrated in risky construction-and-development loans.

"The department took possession of Nexity Bank pursuant to the provisions of section 5-8A-20 of the Code of Alabama, which allows the superintendent to take possession ... in such cases where the bank's capital is impaired or if any examination of the bank indicates that the bank is operating in an unsafe or unsound condition," the state said in a news release."

But Nexity Bank's demise was dwarfed by that of Superior Bank, which was also in Birmingham. Superior had a whopping $3 billion in assets, with $0.7 billion concentrated in residential assets, $0.8 billion invested in commercial real estate loans and $0.5 billion in C&D holdings.

"Superior Bank was critically undercapitalized and in an unsafe and unsound condition to transact business," according to the Office of Thrift Supervision, which closed the institution. "The institution reported net losses in 2008, 2009 and 2010.

Stepping in to assume Superior's $2.7 billion in deposits was Superior Bank, N.A. The acquiring bank squeezed a $2.7 billion loss-sharing agreement out of the FDIC.

After all is said and done, the FDIC expects to lose $260 million on Superior's failure -- the most of any of the six banks to fail last week.

Less than $4 million in FDIC losses were projected from the closing of Rosemount National Bank by the Office of the Comptroller of the Currency, which said the Rosemount, Minn., bank was "critically undercapitalized, and there is no reasonable prospect that the bank will become adequately capitalized without federal assistance." The OCC issued a cease-and-desist order against Rosemount in April of last year, while the bank entered a formal agreement with the regulator two months earlier.

The last bank to fail on Friday was Heritage Banking -- which was closed by the Mississippi Department of Banking and Consumer Finance. The Carthage, Miss., institution had faced an FDIC cease-and-desist order in June 2010.

Heritage's collapse is expected to deplete the Deposit Insurance Fund by $49 million. It was the 34th FDIC-insured institution to fail this year.

In Mesa, Ariz., Vensure Federal Credit Union was placed into conservatorship by the National Credit Union Administration also on Friday. The $5 million institution served just 144 members.

The NCUA followed that up by throwing Texans Credit Union into conservatorship. The Richardson, Texas-based credit union has 133,000 members and $1.6 billion in assets.

Texans will continue to operate "with expert management in place correcting previous service and operational weaknesses." NCUA is authorized to appoint itself as conservator under the Federal Credit Union Act.

It was the ninth credit union failure reported this year by Mortgage Daily.

The loan officer compensation rule drove Virginia Beach, Va.-based Southern Trust Mortgage Co. out of wholesale lending, American Banker reported. A letter to mortgage broker clients reportedly indicated that Friday, April 8, was its last day in the wholesale business.

Seven non-bank mortgage operations or lenders have failed or been closed during 2011 based on Mortgage Daily coverage.

In all, 50 mortgage-related businesses or divisions have been closed or failed this year.

April 15, 2011, Bank Failures
Bank Location Regulator Deposits Deposit prem. paid Assets Home Loans CRE Loans C&D Year Founded # Emp Acquirer FDIC Loss-Share Amount Deposit Ins. Fund Losses
Bartow County Bank Cartersville, Georgia Georgia Department of Banking and Finance $304 million 1.00% $330 million $71 million $104 million $30 million 1974 67 Hamilton State Bank $248 million $70 million
Heritage Banking Group Carthage, Mississippi Mississippi Department of Banking and Consumer Finance $196.2 million 0.15% $224.0 million $37 million $64 million $23 million 1920 66 Trustmark National Bank $156.4 million $49 million
New Horizons Bank East Ellijay, Georgia Georgia Department of Banking and Finance $106 million 1.00% $111 million $20 million $20 million $21 million 2004 22 Citizens South Bank $85 million $31 million
Nexity Bank Birmingham, Alabama State of Alabama Banking Department $637.8 million 0.00% $793.7 million $46 million $109 million $97 million 1968 81 AloStar Bank of Commerce $384.2 million $175 million
Rosemount National Bank Rosemount, Minnesota Office of the Comptroller of the Currency $36.6 million 0.00% $37.6 million $4 million $8 million $1 million 1982 16 Central Bank $0 million $4 million
Superior Bank Birmingham, Alabama Office of Thrift Supervision $2,700 million 0.00% $3,000 million $745 million $808 million $528 million 1957 824 Superior Bank, N.A. $1,840 million $260 million

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