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

Trio of Bank Failures Push 2010 Closings Past 100

Three banks fail on Friday

June 5, 2010

By staff

Three banks that were each more than a century old and made it through the Great Depression were unable to survive the Great Recession. The failures pushed the number of mortgage-related closings this year past 100.

After finding that First National Bank experienced substantial dissipation of assets and earnings due to unsafe and unsound practices, the Office of the Comptroller of the Currency seized the Rosedale, Miss., institution and -- as is done when any federally insured bank fails -- handed it over to the Federal Deposit Insurance Corporation as receiver. The bank had just 10 employees.

The Jefferson Bank assumed 103-year-old First National's $64 million in deposits at par and acquired its $60 million in assets, which included more than $2 million in residential loans and $1 million in commercial mortgages. Factoring in a $44 million loss-sharing agreement, the FDIC estimates the cost to its Deposit Insurance Fund will exceed $12 million.

Following First National's demise, the Illinois Department of Financial Professional Regulation - Division of Banking shut down 127-year-old Arcola Homestead Savings Bank. No buyer was found for the Arcola, Ill., bank's $18 million in deposits, and the it will be liquidated. Arcola Homestead had just $17 million in assets -- including $7 million in home loans, $3 million in commercial mortgages and less than $1 million in construction-and-land-development loans. The FDIC projected associated losses at around $3 million.

Just six employees are impacted by the demise of Arcola Homestead, which was hit with an FDIC cease-and-desist order in June 2009.

Friday's third and final failure was the FDIC's most costliest: $298 million. The bank, 103-year-old TierOne Bank in Lincoln, Neb., was closed by the Office of Thrift Supervision -- which noted that TierOne had losses in 10 of the past 11 quarters, had no acceptable plan of recovery and was unable to find a white knight. The OTS hit TierOne employee Kristin M. Hoerle with a removal-prohibition order in December.

Great Western Bank stepped up to assume TierOne's $2.2 billion in total deposits for a 1.5 percent premium. Great Western also acquired the failed bank's $2.8 billion in assets -- including $0.7 billion in one- to four-unit properties, $0.6 billion in commercial mortgages and $0.4 billion in C&D loans.

The FDIC agreed to a $1.9 billion loss-sharing transaction, pushing its estimated losses to $298 million.

TierOne, which had 764 employees, was the 81st FDIC-insured institution to fail this year and the 101st mortgage-related closing tracked by during 2010.

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