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

Nearly $100 Million in Losses from Week's Bank Failures

Recent bank failures

June 17, 2012

By staff

Federal banking regulators project almost $100 million in losses from three bank failures last week. One of the financial institutions was more than a century old.

The first bank failure Friday was Putnam State Bank, which was closed by the Florida Office of Financial Regulation.

An FDIC cease-and desist order was issued in June 2010 against the former bank.

Established in 1988, the Palatka, Fla.-based institution had 42 employees. Total deposits stood at $160 million as of March 31, while total assets of $170 million included $5 million in home loans, $28 million in commercial real estate loans and $13 million in construction-and-development loans.

The state named the Federal Deposit Insurance Corp. as receiver, as is the case in all failures of federally insurance banks.

All of Putnam's assets and deposits were taken over by Harbor Community Bank, though the FDIC agreed to share in losses on $112 million of the assets. The FDIC projected that the Deposit Insurance Fund will be depleted by $37 million as a result of Putnam's collapse.

One state over, Security Exchange Bank was seized by the Georgia Department of Banking and Finance pursuant to the Official Code of Georgia, Section 7-1-150(a), which allows such an action when the financial institution is deemed to be "either insolvent or operating in an unsafe or unsound condition to transact its business; is operating in violation of any court order, statute rule or regulation; or requests the department to take possession of its business and property."

With an order from the Superior Court of Cobb County, the state handed over the Marietta, Ga., bank to the FDIC as receiver. A secret bidding process was held, and the winning bidder was Fidelity Bank -- which took over Security's $148 million in total deposits and $151 million in total assets.

Security was established in April 2000 and employed just 19 people. Residential loans on its balance sheet totaled $8 million, while commercial mortgages amounted to $41 million and C&D assets were $13 million. It was hit with an FDIC cease-and-desist order in March 2009 and entered a formal written agreement with the Federal Reserve Bank of Atlanta and Georgia's banking commissioner in June 2009.

After agreeing to a $103 million loss-share arrangement, the FDIC projected $34 million in total losses from Security's failure.

Friday's final FDIC-insured bank failure, and this year's 31st, was The Farmers Bank of Lynchburg, which was seized by the Tennessee Department of Financial Institutions.

"The department took possession of The Farmers Bank of Lynchburg due to The Farmers Bank of Lynchburg's impaired capital, unsound condition and the bank's inability to continue normal operations," the state said in a news release.

Established in 1888, Farmers is among the oldest banks to recently fall. In November 2011, the FDIC issued a consent order against the 32-employee bank.

Clayton Bank and Trust agreed to assume the Lynchburg, Tenn., bank's $156 million in total deposits for an 0.10 percent premium. It also agreed to acquire all of its $164 million in total assets including $33 million in residential mortgages, $40 million in CRE assets and $1 million in C&D loans.

Losses tied to Farmer's failure are projected to exceed $28 million.

Mortgage Daily has tracked the failure or closing of 51 mortgage-related businesses so far during 2012.

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