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



7 Banks Seized

6 Illinois banks, 1 Texas bank closed today

July 2, 2009

By MortgageDaily.com staff


Six small Illinois financial institutions owned by one family were among seven banks seized by bank regulators today. Banks assuming the deposits of the failed institutions paid some hefty premiums.

The John Warner Bank was shut down today by the Illinois Department of Financial and Professional Regulation, Division of Banking, a news release said. The Federal Deposit Insurance Corporation was named receiver.

Just 26 employees worked at the bank.

State Bank of Lincoln acquired all of the failed firm's $64 million in deposits as of April 30 for a 4.1 percent premium.

The 142-year-old bank, based in Clinton Ill., had assets of $70 million as of April 30 -- including $5 million in home loans, $9 million in commercial mortgages and $6 million in construction-and-land-development loans. State Bank purchased around $31 million of the assets, with the FDIC sharing in losses.

The failure of The John Warner Bank -- the 46th FDIC-insured institution to close this year -- is expected to cost the agency's Deposit Insurance Fund $10 million.

The Illinois banking regulator also seized The First State Bank of Winchester and appointed FDIC receiver.

The bank had been in business since 1867 and had just 15 employees as of Dec. 31.

The First National Bank of Beardstown agreed to assume all of the $34 million in deposits as of April 30 for a 2.0 percent premium.

The First State Bank had $36 million in assets as of April 30. Residential mortgage holdings were $5 million as of March 31, while commercial mortgages on the books were $4 million and construction-and-land-development loans owned were less than $1 million. The First National Bank acquired around $33 million of the assets, and the FDIC agreed to share in losses on around $20 million of the assets.

The Winchester, Ill., institution's failure is expected to cost the FDIC $6 million.

The First National Bank was the 47th federally insured bank to fail this year.

No. 48 was Rock River Bank in Oregon, Ill., which was also closed by the state's banking division and handed over to the FDIC.

The 73-year-old bank had just 24 employees as of March 31.

The Harvard State Bank agreed to acquire all of Rock River's $76 million in deposits as of April 30 for a 2 percent premium.

Assets at Rock River stood at $77 million as of April 30 -- including $15 million in one- to -four-unit financings, $20 million in commercial mortgages and $6 million in construction-and-land development loans. The FDIC, which expects to lose $28 million on the failure, agreed to a loss-sharing arrangement on $51 million of the assets.

The fourth Illinois institution to go today was The Elizabeth State Bank based in Elizabeth. The Illinois bank division closed the 15-employee bank, which was founded in 1934, and appointed FDIC receiver.

Galena State Bank and Trust assumed all of the failed bank's $50.4 million in deposits as of April 30 for a 1 percent premium.

The Elizabeth State Bank's assets ended April at $56 million, and Galena acquired $52 million of the assets with the FDIC sharing in losses on $45 million. As of March 31, residential holdings were $16 million, commercial mortgage holdings were $8 million and construction-and-land-development holdings were $7 million. In all, the FDIC expects to lose $11 million on the failure of the bank -- the 49th this year.

Another Illinois institution, The First National Bank of Danville, was closed by the Office of the Comptroller of the Currency and placed in receivership under the FDIC -- becoming the 50th federally insured bank to fail this year.

First National was established in 1857 and employed 75 people as of March 31.

"The OCC acted after finding that the bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," the OCC said in a statement. "The OCC also found that the bank has incurred losses that have depleted most of its capital, and there is no reasonable prospect that the bank will become adequately capitalized without Federal assistance."

First Financial Bank, N.A., acquired all of First National's $147 million in deposits for a 5.36 percent premium. First Financial also acquired around $148 million of First National's $166 million in assets as of April 30, and the FDIC -- which expects the closing to cost $24 million -- agreed to a loss-sharing arrangement. Residential assets at First National ended March at $38 million, commercial mortgage holdings were $26 million and construction-and-land-development loans were $5 million.

The sixth failure today was Millennium State Bank of Texas in Dallas -- which was seized by the Texas Banking Commissioner.

"The bank closed due to poor oversight of lending activities and failure to properly manage interest rate risk," the commissioner said in a statement. "The institution encountered severe asset quality problems and has been unprofitable since 2005. The board of directors was unsuccessful in resolving these significant problems, resulting in the bank's closure."

Millennium had just 18 employees as of March 31.

State Bank of Texas negotiated the assumption of $115 million in deposits as of June 30 from the FDIC. State Bank also acquired all of the $118 million in assets -- including $3 million in home loans, $62 million in commercial mortgages and $7 million in construction-and-land-development loans.

The FDIC expects to lose $47 million on the collapse.

Millennium, which was just six years old, was the 51st FDIC-insured bank to fail during 2009.

The 52nd, Founders Bank, was also closed by the Illinois Department of Financial and Professional Regulation, Division of Banking and placed in the FDIC's receivership.

Founders was established in 1961 and employed 209 people as of March 31.

The PrivateBank and Trust Co. assumed all of the Worth, Ill., bank's $849 million in deposits as of April 30 for a 1.5 percent premium.

In addition, The Private Bank agreed to acquire around $888 million of Founders' $963 million in assets -- with the FDIC sharing in losses. At March's end, Founders' home loan holdings were $119 million, while its commercial mortgage assets were $244 million and its construction-and-land-development holdings were $163 million.

FDIC's expected costs because of Founders' failure is $189 million.

"The six failed Illinois banks are all controlled by one family and followed a similar business model that created concentrated exposure in each institution," the FDIC stated. "The failure of these banks resulted primarily from losses related to the banks' investment in collateralized debt obligations and other loan losses."

From Jan. 1 through today, MortgageDaily.com has tracked the closing of 94 mortgage-related firms.
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