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

FDIC Chairman Exits With a Bang

3 failures to cost nearly $600 million

July 9, 2011

By staff

The same day that the Republican-appointed chairman of the Federal Deposit Insurance Corp. stepped down, the agency announced that three bank failures that same day would cost the Deposit Insurance Fund nearly $600 million.

On Friday, Shelia C. Bair officially stepped down as FDIC chairman. Bair served through a tumultuous period during which 376 federally insured banks failed.

She was appointed by President George W. Bush in 2006. Bair called her FDIC tenure "a remarkable journey" and plans to spend the summer with her family. In September, she becomes a senior advisor for the Pew Charitable Trusts.

Vice Chairman Martin J. Gruenberg assumed the role of acting FDIC chairman while President Obama decides who he will nominate.

Also on Friday, the Illinois Department of Financial and Professional Regulation closed First Chicago Bank & Trust and handed it over to the FDIC as receiver. In turn, the FDIC conducted a private bidding process prior to the 106-year-old bank's failure and named Northbrook Bank & Trust Co. the winning bidder.

A prompt corrective action was issued by the Federal Reserve Bank of Chicago against 125-employee First Chicago in April. The Federal Reserve Bank of San Francisco reported last year that Franklin Resources Inc. intended to increase its voting shares of First Chicago, while a group including Castle Creek Partners III applied with the Fed also in 2010 to up its voting shares to 85 percent from 39 percent.

Deposits stood at $888 million as of March 31 and cost Northbrook an 0.50 percent premium to assume.

The Chicago-based bank had a whopping $959 million in assets at the time of its demise, including $90 million in residential loans, $394 million in commercial real estate loans and $85 million in construction-and-land-development loans. Northbrook agreed to acquire around $881 million of First Chicago's assets as long as the FDIC agreed to share in losses on $700 million of the assets. The expected cost to the Deposit Insurance Fund as a result of the failure was estimated at $284 million.

After that, the Colorado Division of Banking seized Colorado Capital Bank. As receiver, the FDIC sold the Castle Rock, Colo.-based bank's $718 million in assets -- including $170 million in home loans, $67 million in commercial mortgages and $292 million in C&D assets -- to First-Citizens Bank & Trust Co. The FDIC agreed to a loss-share transaction for $580 million of the assets.

First Citizens assumed $673 million in deposits.

In May, the FDIC issued a prompt corrective action against 13-year-old Colorado Capital, while it issued a cease-and-desist order against the bank in September 2010.

The FDIC expects losses from 130-employee Colorado Capital's failure to reach $284 million.

The Colorado Division of Banking also shut down Signature Bank in Windsor, Colo. The FDIC sold the roughly $67 million in assets to Points West Community Bank, which also picked up $65 million in deposits. Losses from the 15-employee institution's failure are pegged at $22 million.

Seven-year-old Signature was hit with an FDIC prompt corrective action in March and an FDIC cease-and-desist order in October 2009. Assets included $17 million in one- to four-unit mortgages, $9 million in CRE loans and $9 million in C&D loans.

Signature was the 51st FDIC-insured institution to fail this year -- bringing total mortgage-related casualties to 77 so far during 2011.

Total expected losses from Friday's three failures add up to $590 million. While that's nowhere near the as much as $8 billion in losses estimated when IndyMac Bank F.S.B. failed in July 2008, it's still a sizable chunk for the Deposit Insurance Fund.

Operations were discontinued at Borinquen Federal Credit Union by the National Credit Union Administration -- which threw Borinquen into conservatorship a week earlier. The NCUA said it would now liquidate the Philadelphia institution.

Founded in 1974, the 8,600-member credit union had just $6 million in deposits and was among 16 credit union failures tracked so far this year by

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