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

Bank Toll Reaches 90

Recent mortgage-related operations to close or fail

July 10, 2010

By staff

The number of federally insured banks to fail during 2010 has reach 90 institutions. In addition, 13 non-bank firms and 11 credit unions have been shuttered. The Federal Deposit Insurance Corp. recently defended its use of loss-sharing agreements, while former directors and officers of one failed institution are being targeted for loss recovery.

New York's Banking Department closed USA Bank on Friday. The Port Chester, N.Y., bank's failure was attributed to inadequate capital. USA had been operating under two cease-and-desist orders by the state.

Named as receiver was the Federal Deposit Insurance Corp., which issued a prompt corrective action against USA in December 2009 and published a Notice of Charges and of Hearing in April.

New Century Bank, which does business as Customer's 1st Bank, agreed to assume the failed institution's $190 million in deposits at par. It also agreed to acquire USA's $193 million in assets.

The FDIC agreed to a loss-sharing arrangement on $159 million of the assets and expects its Deposit Insurance Fund to be depleted by $62 million as a result of USA's failure.

The Office of the Comptroller of the Currency followed New York with the seizure of Home National Bank in Blackwell, Okla. The OCC, which entered a formal agreement with the bank in 2008, pointed to a "substantial dissipation of assets and earnings" and blamed "unsafe and unsound practices."

"The bank incurred losses that depleted its capital, the bank is significantly undercapitalized, and there is no reasonable prospect that the bank will become adequately capitalized without federal assistance," the OCC said.

Home National employed 174 people.

As receiver, the FDIC sold the 77-year-old bank's 15 branches to RCB Bank, which picked up the failed firm's $561 million in deposits for an 0.22 percent premium. RCB also purchased $341 million of Home National's $645 million in assets. On Home National's balance sheet were $198 million in commercial mortgages, $60 million in construction-and-development loans and $51 million in residential loans.

Factoring in a $261 million loss-sharing agreement, the FDIC has pegged losses at $79 million as a result of Home National's failure. It was the 90th federally insured bank failure this year including two Maryland banks that also failed Friday.

FDIC Director, Division of Supervision and Consumer Protection Sandra L. Thompson recently defended the agency's use of loss-sharing agreements.

"The FDIC's use of loss-sharing agreements allows us to sell failed bank assets when an institution fails and potentially recover prior asset losses when market conditions improve," Thompson said in a recent statement. "These agreements affect not only the resolution of failing banks, but also the examination process for acquiring banks."

The National Credit Union Administration announced the June 30 liquidation of Southwest Community Federal Credit Union. The failed institution, founded in 1937, had $139 million in assets and 19,041 members.

Chartway Federal Credit Union agreed to purchase assets and assume and liabilities of the Saint George, Utah, credit union -- the 11th federally insured credit union failure during 2010.

In all, has tracked to closing or failure of 111 mortgage-related companies this year.

The NCUA said First Delta Federal Credit Union, which failed in October 2009, has been merged with Shreveport Federal Credit Union. First Delta, which operated in Marks Miss., had less than $6 million in assets and 3,000 members. It was chartered in 1981.

Earlier this month, the NCUA reported that it filed a notice of claim with Travelers Casualty & Surety Co. tied to its coverage on U.S. Central Federal Credit Union -- which collapsed in March 2009. In addition, demand letters were served on 18 former directors and officers of the former corporate credit union for losses exceeding the $10 million Travelers policy. They allegedly breached their dutie of care and loyalty -- contributing to the losses.

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