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

PrimeLending Parent Picks Up Failed Bank

Recent mortgage-related closings and failures

Sept. 16, 2013

By Mortgage Daily staff

A small bank and a not-so-small financial institution failed last week, and the larger one was acquired by the parent of PrimeLending. Also on the latest casualty list were a small credit union and a wholesale lender.

The Connecticut Department of Banking announced Friday that it declared The Community's Bank insolvent because it was too unsafe and unsound to continue operations.

State Banking Commissioner Howard F. Pitkin explained that the Bridgeport, Conn.-based firm had a deficit capital position of $31,000 as of June 30.

"The banking department worked diligently to find ways to allow for the continued operation of The Community's Bank," Pitkin said in the statement. "Unfortunately, despite considerable efforts in seeking an acquirer or viable investor, the bank's issues could not be resolved and my primary responsibility is to the protection of Connecticut consumers, and in this case, specifically the depositors of this institution."

Community's Bank was founded in February 2001 and subsequently acquired three branches divested from Fleet Bank's merger with Bank of Boston. Just 13 people were on staff as of mid-year. Total deposits were $26 million, while $26 million in total assets included $5 million in residential loans, $7 million in commercial real estate loans and less than $2 million in construction-and-development loans.

The Federal Deposit Insurance Corp., which was appointed receiver of The Community's Bank, couldn't find a buyer for the failed bank and will send checks to insured depositors.

An FDIC consent order against the bank was modified in April 2011, while an FDIC cease-and-desist order was issued in February 2010.

The FDIC projects nearly $8 million in losses as a result of the demise of Community's Bank.

Next, the Office of the Comptroller of the Currency announced that it closed down First National Bank in Edinburg, Texas.

"The OCC acted after finding that the bank had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," the statement said. "The OCC also found that the bank incurred losses that depleted its capital, the bank is critically undercapitalized, and there is no reasonable prospect that the bank will become adequately capitalized."

The 79-year-old bank had 716 employees and $3.1 billion in total assets -- including $0.418 billion in home loans, $0.925 billion in CRE loans and $0.297 billion in C&D loans.

The failed financial institution faced an OCC consent order in February 2011 and another OCC consent order in January 2012. Parent First National Bank Group Inc. entered a written agreement with the Federal Reserve Bank of Dallas in June 2011.

The OCC appointed the FDIC as receiver. Following a secret bidding process, PlainsCapital Bank won its bid to assume all of the $2.3 billion in deposits and acquire $2.7 billion of the failed bank's assets -- with the FDIC agreeing to a loss-share transaction on $1.8 billion of the assets.

PlainsCapital-parent PlainsCapital Corp., which is also the parent of PrimeLending, was itself acquired in December 2012 by Hilltop Holdings Inc. While it wasn't the first attempt by Dallas-based PlainsCapital to acquire a failed bank, it was its first successful bid. The move will expand its Texas footprint.

The FDIC projects that its Deposit Insurance Fund will be depleted by $638 million as a result of First National's failure -- the 22nd federally insured bank failure this year.

Earlier this month, the Michigan Department of Insurance and Financial Services liquidated Craftsman Credit Union of Detroit and appointed the National Credit Union Administration as liquidating agent.

"The Michigan Department of Insurance and Financial Services made the decision to liquidate Craftsman Credit Union and discontinue its operations after determining the state-chartered credit union was insolvent and had no prospect for restoring viable operations," an NCUA statement said.

Craftsman, which was chartered in 1947, had 6,403 members and $24 million in assets. It was the 13th credit union casualty tracked so far in 2013 by Mortgage Daily.

CSB Mortgage Company Inc. was opened in March 2012 as a subsidiary of The Cortland Savings and Banking Co. The wholesale lender serviced mortgage brokers in Ohio and contiguous states.

"With more of the larger banks pulling back or out of purchasing one-to-four family residential loans, Cortland Banks saw a unique opportunity to create a subsidiary in order to become competitive in the market," CSB Senior Vice President Paul Snyderman said in an news release last year announcing the company's launch.

Now, Cortland Banks is pulling the plug on the business.

The Youngstown Vindicator reported last week that CSB has stopped accepting new business from mortgage brokers as a result of rising interest rates and market uncertainty. Processing and funding will continue for loans in the pipeline.

CSB was the 14th non-bank mortgage lender reported by Mortgage Daily to go out of business this year.

In all, 49 mortgage-related casualties have been identified so far in 2013.

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