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

Failed Bank was Nearly 150 Years Old

Recent financial institution failures

Nov. 4, 2012

By Mortgage Daily staff

A nearly $1 billion bank in Illinois that almost achieved the 150-year mark failed on Friday. But the sizeable institution's demise won't cost as much as the seizure earlier in the day of a much smaller bank. The nation's corporate credit union system, which nearly collapsed three years ago, is reportedly on stronger footing.

Heritage Bank of Florida, a 38-employee institution that opened for business in 1999, was closed Friday by the Florida Office of Financial Regulation.

Heritage had $226 million in assets as of Sept. 30 that included $52 million in residential loans, $77 million in commercial real estate loans and $8 million in construction-and-development loans. Deposits stood at $223 million -- leaving a razor-thin $3 million in available capital.

The state named the Federal Deposit Insurance Corp. as receiver. The FDIC conducted a secret bidding process that had Centennial Bank picking up all of the deposits and $194 million of the assets.

The FDIC issued a cease-and-desist order against Heritage Bank in December 2010.

Deposit Insurance Fund losses are projected to be around $66 billion for Heritage Bank.

While the next bank failure -- Citizens First National Bank -- involved far more in assets, the $45 million expected tab is far less.

Citizens was seized by the Office of the Comptroller of the Currency, which said it only acted after the Princeton, Ill.-based bank suffered substantial dissipation of assets and earnings because of unsafe and unsound practices. Losses at Citizens depleted capital, according to the OCC, and left the bank with no reasonable prospect of becoming adequately capitalized.

The OCC entered a formal agreement with Citizens First in March 2010. Another OCC formal agreement was executed in October 2011.

Citizens' $924 million in total assets are being acquired by Heartland Bank and Trust Co. -- including $128 million in home mortgages, $231 million in CRE assets and $30 million in C&D loans. Bloomington, Ill.-based Heartland also assumed all of the $869 million in deposits of the failed bank, which was established in 1865.

Around 283 employees are impacted by the failure of Citizens -- the 49the FDIC-insured bank to fail so far during 2012.

On Wednesday, the National Credit Union Administration liquidated Women's Southwest Federal Credit Union. The move came after the regulator determined that the Dallas-based credit union was insolvent and had no prospect for restoring viable operations. Assets at the defunct financial institution were $260 million, bigger than the typical credit union failure, and it serviced 38,000 members.

Including Women's Southwest, Mortgage Daily has tracked the failure of 12 credit unions since Jan. 1.

The NCUA completed its three-year effort to stabilize the corporate credit union system with its Oct. 29 closing of U.S. Central Bridge Corporate Federal Credit Union, which was created to take over U.S. Central Federal Credit Union when it was placed into conservatorship in March 2009. NCUA Board Chairman Debbie Matz touted in the statement how the corporate system has gone from the brink of failure three years ago to a "stronger, safer system."

On Thursday, the NCUA reported that its estimate of assessments tied to the Corporate Credit Union Stabilization Fund was cut from between $6 billion and $9.3 billion as of the end of last year to between $6 billion and $8.9 billion as of the end of June. Given the $4.1 billion already paid by credit unions to the fund, remaining assessments are projected to range between $1.9 billion and $4.8 billion over the remaining life of the Stabilization Fund, which expires in 2021.

"The narrower range of projected remaining assessments reflects the actual performance of the legacy assets to date and NCUA's updated assessment of the macroeconomic factors used in projecting the future performance of [NCUA Guaranteed Notes] Program," the statement said. "Forecasting borrower behavior and changes in the economic environment is challenging. Factors influencing the estimated range include changes in housing prices, interest rates, unemployment rates and mortgage prepayments."

Some fund costs have been offset by more than $170 million in legal settlements extracted from seven Wall Street securities firms.

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