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

No. 50 Goes Down

Recent bank failure activity

Nov. 18, 2012

By Mortgage Daily staff

This year's death toll for federally insured banks has reached 50. The latest casualty was in Georgia -- home to more of 2012's bank failures than any other state. But one bank sees opportunity in the Peach State's elevated activity.

An order was obtained Friday from the Superior Court of Jackson County enabling the Georgia Department of Banking and Finance to seize control of Hometown Community Bank.

The maneuver was made pursuant to the Official Code of Georgia, Section 7-1-150(a) authorizing the department to take possession of the business and property of any state chartered financial institution when it determines the bank is either insolvent or operating in an unsafe or unsound condition; operating in violation of any court order, statute, rule or regulation; or is requested by the bank's board to take possession of its business and property.

The state appointed the Federal Deposit Insurance Corp. as receiver of the seven-year-old bank. Following a secret bidding process, the FDIC awarded the winning bid to CertusBank, N.A.

More than $15 million of the failed bank's assets were tied up in one-to-four residential loans, while $25 million was invested in commercial mortgages and $26 million was held in construction-and-land-development loans.

Hometown was among 127 mortgagees that failed to meet the Department of Housing and Urban Development's annual recertification requirements and lose Federal Housing Administration approval for a year in 2010.

It's the fourth recent failed bank acquisition that Greenville, S.C.-based CertusBank has done with the FDIC. In January 2011, assets of CommunitySouth Bank & Trust were acquired from the FDIC. In May 2011, assets of First Georgia Bank Co. and Atlantic Southern Bank were acquired from the FDIC.

"The State of Georgia remains strategic to us," CertusBank Executive Chairman, Milton H. Jones Jr. said in a statement. "Our footprint covers some of the most economically diverse and promising markets in the country, and we enjoy being an integral part of the communities we serve."

Nearly $125 million in losses to the Deposit Insurance Fund as a result of 18-employee Hometown's failure are projected by the FDIC.

Hometown was the 50th FDIC-insured bank failure so far during 2012.

Georgia has been hit hardest by bank failures this year, with the latest casualty bringing this year's count to 10.

The FDIC disclosed on Nov. 14 plans to close its east coast temporary satellite office in Jacksonville, Fla., on April 5, 2014. The decision to close the office was based on a review of ongoing workload and signs of improving health in the banking industry. Approximately 420 mostly non-permanent employees are impacted by the office closing.

The FDIC found banks that failed during the recent financial crisis had acquisition, development and construction loan concentrations at three times the level of their surviving brethren. The FDIC Office of Inspector General studied the concentration of ADC loans at institutions that did not fail to determine how they mitigated risk from the loan type during stressful economic times. The OIG found 436 institutions had an ADC concentration of 100 percent or greater as of December 2007 and were in satisfactory condition as of April 2011.

The report found boards that are well informed and active were better able to weather the financial crisis without deterioration in their financial conditions. Also contributing here are strong management, sound credit administration and underwriting practices, and adequate capital.

"Ultimately, the strategic decisions and disciplined, values-based practices and actions taken by the boards and management helped to mitigate and control the institutions' overall ADC loan risk exposure and allowed them to react to a changing economic environment," the report stated. "Unlike many failed banks that saw their capital evaporate rapidly because of the losses associated with their ADC portfolios, the banks in our study experienced comparatively fewer losses and were able to maintain stable capital positions."

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