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

FDIC Finds No Buyers for 3 Failed Banks

7 banks fail Friday

Dec. 21, 2009

By staff

Seven federally insured financial institutions with assets in excess of $14 billion failed on Friday, including three seized by the Office of Thrift Supervision and three for which no acquirers were found. Projected losses from the failures exceed $1.7 billion.

RockBridge Commercial Bank will be liquidated by the Federal Deposit Insurance Corporation, which was named receiver Friday after the Georgia Department of Banking and Finance shut down the three-year-old Atlanta institution. Checks will be mailed to depositors on Monday. Deposits, including $2 million in uninsured deposits, stood at $292 million as of Sept. 30, while the capital cushion was alarmingly low with assets at $294 million -- including $15 million in home loans, $58 million in commercial mortgages and $79 million in construction-and-land-development loans.

The FDIC said it could not find a buyer for RockBridge's assets and it did not estimate losses to its Deposit Insurance Fund. Rockbridge, which faced an Oct. 28 prompt corrective action by the FDIC, had 20 employees.

Next, the OTS closed Peoples First Community Bank, noting that the Panama City, Fla.-based bank "was critically undercapitalized and in an unsafe and unsound condition to transact business." Mississippi's Hancock Bank assumed Peoples First's $1.7 billion in deposits as of Sept. 30 for a 1 percent premium and acquired $1.6 billion of its $1.8 billion in assets -- with the FDIC sharing in losses on $1.4 billion of the assets. The FDIC projects a $557 million loss from the 375-employee firm's failure.

In New Baltimore, Mich., the Michigan Office of Financial and Insurance Regulation seized 87-year-old Citizens State Bank, which had 58 employees, $157 million in deposits and $169 million in assets as of September's end -- including $37 million in residential loans, $74 million in commercial real estate loans and $10 million in construction-and-land-development loans. In October, Citizens faced an FDIC cease-and-desist-order.

The FDIC created the Deposit Insurance National Bank of New Baltimore to enable a smooth liquidation of deposits over a 45-day period. The Huntington National Bank has agreed to provide management assistance during the liquidation. Losses from the closure of Citizens are expected to hit $77 million.

Friday's fourth failure was New South Federal Savings Bank in Irondale, Ala., which was closed by the OTS. New South had $1.2 billion in deposits as of Sept. 30 and $1.5 billion in assets -- including $732 million in one- to four-unit assets, $126 million in commercial mortgages and $131 million in construction-and-land-development assets. New South -- which suspended mortgage originations last month -- was founded in 1985 and employed 381 people at the end of September. It faced a cease-and-desist order by the OTS in May.

Beal Bank assumed all of New South's deposits at par and acquired all of its assets, with the FDIC agreeing to a $1.2 billion loss-sharing transaction. Beal's deal follows a settlement between Beal and the FDIC where the agency agreed to pay the Plano, Texas-based bank $90 million to settle a seven-year-old lawsuit accusing the FDIC of refused to repurchase more than 1,000 defaulted subprime mortgages originated by failed Superior Federal Bank.

The FDIC projected that the Deposit Insurance Fund will be depleted by $212 million as a result of New South's failure.

The operations of Independent Bankers' Bank, founded in 1986, will be taken over by Independent Bankers' Bank Bridge Bank, National Association, which the FDIC created to carry on the failed bank's business. Independent Bankers' had no retail deposits or loans; instead, it provided correspondent banking services to client banks.

The failed Springfield, Ill.-based bank had 450 clients, 64 employees and $512 million in deposits as of the end of the third quarter. Its assets totaled $586 million -- including $1 million in residential assets, $54 million in commercial mortgages and $33 million in construction-and-land-development loans. FDIC losses are forecasted at $68 million.

Independent Bankers entered a formal agreement with the Federal Reserve Bank of Atlanta and the State of Florida, Office of Financial Regulation, in October; entered a formal agreement with the Federal Reserve Bank of Chicago
and the Illinois Department of Financial and Professional Regulation, Division of Banking in June; and faced a cease-and-desist order from the fed and Illinois in September.

After that, the California Department of Financial Institutions -- in cooperation with banking commissioners in Maryland and Nevada -- shut down 146-employee Imperial Capital Bank. The state cited "inadequate capital and other material weaknesses" in its seizure of the 36-year old firm -- which faced an FDIC prompt corrective action in October and a cease-and-desist order by the FDIC in February.

City National Bank agreed to assume Imperial's $2.8 billion in deposits as of Sept. 30 for an 0.24 percent premium, It also agreed to acquire $3.3 billion of the La Jolla, Calif.-based institution's $4.0 billion in assets -- which included less than $0.1 billion in home loans, $2.2 billion in commercial mortgages and $0.3 billion in construction-and-land-development loans. Factoring in a $2.5 billion FDIC loss-sharing arrangement, $619 million losses are projected from the failure.

Friday's seventh and final bank failure was 80-year-old First Federal Bank of California, which the OTS closed because it "was in an unsafe and unsound condition." The 509-employee Santa Monica, Calif.-based bank had $4.5 billion in deposits as of Sept. 30, which were all assumed at par by OneWest Bank, FSB. All of first Federal's $6.1 billion in assets -- including $3.7 billion in home mortgages and $2.0 billion in commercial mortgages -- were acquired by OneWest, though the FDIC will share in losses on $5.3 billion of the assets.

First Federal announced in January that it faced an OTS cease -and-desist order, and it halted new originations shortly after. Babette Heimbuch resigned two weeks ago as chairman FirstFed Financial Corp. She had planned to relinquish her role as chief executive officer on Dec. 31.

The Deposit Insurance Fund will take an estimated $146 million hit as a result of First Federal's failure -- the 140th FDIC-insured failure this year. Including credit unions and non-bank mortgage lenders, has tracked 225 mortgage-related closings this year.

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