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Losses on Friday’s 5 Failures Estimated at $3.7 Billion

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The government expects nearly $3.7 billion in losses from five financial institutions that failed Friday. No buyer was found for one of the failures — leaving more than 200 employees without work. Several branches were caught up in the recent collapse of West Coast-based operation.

The first casualty was Dwelling House Savings and Loan Association, which was seized by the Office of Thrift Supervision. As was the case with all of Friday’s failures — the Federal Deposit Insurance Corporation was named receiver of the 119-year-old Pittsburgh institution.

The OTS said Dwelling House, which had just nine employees as of March 31, “was in an unsafe and unsound condition, was critically undercapitalized and had no reasonable prospect of recovery.”

PNC Bank, National Association, assumed all of Dwelling House’s $14 million in deposits as of March 31. PNC also acquired $3 million of the failed firm’s $13 million in assets, which included $8 million in residential loans and $1 million in commercial mortgages as of March 31.

Dwelling House, the 73rd FDIC-insured failure this year, is expected to cost the FDIC $7 million.

But the 74th failure — Colonial Bank, which was closed by the Alabama State Banking Department and sold to Branch Banking and Trust — is expected to deplete the Deposit Insurance Fund by $2.8 billion.

No. 75 Union Bank, National Association, was closed by the Office of the Comptroller of the Currency, which said in an announcement that the bank was operated in an “unsafe and unsound” manner leading to deterioration in earnings, assets and capital and leaving the bank critically undercapitalized with no reasonable prospect of recovery.

MidFirst Bank in Oklahoma City assumed all but $88 million of Union Bank’s $112 million in deposits as of June 12. MidFirst also acquired around $11 million of the failed institution’s $124 million in total assets, which included $14 million in one- to four-unit mortgages, $23 million in commercial mortgages and $31 million in construction-and-land-development loans as of March 31.

The FDIC expects losses of $61 million from the failure of Gilbert, Ariz., Union Bank — which was founded in 1998 and had just 17 employees at the end of March.

MidFirst also acquired $126 million in assets from Community Bank of Arizona in Phoenix, which was closed by the Arizona Department of Financial Institutions. The department called the bank’s condition “unsafe and unsound” and noted that parent Community Bancorp was unable to invest more capital.

Total assets at Community Bank ended June at $159 million, while total deposits were $144 million. The FDIC entered a loss-sharing agreement with MidFirst on $55 million of the assets, and losses to the agency are projected at $26 million.

By order of the Nevada Financial Institutions Division, another Community Bancorp subsidiary — Community Bank of Nevada — was closed by the state commissioner due to inadequate capital. No buyers were found for the 233-employee bank, so the FDIC prepared it for dissolution by creating the Deposit Insurance National Bank of Las Vegas to manage temporary bank services for 30 days while individual deposits are returned or transferred.

Nevada State Bank is providing operational management for the failed Las Vegas bank, and remaining depositors’ checks will be mailed at the end of the 30-day period.

Community Bank of Nevada had $1.52 billion in assets as of June 30, including just $14 million in home loans, $374 million in commercial mortgages and a whopping $652 million in construction-and-land-development loans. Deposits stood at $1.38 billion — including $4 million in uninsured deposits at the end of June. The cost to the FDIC for the 14-year-old bank’s failure was estimated at $781 million.

Community Bank of Nevada was the 77th federally insured bank to fail this year.

America One Finance Inc. advised its 2,000 loan professionals on Aug. 7 that it is winding down business in all states, according to the Mortgage Lender Implode-O-Meter. America One Chief Executive Officer Matt Simmons reportedly called the broker model “dead” because of fee policing by the U.S. Department of Housing and Urban Development.

Bellevue, Wash.-based America One said it transferred its best branches to Loan Network LLC. A letter to loan officers indicated they were invited to apply with Loan Network.

Loan Network Managing Member Scott Fletcher declined to comment on the branch additions, noting in a statement to MortgageDaily.com that the move was, “Not a big story — just good old fashion business.”

In all, MortgageDaily.com has tracked 130 mortgage-related closings during 2009.

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