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2011 Mortgage-Related Casualties Reach 100

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Including banks, credit unions and non-bank operations — this year’s mortgage-related casualties climbed to 100 last week.

With an order in hand from the Superior Court of Cherokee County, Ga., the Georgia Department of Banking and Finance took possession Friday of CreekSide Bank. The seizure was made pursuant to the Official Code of Georgia, Section 7-1-150(a).

The state said it takes “possession of the business and property of any state chartered financial institution whenever such financial institution is either insolvent or operating in an unsafe or unsound condition to transact its business, is operating in violation of any court order, statute, rule or regulation, or requests the department to take possession of its business and property.”

As was the case with both of last week’s bank failures, the Federal Deposit Insurance Corp. was named receiver of the Woodstock, Ga., institution. The regulator had issued a cease-and-desist order against the bank in January 2010.

CreekSide was founded five years ago. The staff size finished June at 13 employees.

CreekSide’s deposits stood at $97 million as of June 30. Assets totaled $102 million and included $4 million in home loans, $29 million in commercial real estate loans and $19 million in construction-and-land-development loans.

Georgia’s banking department also closed down Patriot Bank of Georgia. The 8-year-old institution had $111 million in deposits and $151 million in assets including $85 million in residential mortgages, $74 million in commercial mortgages and $32 million in C&D assets. Headcount was 54 people.

Both failed banks were taken over by Georgia Commerce Bank. The FDIC agreed to a loss-sharing arrangement on $69 million of CreekSide’s assets and $136 million of Patriot’s assets. Losses from CreekSide’s failure are pegged at $27 million, while Patriot’s cost to the Deposit Insurance Fund is projected to reach $44 million.

So far this year, 70 FDIC-insured banks have failed. Including credit unions and non-bank firms, 100 mortgage-related entities have failed or been closed down.

The 10th FDIC-insured bank to fail this year, FirstTier Bank in Louisville, Colo., was due to poor board and management oversight of rapid growth, according to an analysis by the FDIC’s Office of Inspector General.

“By the close of 2006, more than half, of FirsTier’s $236 million loan portfolio consisted of acquisition, development and construction loans, representing 463 percent of the bank’s total capital,” the report stated. “This exposure made the institution vulnerable to a sharp downturn in the Colorado real estate market.”

On Thursday, the National Credit Union Administration released a statement indicating that United Resources Federal Credit Union didn’t reach the $200 million level of capital needed by Aug. 31 in order to maintain the operations of Western Bridge Corporate Federal Credit Union.

Western Bridge was a temporary entity created to assume the operations of Western Corporate Federal Credit Union, which was thrown into conservatorship by the NCUA in March 2009.

But the NCUA still plans to ensure that Western Bridge continues to serve its corporate credit union members.

“The service infrastructure and member service volume at Western Bridge have significant value,” the regulator said in a statement. “NCUA is working to solicit acquirers to obtain the business as a package transaction that will have minimal impact on member credit unions. This may be accomplished through a merger with or an acquisition by another corporate or wholesale financial institution.”

A day later, the NCUA issued a similar statement about U.S. Central Bridge Corporate Federal Credit Union after the Payments Network Federal Credit Union organizing council announced that that entity will not launch.

U.S. Central Bridge was created when U.S. Central Federal Credit Union failed the same week in 2009 as Western Corporate Federal.

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