First National Bank of the South - Wholesale - Agency, Alt-A

In a memo dated 2009-09-02, First National Bank of the South announced it had made "a strategic decision to withdraw from the wholesale mortgage business." The division had been in operation for about 18 months and accounted for the majority of the bank's residential mortgage loan volume. Wholesale residential originations averaged as much as $34.7/mo at peak per reports on file with banking regulators.

Parent company First National Bancshares, Inc. had reported a $20 million loss for the second quarter of 2009. The losses, according to an article in MSN Money, were due largely to increased provisions for loan losses. FNB of the South is operating under a Consent Order with the OCC, and continues to work on a "proactive strategy" to reshape "the mix of its credit portfolio," which included mostly commercial and construction/development loans. Residential loans were primarily sold on the secondary market, as illustrated in this excerpt from their most recent 10-Q filing:

"Due to the nature of this division, the loans held for sale typically are held for a seven- to ten-day period. Therefore, the liquidity needs of this activity have leveled off since its initial reporting period in 2007, as the ongoing activity of the wholesale mortgage division generally funds future loans with the proceeds from the sale of loans in the existing portfolio."

According to a source familiar with the company, First National Bank of the South's wholesale operation "catered to community banks and a small group of bankers" primarily within their banking footprint in South Carolina. We have a call in to CFO Kitty Payne for more details of the division's closure.