Capitol City Bank & Trust Co, Georgia, Collapses – Largest Bank Failure of 2015

Capitol CityThe largest bank failure of the year occurred today as regulators closed down Capitol City Bank & Trust Company, Atlanta, Georgia.  After shuttering the bank, the Georgia Department of Banking & Finance appointed the FDIC as receiver.  To protect depositors the FDIC sold the failed bank under a purchase and assumption agreement to First-Citizens Bank & Trust Company, Raleigh, North Carolina.

After a rash of banking failures during the financial crisis Georgia had only one banking failure last year when regulators closed down the Eastside Commerical Bank on July 18, 2014.  Capitol City

With the economy recovering from the dark days of the financial crisis both the number and size of bank failures has declined dramatically.  The number of banking failures has declined every year since 2010 when 157 banks failed and the size of failed banks has also greatly declined.  During 2014, 18 banks failed that had an average of $172 million in total assets.

Banking Failures Since 2008

Year           Number of Bank Failures

2008               25

2009             140

2010              157

2011                92

2012                51

2013                24

2014                 18

2015                   3

Total               510

Although there were a not insignificant total of 329 banks officially considered as “problem banks” by the FDIC as of September 30, 2014, the average asset size of these problem banks was only $310 million.  The days of billion dollar asset sized bank failures appears to be largely over at this point.

Click on graph area to view data points tableCapitol City Bank & Trust was opened in October 1994 and served customers from eight branches.  According to the Bank’s website, Capitol City was started with the mission of serving inner city inhabitants of Atlanta and the bulk of its customer base was the African-American community based in southwest and downtown Atlanta.  The bank offered the standard array of banking services but ultimately failed due to a staggering amount of defaulted loans.  At September 30, 2014, Capitol City Bank had a troubled asset ratio of 454% and the ratio has been above 100% since late 2009.  Once a bank’s troubled asset ratio exceeds 100% the odds of ever recovering are extremely remote and one can only wonder why regulators took so long to close this bank.  Past banking crises have seen a rapid decline in problem banks as regulators swiftly closed down banks with little hope of recovery.  The reason why the number of problem banks remains high long after the banking crisis has receded seems to be based on the unusual leniency by regulators in allowing very weak banks to attempt to recapitalize themselves when the odds of success are very low.

All eight branches of failed Capitol City will reopen as branches of First-Citizens Bank & Trust.  All depositors of the failed bank will become depositors of First-Citizens with uninterrupted FDIC coverage of deposits up to the applicable limits.  Depositors of Capitol City will have full access to their money over the weekend through the use of checking accounts, debit cards, or by using ATM.

At December 31, 2014, Capitol City Bank & Trust had total assets of $272.3 million and total assets of $262.7 million.  First-Citizens, in addition to assuming all deposits of failed Capitol City also agreed to purchase all of the assets of the failed bank.

The cost to the FDIC Deposit Insurance Fund is $88.9 million or about 33 percent of the failed bank’s total assets.  Capitol City Bank & Trust becomes the largest and third banking failure of 2015.  The previous two banking failures of 2015 occurred in Illinois and Florida.

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