CreekSide Bank, Woodstock, Georgia, was closed today by state regulators who appointed the FDIC as receiver. The failed bank was sold by the FDIC to Georgia Commerce Bank which will assume all deposits of the failed bank.
Creekside Bank was very similar to Patriot Bank, the second Georgia bank closed by regulators today. Both banks were established in mid 2006 at the peak of the Georgia real estate market and proceeded to aggressively expand their loan portfolios.
The latest reported financial results for Creekside Bank reveal an extremely high troubled asset ratio of 593%. Once a bank’s troubled asset ratio exceeds 100%, the odds of recovery are extremely small and the bank usually fails.
In January 2010, the CreekSide Bank signed a consent order issued by the FDIC which cited numerous operational, financial and managerial deficiencies. The consent order prohibited CreekSide from undertaking asset growth of over 10% without specific regulatory permission but the damage had already been done.
Aggressive loans made by CreekSide during its first four years of operations defaulted and loan losses quickly vaporized the Bank’s capital position. The FDIC ordered Creekside to raise additional capital within 60 days. Creekside was unable to raise additional capital from investors and regulators were forced to close the Bank.
The two branches of Creekside will reopen on Tuesday as branches of Georgia Commerce Bank. Depositors will have full access to their money over the weekend through the use of debit cards, checks and ATM machines.
At June 30, 2011, Creekside had total assets of $102.3 million and total deposits of $96.6 million. Besides assuming all deposits, Georgia Commerce will purchase all of the assets of failed CreekSide, subject to a loss-share transaction with the FDIC that covers $69.2 million of the asset pool acquired. The loss-share agreement will limit future losses to Georgia Commerce on the purchased assets. According to the FDIC, loss-share transactions minimize losses on failed bank assets by keeping the assets in the private sector.
Georgia Commerce Bank is a locally owned independent bank with $420 million in assets and showed net income of $870,700 for the six months ended June 30, 2011. Georgia Commerce also acquired failed Patriot Bank of Georgia, Cumming, GA, which was closed by regulators today along with CreekSide Bank.
CreekSide Bank is the nation’s 70th banking failure of 2011 and the 19th banking failure in Georgia. The loss to the FDIC for the failure of CreekSide Bank is $27.3 million.