Georgia continues to lead the nation with bank failures as regulators closed two more failed banks in Georgia. The latest bank to fail in the State was the Georgia Trust Bank, Buford, GA. For the year a total of eight banks have failed in Georgia, making the State the capital of U.S. bank failures and continuing a trend from last year.
Georgia had the largest number of bank failures in the United States during 2011 as regulators closed a total of 23 banks. The failed Georgia banks accounted for 25% of all bank failures last year.
To protect depositors, the FDIC sold failed Georgia Trust Bank to Community & Southern Bank, Atlanta, Georgia, which will assume all deposits of the failed bank. The two offices of Georgia Trust will reopen on Monday as branches of Community & Southern with all depositors of Georgia Trust automatically becoming depositors of the acquiring bank. FDIC insurance coverage for depositors of Georgia Trust will continue without interruption and depositors will have full access to their money over the weekend through the use of checks, ATM and debit cards.
Georgia Trust Bank had only been in business since May 2005. During the real estate mania of the 2000’s, the Bank rapidly and recklessly expanded its loan book by 400% from 2005 to 2009. In the aftermath of the financial meltdown of 2008, the Bank’s nonperforming assets increased rapidly and at March 31, 2012, the Bank had an astonishingly high troubled asset ratio of 544%. Considering the large amount of nonperforming loans on the books of Georgia Trust, it was simply a matter of time before regulators closed the bank.
Georgia Trust Bank had total assets of $119.8 million and total deposits of $117.4 million at March 31, 2012. The FDIC sold the failed Bank’s deposits to Community & Southern at a premium of 0.50%.
In addition to assuming all deposits, Community & Southern will also purchase $111.5 million of the failed bank’s assets subject to a loss-share transaction with the FDIC on $65.9 million of the asset pool acquired. The loss-share agreement allows Community & Southern to have a portion of the loss on the purchased bank assets to be reimbursed by the FDIC. According to the FDIC, a loss-share transaction results in minimizing losses on failed banking assets by keeping them in the private sector. The assets not purchased by Community & Southern will be retained by the FDIC for later disposition.
Community & Southern also acquired another Georgia bank that failed today, First Cherokee State Bank, Woodstock, GA. Counting today’s acquisition of two failed banks, Community & Southern has now acquired a total of 7 failed banks since 2010.
Community & Southern Bank is one of the best capitalized banks in Georgia and has over $2 billion in assets. According to the Bank’s website, Community & Southern was “created to build a leading regional bank delivering exemplary customer service and strong shareholder results. Since its inception on January 29, 2010, CSB has acquired the assets and deposits of five banks from the FDIC.” From the ashes of failed banks, CSB has become a large and financially stable bank serving the banking needs of Georgia residents.
The loss to the FDIC Deposit Insurance Fund for the failure of Georgia Trust Bank is $20.9 million. Georgia Trust Bank is the nation’s 35th banking failure and the seventh in Georgia.