One Georgia Bank of Atlanta, Georgia, a $186 million dollar asset bank, was closed today by the Georgia Department of Banking and Finance. The FDIC, acting as receiver, sold the failed bank to Ameris Bank.
One Georgia Bank has been effectively insolvent since late last year with a troubled asset ratio of 350% which is 23 times higher than the nation median. A bank with a troubled asset ratio of over 100% has a very high statistical risk of winding up as a failed bank.
One Georgia Bank was given $5.5 million under the TARP program in May 2009 and never was able to repay the funds. Nor did One Georgia Bank make any payments of interest to the US Treasury on the loan which is now owned by the taxpayers.
One Georgia Bank agreed to execute a Consent Order with the FDIC in March 2010, which among other things, required One Georgia Bank to raise additional capital. The Bank was unable to comply with regulatory orders and was finally closed today.
One Georgia Bank was organized at the peak of the real estate boom in May 2006 and had to aggressively compete for loans against larger financial institutions. According to a press release issued by One Georgia Bank in October 2006, the Bank quickly doubled its assets to $50 million during the first six months of operations. The Bank was also giving away “fabulous prizes” to attract depositors and loan customers. Georgia Bank, like every other bank, had every reason to lend aggressively. If the profits rolled in, bank executives would profit handsomely, if the bank went under – well, the taxpayers were always there to pay for the losses.
The public is invited to visit the bank to register for weekly drawings of fabulous prizes. Drawings will begin on October 5, 2006, and run through November 15, 2006. Some of the giveaways include a four day/three night vacation at Pelican Bay at Lucaya, Bahamas, with roundtrip Business class airfare for two on AirTran; a four day/three night stay at The Westin Grand Bahama Island Our Lucaya; $1,000 in gold; $1,000 in silver; gift certificates to local restaurants such as Trois and Ted’s Montana Grill; and services from local businesses such as a custom suit from Soulo apparel, a cooking class at Park 75, a night a the Four Seasons and dental gift certificates from Dr. Don Ross. An original oil painting of a Bahamian beach scene by renowned Atlanta artist Gilbert Young is also featured as one of the prizes.
Regulators have allowed problem banks to remain open with the hope that they would be able to raise additional capital but this tactic has not worked. Small banks have found few investors willing to invest capital in troubled institutions especially when they can be bought much more cheaply from the FDIC after failing and have the benefit of loss protection agreements provided by the FDIC.
After previous recessions, rapid economic recovery allowed some troubled banks to grow their way out of problems as property values recovered and demand for new loans increased. This has not been the case this time around since there has been little recovery in the aftermath of the recession that started with the financial crisis in 2008. Property values have continued to decline, job growth has slowed to zero, real hourly earnings for employees is declining and the percentage of the population working is at a 25 year low.
At March 31, 2011, One Georgia Bank had total assets of $186.3 million and total deposits of $162.1 million. Ameris Bank will assume all deposits and purchase all assets of failed One Georgia Bank. Ameris will be protected from losses on $146.3 million of the asset pool acquired through a loss-share transaction with the FDIC.
Ameris Bank, which has been aggressively buying failed banking institutions, has its own set of financial problems. Ameris Bank has a very high troubled asset ratio of 92% and is given a low score for overall institutional financial strength by depositaccounts.com which ranks the financial health of banks. Although Ameris Bank is technically well capitalized, it has a large amount of nonperforming and REO assets.
Ameris Bank also acquired another Georgia bank that failed today, High Trust Bank of Stockbridge, GA. Including today’s acquisitions, Ameris has now acquired a total of 8 failed banks since October 2009.
Ameris Bank is one of the few banks that still owe the US Treasury money under the TARP program. Ameris was given $52 million through the TARP Capital Purchase Program in November 2008. Although Ameris has made the interest payments due on the loan, the Bank has not repaid the original loan of $52 million. The question of why regulators would sell a failed bank to a problem bank has been previously raised – see Banks With Unpaid TARP Loans Buy Failed Banks From FDIC. Ameris Bank is owned by its holding company Ameris Bancorp.
The stock of Ameris Bancorp is trading at almost 70% below its price level of 2007. After trading above $25 in 2007, Ameris closed Friday at $9.23.
One Georgia Bank is the nation’s 52nd banking failure of 2011 and the fifteenth banking failure in Georgia which accounts for almost 30% of all failed banks this year. The loss to the FDIC on the closing of One Georgia Bank is estimated at $44.4 million.