Patriot Bank of Georgia, Cumming, GA, was closed by state regulators who appointed the FDIC as receiver. Patriot Bank had a very short life span, having been established only in July 2006 at the peak of the real estate mania. The failed bank was sold by the FDIC to Georgia Commerce Bank, Atlanta, GA, which will assume all deposits of Patriot Bank.
Established as a community bank by a group of local businessmen, Patriot Bank rapidly expanded its assets to over $160 million within the first four years of operation. Regulators are supposed to closely scrutinize the business plan and growth of de novo banks which have been in operation for less than five years or less, which was the case with Patriot Bank.
Apparently, regulators saw no risk in the extremely rapid loan growth at Patriot Bank until after loan defaults by borrowers started to soar during 2010. The latest reported numbers show that Patriot Bank had an astronomical troubled asset ratio of 703%. A bank with a troubled asset ratio of over 100% is usually past the point of recovery and winds up being closed by regulators.
A new bank in an area already heavily populated with existing lenders can grow rapidly only by making aggressive loans to borrowers who were already turned away by more established banking institutions. The poor quality of Patriot Bank’s loan portfolio eventually resulted in the the bank being severely undercapitalized. Unable to raise new capital, regulators were forced to close Patriot Bank.
Patriot Bank had only one branch which will reopen on Tuesday as a branch of Georgia Commerce Bank. At June 30, 2011, Patriot Bank had total assets of $150.8 million and total deposits of $111.2 million.
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 Creekside Bank, Woodstock, GA, which was closed by regulators today along with Patriot Bank.
Georgia Commerce Bank agreed to purchase all of Patriot Bank’s assets, subject to a loss-share agreement with the FDIC. The loss-share agreement covers $136.2 million of the asset pool acquired and limits future losses by Georgia Commerce Bank.
The loss to the FDIC deposit insurance fund is $44.4 million or 29.4% of the total assets of Patriot Bank. The failure of Patriot Bank is the nation’s 69th banking failure of 2011. The total number of banking failures in Georgia now totals 19.