Seven Banks Fail, Making It 64 for '09
By DAMIAN PALETTA / WSJ / July 25, 2009
Regulators seized seven banks on Friday, including six in Georgia owned by the same parent, increasing the number of U.S. bank failures to 64 in 2009.
The six Georgia banks were part of Security Bank Corp., of Macon, Ga., and had assets of about $2.8 billion and deposits of $2.4 billion. The banks were doomed by their real-estate loan exposure in metropolitan Atlanta, an area plagued by foreclosures and declining home values.
Security Bank also revved up on brokered deposits, or funds typically gathered from far-flung investors who are attracted to unusually high interest rates. Some critics say such funds can cause banks to make riskier loans in order to offset high deposit costs.
The failures are expected to cost the Federal Deposit Insurance Corp.'s deposit-insurance fund $807 million.
As of March 31, Security Bank of Bibb County, the company's largest bank unit, had $367.8 million in brokered deposits out of an overall deposit base of $1 billion. The Bibb County bank also had $1.2 billion in assets.
The FDIC sold the failed Georgia banks' deposits, their 20 branches, and most of their assets to State Bank & Trust Co. of Pinehurst, Ga. The buyer got a $300 million capital infusion from 26 investors to assume the deposits and assets of the failed banks, and the FDIC and State Bank entered into a loss-share transaction on about $1.7 billion of the acquired assets. State Bank had just $36 million in assets at the end of the first quarter.
Separately, Waterford Village Bank, of Clarence, N.Y., also failed Friday, and the FDIC sold all its deposits and most of its assets to Evans Bank, of Angola, N.Y. Waterford Village had just $61.4 million of assets and one branch, and got its charter from regulators in 2007. The FDIC and Evans Bank agreed to share future losses on $56 million of the failed bank's assets.
As of March 31, Waterford Village's Tier 1 capital level was 1.05%, down from 8.1% a year ago. |
