Lender Failures Reach 64 as Georgia Shuts Security Bank’s Units
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By Ari Levy and Margaret Chadbourn
July 25 (Bloomberg) -- Security Bank Corp.’s six Georgia subsidiaries and Waterford Village Bank in New York were seized by regulators, pushing this year’s toll of failed U.S. lenders to 64, the most since 1992.
The six units of Macon-based Security Bank, with total assets of $2.8 billion and deposits of $2.4 billion, were closed by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. was named receiver, the FDIC said yesterday in a statement. State Bank and Trust Co. of Pinehurst, Georgia, assumed the deposits and agreed to share losses with the FDIC on most of the assets.
“The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector,” the FDIC said. “The agreement also is expected to minimize disruptions for loan customers.”
Bank failures this year have cost the U.S. deposit insurance fund more than $13.5 billion, including $812.6 million from yesterday’s seizures, straining the FDIC reserves amid the steepest recession since the Great Depression. The FDIC has imposed an emergency fee aimed at raising $5.6 billion to replenish the fund, which fell to $13 billion, the lowest since 1993, at the end of the first quarter.
Security Bank, which lost more than $200 million in the past five quarters, mostly on loans to Atlanta builders and developers, said in November that it was seeking to tap the Treasury’s bailout fund. In April, with most of its units operating under a cease-and-desist order, the company withdrew the application.
The six banks’ 20 combined offices will open as branches of State Bank. To assume the deposits and assets of the failed bank, State Bank received a $300 million capital infusion from a group of 26 investors, led by Joseph Evans, former chief executive officer of Flag Financial Corp. Evans, who was joined by former Flag executives Dan Speight and Kim Childers, will be CEO of State Bank, the company said in a statement.
Waterford Village Bank of Clarence, New York, with $61.4 million in assets and $58 million in deposits, was closed by the state’s Banking Department, and the FDIC was named receiver. Evans Bank of Angola, New York, assumed Waterford’s deposits, and will share losses with the FDIC on $56 million of assets, the agency said. Waterford’s single office will open July 27 as an Evans branch, the FDIC said.
Waterford Village Bank had inadequate capital and management was unable to correct deficiencies bank regulators identified, Richard Neiman, New York bank superintendent, said in a statement on the agency’s Web site. The bank had become “critically undercapitalized,” Neiman said in the statement.
Banks including Pittsburgh-based PNC Financial Services Group Inc. and Winston-Salem, North Carolina-based BB&T Corp. said paying the higher assessment cut into per-share earnings. PNC said the fee trimmed profit 19 cents, and BB&T said the fee reduced earnings by 7 cents.
The FDIC insures deposits at 8,246 institutions with $13.5 trillion in assets. The agency reimburses customers for deposits of as much as $250,000 when a bank fails.
To contact the reporters on this story: Ari Levy in San Francisco at firstname.lastname@example.org; Margaret Chadbourn in Washington at email@example.com.
Last Updated: July 25, 2009 00:00 EDT
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