Atlanta Foreclosures Pulled Down Three More Banks

by on cities

Atlanta foreclosures have pulled down three more banks as unpaid commercial and residential real estate loans became too heavy for the three banks to bear.

Early this month, the Federal Deposit Insurance Corporation closed Buckhead Community Bank and First Security National Bank in Atlanta and Tattnall Bank in rural Reidsville. Buckhead and First Security were sold to Macon-based State Bank and Trust Company while Tattnall was sold to HeritageBank of the South, which is based in Albany.

So far this year, 24 banks in Georgia have already failed, leading other states with 29 bank failures since August 2008. The last time a Georgia bank closed was on November 6 and the last time multiple banks in Georgia have closed on the same date was August 21. The day with the biggest number of Georgia banks that failed was July 24 when six Security Bank Corporation subsidiary banks closed.

According to Tony Plath, professor of finance at the University of North Carolina-Charlotte, the rapid commercial real estate growth and the sharp drop in real estate values have been too much for fledgling commercial banks that have not been tested by stress previously.

In addition, Atlanta foreclosures in the commercial and residential real sector and the flight of brokered deposits weakened the ability of the three banks to weather the economic downturn.

With the purchase of Buckhead and First Security, State Bank now has become the fourth biggest bank in Georgia and one of the biggest community banks in the Atlanta metro area. State Bank was also the one that acquired the operations of failed Security Bank in July.

Joe Evans, chief executive and chairman of State Bank and founder and former CEO of Flag Financial Corporation, and capitalists from Bankers’ Capital Group LLC invested $300 million in Security Bank, prompting analysts to expect Evans and his team to make more moves to strengthen the presence of State Bank in Georgia.

State Bank and the FDIC signed a loss-share agreement on around $692 million of Buckhead assets and about $118 million First Security assets. HeritageBank meanwhile agreed to take over $48.5 million of the total assets of Tattnall Bank.

The collapse of Buckhead was similar to that of Georgian Bank, which failed because of the injection of record investments in the real estate sector.

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