Georgia, the state hit the hardest by the string of bank failures to come out of the 2009 financial crisis, has suffered another three bank closures Friday. Assets from the three banks total over $1 billion, and have been sold in a loss-share transaction negotiated by the FDIC that is estimated to cost the Deposit Insurance Fund (DIF) $285.4 million. Virginia, Illinois, and Ohio also saw bank failures last Friday, bringing the total assets up to $13.4 billion, with total cost to the DIF of $2.4 billion.
The Georgian Banks
The three Georgian banks to fail are The Buckhead Community Bank of Atlanta, First Security National Bank of Norcross and Tattnall Bank of Reidsville, with $874 million, $128 million and $49.6 million in assets respectively.
Portions of the assets of first two banks, Buckhead Community and First Security National, were sold to State Bank and Trust Company of Macon, Georgia. The 6 branches of The Buckhead Community Bank and the 4 branches of First Security Bank will reopen as branches of State Bank and Trust Company today.
The assets and 2 branches of Tattnall Bank will be transferred to Heritage Bank of the South of Albany, Georgia.
AmTrust Bank of Cleveland, OH
The largest bank to fail last week was AmTrust Bank of Cleveland, OH, with $12 billion in assets. The 66 branches of AmTrust and about half of its assets will be transferred to New York Community Bank of Westbury, NY. This loss-share transaction, which the FDIC stated was the “least costly option,” will cost the DIF $2 billion.
All of the banks remain insured under the FDIC, and depositors at the failed banks can continue to use their bank branches as normal, and all accounts and deposits will simply be transferred to the assuming institutions. Customers will receive a notice about any changes to their normal banking activities, and will be notified when the systems changes allowing them to use other branches of the assuming institutions have been completed.
Reaching the End of 2009 Failures
As we have watched the list of bank failures grow over the course of this year, it is hard to tell if the rate of closures will slow in the new year. New financial legislation scheduled to go into effect next year may actually increase the number of bank failures, by strengthening the restrictions on “too-big-to-fail” institutions, and ensuring that banks that become insolvent will no longer be propped up by the government. However, while FDIC Chair Shelia Bair says that the agency predict bank failures to peak in 2010, she expect the rate of closures to begin slowing after that.
