3 more bank failures in state; bad real estate loans to blame; 44 institutions succumb in two years

Three more Georgia banks failed Friday, pushing the state’s nation-leading number of failures to 44 over the past two years.  One was led by a chief executive who was also the one-time chairman and interim CEO of a bank that failed last year. Another had U.S. Rep. Phil Gingrey, R-Marietta, as a founding investor and board member until earlier this year.   All three banks — two in metro Atlanta and one in North Georgia— succumbed to soured real estate loans in the worst recession in generations.  Peoples Bank of Winder, Bank of Ellijay and First Commerce Community Bank of Douglasville were seized by regulators and sold as a package to Carrollton-based Community & Southern Bank.  Service at the banks will not be affected, the FDIC said, and deposits are insured up to $250,000.

The three failures will cost the FDIC’s insurance fund $225.5 million. Community & Southern agreed to assume all deposits and buy most of the failed banks’ assets under a loss-sharing deal with the FDIC.  Community & Southern was created in January to take over failed banks and has now acquired five in nine months.   ”It was too much real estate. Too much of one product type,” FIG Partners bank analyst Chris Marinac said of the failures, citing a common theme with Georgia bank failures. Friday was the first time multiple Georgia banks were closed on one day since March 26.  Peoples Bank of Winder (not to be confused with similarly named institutions in Covington, Eatonton and Buford) was founded in 1926 by a group of Barrow County business leaders.

Its president and CEO, Christopher Maddox, is part of a respected family of Georgia bankers. His grandfather helped found Peoples, and his father was a founder of the Bankers Bank (later Silverton Bank). Maddox led Peoples Bank for more than a decade and also was named interim CEO of Silverton Bank shortly before May 2009 when it was the largest bank to fail in state history.   Atlanta’s rapid suburban push and the housing boom helped Peoples Bank nearly quadruple in size to $520.7 million in assets by the end of 2008. It had $447.2 million in assets and $398.2 million in deposits at the time it was closed. Its cost to the FDIC fund is estimated at $71.4 million.

Last January, the FDIC slapped Peoples Bank with a consent order criticizing its lack of board oversight, loan underwriting and portfolio management. By the end of June, a quarter of its assets were in some form of distress. It reported a $11.4 million loss for the quarter.   In addition to its bet on local real estate, Peoples Bank was the lead lender on Merrill Ranch, a $100 million, 5,600-acre development outside Phoenix that collapsed with the housing market, resulting in heavy losses for Peoples and dozens of other banks that were involved.   ”With hindsight, everything is clear, but at that point it was a great loan,” Maddox told The Atlanta Journal-Constitution last year.  Click here for full report….