The First National Bank of Georgia, located in Carrolton, GA, which had approximately $832.6 million in total assets and $757.9 million in total deposits was closed in late January 2010 by the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC). Following the bank’s failure, depositors from its eleven branches became customers of Community & Southern Bank.

Community & Southern Bank paid the FDIC a 1.25 percent premium to assume all of the deposits of the failed Bank. The loss–share transaction between the FDIC and Community & Southern Bank is estimated to be worth approximately $607.4 million. The failure of First National Bank of Georgia represents the first bank failure in Georgia thus far in 2010. The cost to the Deposit Insurance Fund (DIF) is estimated at $260.4 million.

Distressed Pro’s BankProspector shows that First National Bank reported capital adequacy of 1% with nonaccrual real estate loans of $92 million, and an OREO balance of over $42 million. First National Bank of Georgia carried noncurrent distressed real estate loans at approximately 50% and 24% in their construction and multifamily loan portfolios respectively.

The Federal Deposit Insurance Corporation (FDIC), in conjunction with the Georgia Department of Banking and Finance, continued its 2010 roll of shutting down banks with the January 29, 2010 closing of Community Bank and Trust of Cornelia, GA.

Following the closure, SCBT announced that its bank subsidiary would enter an $827.7 million purchase and assumption agreement to envelope Community Bank & Trust. The 36 branches of the full service Georgian Community Bank & Trust will reopen as branches of SCBT, N.A., but under the name Community Bank & Trust.

The FDIC estimates the cost associated with the bank failure to the Deposit Insurance Fund (DIF) will be $354.5 million. Community Bank & Trust is the second bank in Georgia, and the 13th FDIC-insured institution, to fail during 2010.

BankProspector shows Community Bank & Trust carries a 9% leverage ratio, $12 million in nonaccrual real estate loans, and over $40 million in OREO. Ballooning noncurrent loan portfolio percentages, especially in Construction and Multifamily asset types at 26% and 24% respectively, crippled Cornelia, GA Community Bank & Trust.

Construction loans continue to be a huge problem for banks. In fact construction loan problems at US banks top $85 Billion in the most recent report. Construction loans make up about 30% of the total problem loan and bank owned property balances with banks nationally.

While you might expect to see lenders from Florida, Nevada and California on the list, the banks on this top ten are mostly national lenders, with a few big exceptions. Many local and regional banks went heavy into construction loans during the boom as it because more difficult to compete with larger lenders for residential loans and the CMBS market for commercial mortgages.

Only one of the lenders that made this top ten list is reporting low capital adequacy. Construction loan default rates are high across the country. Many banks are reporting non-current percentages in the high teens. Corus Bank which was recently shut down by the FDIC reported construction loans as 71% non-current.

Nationally banks reported $13,467,709,000 in construction REO and $64,844,478,000 in non-accrual. These numbers point to banks taking back large amounts of troubled construction projects over the next few quarters. Banks will be looking for services to sell these non-performing notes or else hiring firms to assess, recover, manage, repair and liquidate these assets over the next 12-24 months.
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