Non-Conforming Loans in Georgia/Home Savings of America fails—no buyers!

The five branches of Central Bank of Georgia, Ellaville, Georgia, were closed with Ameris Bank, Moultrie, Georgia, to assume all of the deposits. Founded September 16, 1910, the bank had five officers: Butler, Buena Vista, Cusseta, Ellaville, and Macon. September, 30, 2011 they had 57 full time employees. Year-end 2006 they had 49 full time employees to a high of 72 full time employees in 2008 as they had opened an office in Buena Vista on June 15, 2007 and one in Cusseta March 3, 2008.

The bank saying below its name was “Common Sense Banking.”

Tier 1 risk-based capital ration: .066% (not a typo. editor)

The purchaser of the bank still owes $52 million in TARP:

“Ameris Bancorp, along with 370 other banks, still owes the U.S. Treasury money from the TARP program… Ameris Bancorp borrowed $52 million under the TARP Capital Purchase Program in November 2008. Ameris has made interest payments on the loan but has not paid back the original $52 million lent to it. Regulators have allowed many banks in the past to purchase failed banks when they still had outstanding TARP loans to the U.S. Treasury.”

http://problembanklist.com/central-bank-of-georgia-fails-after-serving-public-for-years-0488/

John Gill Chairman, President, 2nd on the left is (without tie)

“…in 1975, John Gill became a director upon the death of his father, Paul L. Gill, who was president of the bank at that time. John Gill has been president since 1981 and president of the Middle Georgia Corporation since its inception in 1980. ..”

http://www.centralbankga.com/history.htm

A Consent and Decease agreement was entered July, 2009, then a new one December 9, and finally one in January. The July, 2009: “…issued an unusual 13-page notice detailing “unsafe and unsound” practices. They included manipulating and misstating the bank’s quarterly financial condition. Twice last year, the FDIC said, the bank’s holding company borrowed $500,000 from a board member and injected the money into the bank’s surplus capital account. A short time later, the bank paid a dividend to the holding company, which repaid the loan to the board member. These practices “inflated the bank’s capital at quarter and misstated the true condition of the bank,” the document said.”

http://americustimesrecorder.com/local/x1720282823/Central-Bank-of-Georgia-under-consent-agreement-with-F

2008 the bank had charge offs of $3.3 million, followed by $7.3 million, $1.5 million, and $4.95 million year-end 2001. Real estate loans, construction and development primarily, along with other poor loan decisions did the long time bank in.

Charge Offs
2006 $185,000 ($61,000 construction & land, $61,000 nonfarm nonres., $44,000 loans to individuals)
2007 $60,000 ($21,000 commercial, $19,000 individuals, $16,000 1-4 family)
2008 $3.3 ($1.5 commercial, $737,000 construction & land, $374,000 1-4 family, $120,000 indiv.)
2009 $7.3 ($2.8 construction & land, $1.75 1-4 family, $1.5 commercial, $806,000 nonfarm, $447,000 indiv.)
2010 $1.5 ($945,000 1-4 family, $255,000 commercial, $238,000 individuals
2011 $4.95 ($2.3 const. & land, $1.5 1-4 family, $492,000 commercial, $283,000 nonfarm nonres., $404,000 loans to individuals).

Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.

It is more than the charge offs, but the non-conforming loans.

A non-conforming loan is a loan that fails to meet bank criteria for funding.Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it.

These can also be 60 to 90 days delinquent, and in some cases up to 120 days, although they really go into a charge off column, but that is another subject. The point is the lack on income payments affects the bottom line not only in additional manpowr and costs, but in payments, and thus the profit goes down.

Here 2009 was $20.6 million, 2010 $22.4 million, and while year-end 2011 numbers were not available, the nine month number was $25.7 million. Note the effect on net equity and profit below:

(in millions, unless otherwise)

Net Equity
2006 $20.2
2007 $22.6
2008 $20.8
2009 $18.2
2010 $14.6
2011 $1.4

Profit
2006 $2.3
2007 $2.8
2008 -$831,000
2009 -$2.35
2010 -$4.6
2011 -$13.4

Non-Current Loans
2006 $3
2007 $2.95
2008 $7.1
2009 $20.6
2010 $22.4
09/11 $25.7

Georgia banks were hit hard with such loss, but the numbers below show a beleaguered bank headed for failure. Unfortunately this was common with “good ole boys” board of directors supporting loans to their colleagues, friends, and real estate developers who courted them at country clubs and the golf course.

In 2011 Georgia had the largest number of banking failures in the United States; 23 or 25% of all banking failures.

As of December 31, 2011, Central Bank of Georgia had approximately $278.9 million in total assets and $266.6 million in total deposits. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase essentially all of the assets.

The FDIC and Ameris Bank entered into a loss-share transaction on $192.8 million of Central Bank of Georgia’s assets. Ameris Bank will share in the losses on the asset pools covered under the loss-share agreement.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $67.5 million

http://www.fdic.gov/news/news/press/2012/pr12021.html

After being closed by the Office of the Comptroller of the Currency, and appointed as the received, the FDIC was unable to find another financial institution to take over the banking operations of Home Savings of America, Little Falls, Montana. Included in the enclosure were two branches in Orange County, California, and one in Walnut Creek, California. During 2011, the FDIC was unable to find a purchaser for two failed banks.

Between January 2009 to December 2010, the FDIC could not find buyers for 19 banks and was forced to liquidate the banks and payoff depositors.

Founded September 1, 1934, the bank expanded in June 22, 2007 with an office in Laguna Woods, Orange, California, January 7, 2008 with an office in Seal Beach, California, and on December, 29, 2008 with an office in Walnut Creek, California. As of September 30, 2011 they had 810 full time employees, specializing in mortgage transactions. As of December 31, 2006 they had 69 full time employees.

The FDIC said there were no sufficient bids primarily because on branch was in Minnesota and three were scattered in California. The majority of business came from all over the United States. There are many complaints about real estate transactions, even employment, on the internet involving this operation.

The FDIC will mail directly to depositors of Home Savings of America, checks for the amount of their insured money.

Depositors of Home Savings of America with more than $250,000 at the bank may visit the FDIC’s Web page “Is My Account Fully Insured?” at http://www2.fdic.gov/dip/Index.asp to determine their insurance coverage. In these relatively circumstances, depositors who are above insurance limitations may find themselves at the loss of their savings over the limit.

The FDIC will mail directly to depositors of Home Savings of America, checks for the amount of their insured money.

As of December 31, 2011, Home Savings of America had $434.1 million in total assets and $432.2 million in total deposits. The amount of uninsured deposits will be determined once the FDIC obtains additional information from those customers.

The FDIC as receiver will retain all the assets from Home Savings of America for later disposition. Loan customers should continue to make their payments as usual.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $38.8 million.

Tier 1 Risk-Based Capital Ratio 4.59% as of September 30, 2011. More current information was not available from the FDIC.

This is a more apparent with non-current loans hitting $9 million, 2008, $28.2 million, 2009, and $17.6 million, 2010. The year-end numbers were not available, but note nine month is $11.1 million, and it is not the charge-offs, but lack of profit that hit the net equity.

There is more to this story, and there may be a federal investigation in the works.

(in millions, unless otherwise)

Net Equity
2006 $18.3
2007 $24.1
2008 $25.9
2009 $28.0
2010 $25.9
09/11 $12.0

Profit
2006 $1.6
2007 $831,000
2008 -$780,000
2009 $2.2
2010 -$2.1
09/11 -$7.6

Non-Current Loans
2006 $120,000
2007 $2.7
2008 $9.0
2009 $28.2
2010 $17.6
09/11 $11.1

Charge Offs
2006 $1,000 ($1,000 consumer loans)
2007 $18,000 ($19,000 1-4 family, -$1,000 consumer loans)
2008 $103,000 ($103,000 1-4 family residential properties)
2009 $4,000 ($4,000 loans to individuals)
2010 $3.9 ($3.3 1-4 family residential, $647,000 construction & loans)
09/11 $2.5 ($2.5 1-4 family residential)

Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.

http://www.fdic.gov/news/news/press/2012/pr12022.html

List of Bank Failures:
http://www.fdic.gov/bank/individual/failed/banklist.html

Bank Beat:
http://www.leasingnews.org/Conscious-Top%20Stories/Bank_Beat.htm