$17 Million Fraud Closes the 6th Bank this year in Georgia

The three offices of Montgomery Bank & Trust, Ailey, Georgia, were closed with Ameris Bank, Moultrie, Georgia, to assume all of the deposits. Ameris Bank has now acquired at least 9 failed banks since fall 2009 (8 in Georgia, 1 in Florida). Montgomery Bank & Trust Established March 1, 1926, the bank had 45 full time employees as of March 31, 2012 at their two offices in Vidalia and one in Ailey. December 31, 2008, they had 89 full time employees.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $75.2 million.

What happens seems to be a major embezzlement with the U.S. Attorney’s office charging Montgomery Bank director and on-time metro Atlanta investment adviser Aubrey Lee Price with wire fraud of $17 million from the bank. After telling upper management that he was investing in U.S. Treasury securities, he wired bank funds to accounts he controlled and prepared falsified statements to cover his tracks, the federal complaint said. He is also charged with allegedly defrauding more than 100 clients in Georgia and Florida.

According to ajc.com, “The FBI is searching for Price, who disappeared last month. A letter bearing his name was sent to friends and colleagues about the same time and said he had lost millions of dollars in client funds and suggested he intended to commit suicide.”

Investigators say Price, 46, was last seen boarding a ferry in Key West, Florida. bound for Fort Myers, Fla. He had “previously stated that he owns real estate in Venezuela” and “may own a boat that would be large enough to travel to Venezuela from Florida,” the complaint says.

The AJC.com reports, “Montgomery Bank was founded in 1926, and remained a slow-growing, but stable player in Montgomery and Toombs counties for much of its history. But a decision in the mid-2000s to expand to St. Simons Island proved disastrous. The bank lost nearly $37 million from the beginning of 2009 until March 2012, according to an AJC analysis of federal bank data.”

On October 6, 2009, the Bank was issued a Cease and Desist Order from the FDIC for “unsafe or unsound banking practices and violations of law and/or regulations alleged to have been committed by the Bank.”

In 2010 Montgomery County Bankshares, Inc. raised approximately $14.1 million through the combination of a sale of common stock to PFGBI, LLC, a newly-created bank holding company comprised of individual investors, lead by Price, and a private placement to his clients and other investors in the Montgomery County area. The investment group Price controlled invested $10 million into ailing Montgomery Bank. Locals in the community of 450 people pitched in an additional $4 million.

As a result of the transaction, PFGBI acquired a controlling interest in Montgomery County Bankshares, Inc.

Federal authorities said Price, as a director for the bank, took control of investing the bank’s capital. Price allegedly wired funds to accounts he controlled at other banks, and provided false financial statements to bank management.

Trae Dorough was brought in as president. He previously was executive vice-president and senior lender at First Coweta Bank in 2008, which the FDIC closed August 21, 2009. January 28, 2011 the bank announced three new hires to help turn things around. http://leasingnews.org/PDF/MontgomeryBankNewHires.pdf

Little did the board of directors of bank officers control the activities of bank director Price. In less than a year, from 2011 to 2010 the bank equity dropped from $16.6 million to $3.8 million with a $14.1 million loss.

As of March 31, 2012, the bank has a Tier 1 Risk factor of 2.98%.

(in millions, unless otherwise)

Net Equity
2006 $17.1
2007 $19.0
2008 $19.0
2009 $9.1
2010 $16.6
2011 $3.8
3/31 $3.6

Profit
2006 $2.5
2007 $2.6
2008 $721,000
2009 -$12.3
2010 -$6.4
2011 -$14.1
3/31 $3.9

Non-Current Loans
2006 $1.4
2007 $5.8
2008 $8.4
2009 $29.8
2010 $34.0
2011 $18.7
3/31 $15.0

Charge Offs
2006 $112,000 ($70,000 loans to individuals, $42,000 commercial/industrial)
2007 $95,000 ($47,000 commercial/industrial, $42,000 loans to individuals, $5,000 construction)
2008 $302,000 ($176,000 other loans, $64,000 loans to individuals, $40,000 commercial/Ind., $22,000 construction/land development)
2009 $17.6 ($12.4 construction/land development, $2.3 1-4 family, $459,000 loans to individuals, $305,000 commercial, $26,000 other loans)
2010 $3.6 ($1.6 construction/land, $555,000 nonfarm-nonres., $481,000 1-4 family, $287,000 loans to individuals, $$256,000 farmlands, $98,000 multifamily
2011 $6.4 ($3.1 construction/land, $1.2 1-4 family, $725,000 commercial-industrial, $443,000 multifamily, $362,000 loans to individuals, $340,000 nonfarm nonres, $165,000 farmland.
3/31 $2.6 ($1 construction/land, $590,000 commercial-industrial, $552,000 1-4 family, $231,000 farmland $154,000 loans to individuals, $113,000 multifamily, -$25,000 loans to depository institutions.

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

As of March 31, 2012, Montgomery Bank & Trust had approximately $173.6 million in total assets and $164.4 million in total deposits. In addition to assuming all of the deposits of the failed bank, Ameris Bank agreed to purchase approximately $12.4 million in assets, comprised mainly of cash and cash equivalents. The FDIC will retain the remaining assets for later disposition

This is the sixth bank to fail in Georgia this year. Bill Dawers of peachpundit.com notes:

• Georgia’s political leadership has not taken any substantive steps to determine whether state policies contributed to our leading the nation in bank failures.

• After subtracting this failure, there are 68 Georgia banks on the unofficial problem bank list published by Calculated Risk and maintained by Suferdude808 using FDIC public actions.

• Note: Georgia had 237 active banks as of May 14, 2012:

http://www.bankencyclopedia.com/banks-Georgia.html

http://www.fdic.gov/news/news/press/2012/pr12080.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