Tycoon’s bank struggles 
for survival

By Paul Donsky

The Atlanta Journal-Constitution

One of Atlanta’s best-known business titans says he’s in danger of getting burned in the state’s banking meltdown.

Buckhead Community Bank, launched by Aaron Rents founder Charlie Loudermilk, has been searching in vain for investors or a buyer as the bank fights for survival. But Loudermilk said potential investors have been scared off by the bank’s $160 million pool of toxic loans mostly tied to real estate bets gone bad.

“We’ve turned over every stone to get people to invest,” Loudermilk, 82, said in a recent interview. “We don’t know what the future holds. It’s up to the [regulators.]”

Loudermilk, chairman of the bank’s board of directors, said he’s gone as far as to remind customers the Federal Deposit Insurance Corp. guarantees individual accounts up to $250,000. “A lot of these investors are friends of mine, and it’s only fair that I tell them what the law is,” he said.

Watching the bank fall into distress has been humbling for Loudermilk, who built Aaron Rents — now known as Aaron’s Inc. — into a lease-to-own retail giant.

“I’m known as a winner,” said Loudermilk. “In this case I’m a loser. If the bank closes, I’m a loser. Hell, there’s nothing I can do about it.”

The bank lost $38 million in the second quarter, including a write-off of goodwill, and burned through much of its capital cushion.

Marvin Cosgray, Buckhead Community’s president and CEO, said he’s exploring several options that could turn things around.

Cosgray said he can’t disclose details. But he said the plan includes selling a sizable chunk of the bank’s non-performing loans in hopes that an improved balance sheet will prove more palatable to investors. He noted that the bank has a large base of about 16,000 depositors, some of them very wealthy, which should prove attractive for investors.

“I’m optimistic, I’m very hopeful,” Cosgray said. “I’m working very hard to survive in this current environment. All of us are. We are looking at everything.”

Banking experts say it’s no surprise that Buckhead Community has had a hard time finding investors. It’s a story being played out at banks across Georgia and the country.

The problem: Banks and other investors who might want to buy banks are waiting until they’re able to pick up failed institutions on the cheap, with loss-sharing protection from the FDIC to boot.

“Private equity and private capital is right now focused on failed bank transactions,” said Chris Marinac, a banking analyst at FIG Partners in Atlanta. “It’s part of the price of cleansing the industry, which will take some time, and it’s not very pleasant. But it’s just where we are right now.”

Like many Georgia banks, Buckhead Community invested heavily on new home construction in recent years, particularly on the Atlanta region’s north side. The bank grew during the real estate boom, becoming one of the state’s largest community banks with nearly $1 billion in assets.

Losses mounted when the real estate market collapsed, and this past April the bank’s auditor raised doubts about the company’s ability to survive. In August, regulators ordered the bank to raise capital and improve its lending practices.

In the interview, Loudermilk said his bank made sound loans that only soured when the real estate market and economy tanked.

“I’m very saddened by it,” he said. “I’m a big guy. I know you win some, you lose some. If we had done anything improper at the bank, I would be very upset with myself and everybody involved.

“But if a recession is a cause of our problems, there’s nothing I can do about it. It’s beyond my control.”

He said he regrets the bank’s decision to buy two banks, one in Cumming and another in Gainesville, at the height of the housing boom. Many of Buckhead Community’s losses are tied to those locations, he said.

The way Loudermilk tells it, he decided to start a bank about 13 years ago, after trying to cash a large check at his bank at the time — “one of the big banks,” he said.

Despite being a longtime customer, he had to talk to three different people before he got his money. He figured there had to be a better way and called on some deep-pocketed friends to open Buckhead Community.

Loudermilk said he has between $5 million and $10 million invested in the bank. He would lose it all should the institution fail.

But Loudermilk remains a very rich man. He retired as CEO from Aaron’s last year, but not before growing it into a $1.6 billion-a year business. While the economy has hammered his bank, it’s done the opposite for Aaron’s, which has reported a big uptick in sales as shoppers trade down in the recession.

He admited the bank got too heavily invested in real estate lending, but said that’s where the business was. Many of the bank’s customers were well-known, large developers who in normal times would make terrific borrowers.

“I’m very disappointed that we are having to have this conversation,” Loudermilk said. “But anyway, it is what it is. It’s not going to break any of us.”