Bank failures get personal for some CEOs

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Just a few years ago, Richard C. Hayden’s career appeared to be a roaring success.

The small bank he launched in 2003, Community Bank of West Georgia, was raking in profits. He had income of nearly $800,000 a year and owned three homes, including two in Maine.

But Hayden’s financial life took a U-turn in 2009 when his bank failed amid the recession and real estate crash. Out of work, Hayden began collecting unemployment checks. Last week, he filed for personal bankruptcy.

Hayden is one of three former CEOs of failed Georgia banks to file for bankruptcy in the past two weeks. Also filing: James L. Box, former head of Atlanta’s ebank; and Joseph L. Briner, former CEO of Alpha Bank.

It’s a grim parade of financial failure that marks a new chapter in the state’s banking crisis, which has claimed 32 banks since 2008 and severely weakened dozens of others.

Historically, Georgia banks have been staid, profitable enterprises, which makes it stunning to find CEOs falling on such hard times, said Steve Bridges, executive director of legislative affairs at the Community Bankers Association of Georgia.

But the industry changed during the housing boom, as many banks loaded up on real estate loans — a strategy that proved risky when the market collapsed, making the bankruptcies not so surprising, Bridges said.

“The troubled times we are having in banks, and in turn [with] bankers, is unprecedented,” he said.

The three former executives declined to comment through their attorneys.

A review of bankruptcy court filings shows the former bank CEOs are struggling with the same problem as hundreds of thousands of Georgians: the loss of a job. Drastic income cuts made it difficult to pay off debts, from bank loans to credit card bills, while maintaining lifestyles averaging about $9,000 a month.

According to filings, Hayden is living off unemployment checks of $1,420 a month and his fee for serving on a corporate board, for a total of $3,420 a month. Box, the former ebank CEO, is collecting $1,400 in unemployment benefits and $1,780 in Social Security each month.

Briner, the former Alpha Bank CEO, cashed in his and his wife’s retirement accounts and is running a consulting company out of his Alpharetta home. He has earned $4,396 in the first two months of the year, records show.

The income is not insignificant, to be sure. But the former executives’ debts are piled high.

Briner’s credit card bills top $100,000, the filing shows. Hayden’s debt load includes six mortgages totaling more than $1 million and $1.3 million in loans from banks and other sources to purchase property and stock, including shares in his own bank. Any shares Hayden and the others held in their banks are now worthless.

Meanwhile, their cash reserves have dwindled, the court records show. At the time he filed bankruptcy, Briner’s checking and savings accounts totaled less than $500. Hayden had $1,500.

The CEOs filed for Chapter 7 bankruptcy protection, meaning that some — though not all — of their debt will be wiped out, said Jessica Gabel, a law professor at Georgia State University who teaches a class on bankruptcy. The process typically leaves the debtor with little cash but enables them to keep homes if they can pay the mortgage and allows them to keep their future income.

The system is designed to give debtors a fresh start, Gabel said. It’s not meant to be punitive, and filers often are able to maintain a degree of their former lifestyles.

According to Hayden’s filing, he will keep paying the mortgages on his three homes but will forfeit a $325,000 bank CD and three vehicles.

There are other costs, too. The bankruptcy will stay on their credit for about eight years, perhaps longer, making it difficult or expensive to get loans, Gabel said. They may have to pay up to 20 percent for a car loan, for instance, Gabel said, and they won’t be able to discharge debt through another bankruptcy for eight years.

The former bankers — all men accustomed to working high-dollar deals — will have to take a credit counseling course.

“You’re not going to conduct your life the same way as before bankruptcy, for sure,” Gabel said. “It does have an impact.”

The banks led by these CEOs were small institutions that took on too much risk during the real estate boom and could not survive when the market collapsed. None received federal bailout money through TARP, the Troubled Asset Relief Program.

Experts say it’s tough for people who ran failed banks to find similar jobs in the industry. Some, like Briner, consult for banks; others work in lower-level positions at former competitors.

Part of the problem is that as many as two-thirds of the state’s banks are facing increased regulatory supervision and need special approval to hire anyone who led a failed bank.

And bank board members may be leery of hiring someone with the taint of a failed bank on their résumé, said Walt Moeling, a veteran Georgia bank attorney at Bryan Cave Powell Goldstein in Atlanta.

Moeling said many bank CEOs borrowed large sums of money during the easy lending days of the last decade, sometimes to invest in real estate. The crash, of course, caused many deals to go bust.

Bankers also took out loans to buy stock in their banks. Records show Hayden borrowed over $340,000 from Bank of North Georgia to buy 36,000 shares of his own bank’s stock in early 2009, just a few months before Community Bank of West Georgia failed, rendering the investment worthless.

The bankruptcy filings also show household budgets that evolved during flusher times that no one expected to end so suddenly.

Briner’s monthly expenses include a $2,500 mortgage payment and more than $1,000 in health and auto insurance. Hayden’s expenses include a $2,245 mortgage payment and $1,250 in college tuition fees.

“All of a sudden, if you don’t have any salary, no matter how conservative you’ve been, pretty soon your savings will run out,” said Bridges, the Community Bankers Association of Georgia vice president. “When you consider that, [the bankruptcies] are not terribly surprising.”

Staff writer Péralte Paul contributed to this article.

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