Bank loss personal for brothers

Not long ago, Haven Trust Bank appeared to be the latest business venture from Atlanta’s successful Patel family to strike gold.

Hotel magnates Mike and R.C. Patel teamed up with other Indian-Americans to launch the bank in 2000, with an eye to serve Atlanta’s Indian population and other minority communities.

The bank grew quickly from its base on Lawrenceville Highway in DeKalb County, adding three locations and building a deposit base of more than $500 million. Earlier this year, Entrepreneur magazine named Haven Trust the country’s 44th-fastest growing business.

Then the wheels came off the enterprise this year as the economy tanked and real estate values plummeted. Loan losses mounted, plunging the once-profitable bank deep into the red.

Last week, federal and state regulators shut down the bank, making Haven Trust the fifth Georgia bank to fail this year. The bank’s deposits were taken over by BB&T, a regional bank based in Winston-Salem, N.C.

In an interview, R.C. Patel, a member of the bank’s board, said the bank failure won’t affect the family’s numerous business ventures, operated under its umbrella company, Diplomat Cos.

“The bank was totally a separate entity, not connected to any of our other business interests,” R.C. Patel said. Diplomat did not obtain any financing through Haven Trust, Patel said.

Mike Patel, the bank’s chairman, declined to be interviewed, but the brothers released a statement through their spokesman.

“We put our heart and soul into the bank, as well as our investment dollars,” the statement said. “We’re entrepreneurs, so we’ll move on to new challenges and opportunities. But Haven Trust is like a favorite child that will always have a special feeling for us.”

The Patels, who were raised in London, made their fortune buying and selling hotels in the Southeast but have expanded their empire to include real estate development and even commercial insurance.

They now own and manage four hotels, including several near Atlanta’s Hartsfield-Jackson International Airport. Last year, Diplomat bought the rights to the Budgetel brand of hotels.

The Patels are also converting a historic downtown Atlanta office building into Hotel Indigo, a boutique facility, and are part of a team developing Newnan Village Crossing, a $150 million mixed-use development in Coweta County. However, plans for both projects are being reviewed and could change, given the current economic climate.

Diplomat has also been exploring bringing a Hard Rock Cafe hotel near the Georgia Aquarium, though no deal has been struck.

The bank failure has been a blow to the Patels’ personal finances. The brothers were among the bank’s largest shareholders and have seen the value of those holdings wiped out.

The Patels also ponied up additional funds in recent months along with other shareholders in an effort to save the bank.

The family’s spokesman, Peter Mathon, declined to say how much the Patels lost.

The Patels have become influential in Atlanta’s business and civic circles. Mike Patel serves on the MARTA board and is a former member of the board at the Carter Center. The brothers helped found the Asian American Hotel Owners Association, which is based in Atlanta.

“It’s regrettable that’s what happened to the bank. It’s reflective of the difficult economic climate we’re all facing,” said Fred Schwartz, AAHOA’s president. The Patels “are very strong, very philanthropic, an integral part of the AAHOA family.”

The Patels helped found Haven Trust in part to assist other Indian entrepreneurs buy and operate motels.

“We make the American dream come alive for someone who barely went to high school in India,” Mike Patel told Little India, an Indian-American magazine, earlier this year. “Only a bank like ours can assist him and not take advantage of him.”

According to Haven Trust’s Web site, the bank financed a number of residential and commercial projects including $3.6 million to build a Comfort Suites hotel, $9.6 million to build an unnamed condo project and $9.6 million for a retail strip center in Morrow.

The Patels say several factors came together to doom the bank, including falling real estate values that eroded the value of the bank’s loan portfolio. Also, sharply falling interest rates meant the bank has been earning less on the loans it was making.

The bank became profitable in 2002, showing steady earnings gains through 2006 when Haven Trust earned $7.5 million, according to the Federal Deposit Insurance Corp.

But the bank’s loans were heavily concentrated in the real estate sector. When property values began plunging, the bank’s bottom line came under attack. Haven Trust lost $13.6 million through the first three quarters of this year.

The bank’s Tier 1 capital level —- a key measure of funds available to cover potential losses —- stood at 4.9 percent in the third quarter, compared with 10.14 percent the same time last year. To be considered “well capitalized” by regulators, a bank must have a Tier 1 ratio of at least 6 percent.

As problems mounted, the bank embarked on an aggressive attempt to raise capital to shore up the balance sheet. Shareholders were asked to provide additional investments, and the bank began offering CDs with high interest rates in hopes of attracting fast cash.

In the end, the efforts failed to save the bank.

“We, along with all of our board members, are devastated by the closing of Haven Trust Bank, not just for ourselves but for the shareholders as well as for the staff who provided unmatched personal service and for the customers, especially small-business owners, who relied on the bank for fast, local, and uncomplicated bank dealings,” the Patels said in the statement.

Staff writer Rachel Tobin Ramos contributed to this article.