Banks in crisis quietly help customers protect cash

As Atlanta’s RockBridge Commercial Bank tumbled near collapse last fall, bank officials had more to worry about than saving their company.

Behind the scenes, they counseled affluent customers to restructure their accounts in a way that would protect their money should RockBridge go under.

The bank didn’t survive, but virtually all of its customers’ money did.

It’s a pattern that has held throughout Georgia’s banking crisis. The state leads the nation in bank failures since 2008 with 30, but depositors – people who put their money into checking and savings accounts – have emerged relatively unscathed.

The biggest reason, of course, is that the Federal Deposit Insurance Corp. insures deposits up to $250,000 per account.

But even accounts exceeding that limit have largely escaped harm. That’s because in all but a handful of the state’s failures, an acquiring bank picked up the failed bank’s deposits, meaning no customers lost any money.

In a few instances -- including RockBridge -- banks were so troubled that no buyer could be found, putting at risk any money customers had over the $250,000 insurance limit.

Quick action taken by RockBridge appears to have minimized the damage when the bank finally failed in mid-December.

In many cases, all it took to insure all of a customer’s cash was for a second account to be opened, perhaps in a spouse’s name, said one of the bank’s lawyers, Walt Moeling, a partner at Bryan Cave Powell Goldstein in Atlanta. That essentially doubled the federal insurance available to $500,000.

The results were dramatic. At the end of September, RockBridge had 69 accounts over the $250,000 limit, according to Federal Deposit Insurance Corp. records, with a total of $2.1 million at risk. By the time the bank was shut down, the number of uninsured accounts had dropped to 21, with just $145,000 uninsured.

To put those numbers in perspective, RockBridge had about 20,000 deposit customers when it failed holding a total of $290 million.

Moeling said the actions taken by RockBridge are common in the industry.

“When problems get serious and resolution becomes a significant potential,” he said, “every customer that has uninsured deposits will get a call from their banker, saying, ‘In this world, you should really have your deposits insured.’”

The customers with uninsured deposits may get some of their uninsured money back, though exactly how much depends on the amount of money the FDIC is able to recoup after settling debts and selling off the failed bank’s assets.

If other Georgia banks in similar situations are a guide, the RockBridge customers shouldn’t expect much.

Three other Georgia banks that failed without a buyer in the current cycle have uninsured deposits at risk, according to FDIC records: FirstCity Bank of Stockbridge; Omni National Bank of Atlanta; and Community Bank of West Georgia.

At FirstCity, seven depositors holding a total of $2,740 in uninsured deposits have received $427 back, a return of just 16 cents on the dollar, according to the FDIC. Community Bank of West Georgia, which failed last June, had 11 accounts with a total of $5,700 in uninsured deposits. No money has been returned to those customers.

Omni has had the most uninsured deposits at risk so far -- $582,000 in all, held in 35 accounts. The FDIC has sent back $40,000, or 7 cents on the dollar.

While the total losses at Georgia banks are not high, some individuals appear to have lost tidy sums. The largest losses: $294,000 for an account holder at Omni, and $98,000 for a customer of RockBridge, according to the FDIC.

Neither banks nor the FDIC disclose the identities of bank borrowers.

Bank                                                          no. of uninsured accounts          amount            amount reimbursed*

Omni National                                                          35                                $581,789         $39,673

RockBridge                                                                21                                $144,942         none

Community Bank of W. Ga.                                 11                                $5,697             none

FirstCity                                                                    7                                  $2,740             $427

Total                                                                           74                                $735,168         $40,100

*Money returned to customers by FDIC to date