As the Atlanta Braves fought to stay alive in the playoff race this summer, manager Bobby Cox had more to worry about than his team’s spotty bullpen or offensive struggles.
The Braves skipper sits on the board of Northside Bank, a small community bank in Bartow County that has been hit hard by the recession and real estate crunch.
In July, federal and state regulators cracked down, slamming the bank’s board for providing “inadequate” supervision and ordering the bank to raise cash and improve its operations.
Cox said he had joined the board because he thought it would be a fun thing to do once he retired to his farm, located near Northside’s main branch in Adairsville. But suddenly he was spending more time on bank matters as monthly meetings grew longer and more complicated.
“It’s a lot of work,” Cox said last week in the Braves clubhouse, a few hours before game time. “I knew it would be work, but you’ve got to be available.”
Cox is among a number of well-known people, from sports figures to politicians, who sit on the boards of troubled banks or served as directors of institutions that recently failed.
The list includes: Glenn Richardson, speaker of the Georgia House of Representatives; Keith Brooking, the former Atlanta Falcons linebacker; U.S. Rep. Phil Gingrey (R- Marietta); and Glenn Burns, the longtime weatherman at WSB-TV in Atlanta.
Bank boards are typically filled with business leaders, doctors, lawyers — people who have the cash to help launch a bank and also the contacts to woo investors and business.
Some banks seek out more famous names to round out their boards, hoping the celebrity factor will help generate buzz.
“There’s a little cachet to it,” said Jim Verbrugge, a professor emeritus of finance at the University of Georgia’s Terry College of Business. “They can say, ‘We have X on the board. It’s kind of a feel-good thing.”
A seat on a bank board can be prestigious and lucrative. While board members typically don’t earn much for attending meetings, they usually are among the bank’s initial investors and stand to reap big returns should the bank perform well.
But the housing crunch has taken down many small Georgia banks whose fortunes were closely tied to metro Atlanta’s real estate market. That poses a problem for board members, who face potential lawsuits from shareholders or federal regulators should their bank fail.
Many community bank board members “don’t give any thought at all to the liabilities that they are assuming when they are elected a bank director,” said Bobby Schwartz, a banking attorney at Smith, Gambrell & Russell in Atlanta.
Few of the 23 Georgia banks that have failed during the current downturn had any widely known board members. An exception: First Coweta Bank of Newnan, which failed last month and whose board included Brooking, the former Falcon, and Lynn Smith, a state lawmaker from Newnan.
Brooking declined to comment through a media representative at his current team, the Dallas Cowboys. Smith was not available for comment.
In many ways, Cox’s Northside Bank is typical of the lenders that sprouted in metro Atlanta in recent years. The bank, based about 70 miles northwest of Atlanta, formed in 2005 during the housing boom and lent heavily to homebuilders and developers.
Northside’s losses mounted as the real estate market deteriorated. The bank reported nearly $10 million in troubled loans at the end of June, up from $3 million a year earlier..
Relaxing in the clubhouse before a late-season game against the division rival New York Mets, Cox said Northside’s bank’s issues have not distracted from his managerial duties, nor vice-versa.
“You concentrate on whatever you are doing at the time,” Cox said.
Cox, who last week announced he’d retire after the 2010 season, said Northside’s bets on the real estate market made sense at the time given the area’s growth.
“We were going great until the economy hit the bottom,” he said.
When asked about the regulators who slapped the bank with a federal “cease and desist” order two months ago, Cox says he didn’t feel Northside was treated right.
“We didn’t really feel it was fair, because everything was good the way it was,” he said. Cox added that he understands the pressure regulators are under given the banking crisis, calling them “very helpful.”
Schwartz, the Atlanta banking lawyer, said board members like Cox must understand the role of regulators.
“Regulators are not umpires, they are your partners in this venture,” he said. “They work with you to try to assist in the profitable operation of your enterprise.”
Some community banks have placed politicians on their boards, from small-town mayors to top leaders in the state Capitol.
Richardson, the Georgia House speaker, and Gingrey, a Georgia congressman, sit on the board of WestSide Bank in Paulding County, which has a large pool of problem loans. State Rep. Earl Ehrhart (R-Powder Springs), the powerful chairman of the House Rules Committee, is on the board at Atlanta-based Georgian Bank, which is reeling from mushrooming loan losses.
Former state Rep. Larry Walker of Perry, a member of the Georgia Department of Transportation board, served on the board at Security Bank, the failed Macon lender. Walker declined to comment. Richardson declined to be interviewed through a spokesman, and Ehrhart could not be reached for comment.
Gingrey issued a statement through a spokeswoman, saying the bank is working aggressively to address its problem loans.
The board “brings a well-rounded, diverse perspective to the table, which we believe serves a community bank most effectively,” Gingrey said. “We’re hopeful that the steps we have taken, combined with an eventual rebound in the economy and housing market, will ensure our bank can continue to serve our local communities in Paulding County.”
Tren Watson, WestSide’s CEO, said the inclusion of Gingrey and Richardson on the bank’s board helped the bank raise money for its 2006 launch.
The politicians “lent a lot of credibility to the board of directors,” Watson said. The bank raised $20.4 million in about 45 days, he said.
State Rep. Calvin Hill (R-Canton) sits on the board of Cherokee Bank, another Georgia lender recently hit with a cease and desist order. He also is on the House Banks and Banking Committee alongside Ehrhart. Hill, who ran for the legislature after he joined the bank’s board, said there’s no conflict of interest.
Cherokee Bank is a national bank, regulated by the Office of the Comptroller of the Currency, not the Georgia Department of Banking and Finance, he said.
Besides, “having people that know about banks and banking on the banks and banking committee only makes sense, because you need the expertise,” he said.
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