State and federal regulators are ordering four more small Georgia banks to improve their finances and operations as officials try to steady the wobbly industry.
The banks named on Friday -- One Georgia Bank in Atlanta, Sunrise Bank of Atlanta, Northwest Bank & Trust in Acworth and Bank of Newington in Screven County -- signed "consent orders," which are not admissions or denials of wrongdoing. They also are not bank failures. Consent orders generally require banks to raise reserves of capital, cut dividend payments and bonuses, get bad loans off their books, and tighten oversight by bank board members.
The announcement from the Federal Deposit Insurance Corp. and Georgia's Department of Banking and Finance is only the latest reminder that Georgia has become an epicenter of the banking crisis. The state leads the nation in bank failures, with small community banks particularly hard-hit. Regulators have shut down 37 Georgia banks since 2008. Many of those banks were buried by bad real estate bets.
"It's a struggle in this environment," said veteran banking consultant John Kline of Kline & Associates in Decatur. "Not a lot of people have the means to get additional capital."
Strict federal rules require community banks to write down the value of nonperforming real estate loans. The markdowns reduce their equity capital and can automatically trigger consent orders. Kline estimated that 20 banks in metro Atlanta, and possibly more, are looking for additional capital. "The accounting rules are just extremely unforgiving for community banks," he said.
On Wednesday, U.S. attorney Sally Yates told The Atlanta Journal-Constitution that federal authorities have started criminal investigations into some bank failures in North Georgia, which has had more bank closures than any other district in the nation. Yates did not say which failed banks her office is probing or when charges would be brought. She did say at least some of the bank failures were attributable to criminal fraud.
About half of Georgia's more than 300 banks are facing more regulatory scrutiny in the form of consent orders and other actions as the state's financial sector works through the worst banking crisis in at least a generation.
David Oliver, senior vice president of the Georgia Bankers Association, said consent orders are "specific and orderly plans" hammered out by banks and regulators. They are not a surprise to banks by the time they are announced, typically a month after being finalized. In some cases, banks have made significant progress on fixing their balance sheets by the time the list is made public, he said.
In an encouraging sign, no Georgia banks appeared on the list of banks that require what the FDIC calls "prompt corrective actions." That list is more serious. It is generally reserved for severely undercapitalized banks and gives them tight deadlines to raise capital.
Chuck Lewis, president and CEO of One Georgia Bank, said his bank has "substantially complied with the majority of steps that were required."
He said the bank's capital exceeds the regulatory minimum and it is making progress on the required disposal of bad loans. That requires the sell-off of some collateral, such as townhouses.
"The resolution can sometimes be a lengthy one," Lewis said. "I don't know if there's a bank around that's immune from a sour economy. But we're going to come out."
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