The taxpayers’ investment in Georgia banks has by and large been a good one, but last quarter a handful of small community banks did not cut a quarterly check to repay the Treasury Department’s bank bailout program.
Five Georgia banks in August were listed as having missed at least one quarterly Capital Purchase Program dividend payment, up from three banks a quarter ago, according to a report by the U.S. Department of the Treasury.
The late interest payments amount to only $1,054,186. It’s a relatively puny number. In total, Georgia banks have paid about $493 million over the past two years.
Three of the tardy banks—One Georgia Bank, Georgia Primary Bank and Midtown Bank & Trust—can’t pay because regulations for new banks won’t let them.
After the Wall Street meltdown in 2008, 26 Georgia banks received $6.2 billion in government aid as part of the $700 billion Troubled Asset Relief Program bailout of the financial sector. So far none have completely shed the government’s mantle.
Atlanta-based SunTrust Banks got $4.8 billion, and the state’s second largest banking company, Synovus Financial, got nearly $1 billion.
The rest was sprinkled among mostly small community banks.
“Georgia’s banks that received CPP investments have paid the government almost $493 million in dividends to date, which is a significant return on the investment made,” said Joe Brannen, the president and CEO of the Georgia Bankers Association.
The government’s stock investment calls for repayment in five years at interest rates of 5 percent. That number jumps to 9 percent after that, and the government also hold warrants in certain banks.
A Georgia banking code prohibits banks younger than three years from paying dividends to anyone, and newly-formed banks can’t pay dividends period until they are “cumulatively profitable.”
That’s a high hurdle to clear in a banking crisis that has claimed 41 banks in Georgia alone. Most succumbed to heavy losses in real estate.
Mark DiLuzio, the president and CEO of Georgia Primary Bank in Atlanta, said his bank should make its first TARP installment next quarter. The 3-year-old Buckhead lender, which received $4.5 million in taxpayer aid, has earned $4.3 million in profit the past 18 months.
“We’ve made money year-to-date, but we’re not yet to the point (of paying dividends). You have to reach cumulative profit to pay dividends,” DiLuzio said. “We’re not there yet, but we’d like to make the payments.”
Midtown Bank & Trust made initial interest payments, but a change in the treatment of newly-formed banks made it unable to make its last two.
Federal regulators have extended tough restrictions on new banks to seven years, meaning the 7-year-old Midtown-based lender also fell under the cumulative loss rule because it failed to turn a profit in 2008 and 2009.
“We hope to be able to make a payment as soon as possible,” said Midtown’s President and CEO, Stan Kryder.” The challenge is there’s a statute.”
Two other banking companies—The Queensborough Co. in Louisville, near Augusta and Tifton Banking Co. in South Georgia—are also behind on their payments.
Executives with the banks did not immediately return messages for comment.
If banks miss more than six quarterly payments in a row, the Treasury Department could appoint up to two directors at the bank.
It’s a risk, banking experts say, is very low. The Treasury, they say, has little interest in being on small bank boards.
“The penalty for not paying is the phantom threat of having Treasury in your board room,” said Jim Wheeler, a banking attorney with Morris Manning & Martin in Atlanta.
More than 120 banks nationwide failed to make a payment in the second quarter. Most were likely not profitable in the quarter, industry watchers said.
Banks are able to defer payments largely without immediate penalty.
Queensborough reported a $4.8 million loss in the first six months of the year. It was profitable for at least the previous four years.
“For any bank that’s close and able to make a slim profit and the payment would put them on the wrong side of the line, (not paying is) just good business sense,” Wheeler said. “Banks are trying to attract capital and it’s impossible to attract at any reasonable price if you’re in the red.”
For other banks, it could be about hanging on in a difficult environment. Tifton has lost $12.8 million over the past six quarters as real estate loans have tanked.
Chart
Georgia TARP recipients
Name City Invested Repaid as of August 2010
Alliance Bancshares Dalton $2.9 million $184,856
Ameris Bancorp Moultrie $52 million $4.5 million
CBB Bancorp Cartersville $2.6 million $269,143
Citizens Bancshares Atlanta $7.5 million $535,813
Colony Bancorp Inc. Fitzgerald $28 million $2.24 million
CSRA Bank Corp. Wrens $2.5 million $180,940
Fidelity Southern Corp. Atlanta $48 million $3.99 million
First Intercontinental Bank Doraville $6.4 million $495,928
Gateway Bancshares Ringgold $6 million $415,108
Georgia Commerce Bancshares Atlanta $8.7 million $723,078
Georgia Primary Bank Atlanta $4.8 million $0 ***
Hamilton State Bancshares Hoschton $7 million $566,952
Liberty Shares Inc. Hinesville $17.3 million $1.39 million
MetroCity Bank Doraville $7.7 million $646,960
Midtown Bank and Trust Atlanta $5.2 million $275,105**
Mountain Valley Bancshares Cleveland $3.3 million $159,866
One Georgia Bank Atlanta $5.5 million $0 ***
Peoples South Bancshares Colquitt $12.3 million $968,353
River City Bank Rome $8.9 million $542,098
South Crest Financial Fayetteville $12.9 million $757,731
SunTrust Banks Atlanta $4.8 billion $376 million
Synovus Financial Columbus $972 million $80.1 million
The Queensborough Co. Louisville $12 million $882,900*
Tifton Banking Co. Tifton $3.8 million $223,208*
United Bank Corp. Barnesville $14.4 million $1.48 million
United Community Banks Blairsville $180 million $15.2 million
*Missed latest scheduled payment
**Missed a payment because it was retroactively prohibited from paying dividends
*** Bank prohibited from paying dividends by Georgia banking regulations
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