Georgia’s banking crisis has claimed the state’s fourth-largest lender, Security Bank of Macon, which failed on Friday under an avalanche of real estate-related losses.
The company, which operated 20 branches in middle and north Georgia, will be taken over by three veteran Georgia bankers led by Joe Evans, former president and CEO of Flag Financial Corp.
To fund the acquisition, the group put up an unspecified sum of their own money and raised additional cash for a total of nearly $300 million, which will be used to recapitalize the bank. Industry leaders cheered the deal, saying that the group’s ability to raise a large sum of cash is a show of confidence in Georgia’s banking future.
The transaction is complex and involves the Evans group buying a controlling stake in one of Georgia’s smallest banks, State Bank and Trust Co. of Pinehurst. State Bank, now run by Evans and his team, has acquired all of Security’s $2.4 billion in deposits and most of its $2.8 billion in assets.
State Bank and the Federal Deposit Insurance Corp. agreed to share losses on a large portion of the assets. Security branches will reopen Saturday as branches of State Bank and Trust.
The new bank will be headquartered in Macon.
Evans, who will be State Bank’s chairman and CEO, said he relishes the opportunity to rebuild from the ashes of Security Bank.
“We’ll wake up Monday with arguably the soundest and best-capitalized bank in Georgia,” Evans said in an interview. “We’re excited to be back in the banking business at this point in time. Georgia needs a clean, well-capitalized bank, and we expect to play our role.”
Evans’ former bank, Flag Financial, was purchased in 2006 by RBC Centura Banks. Evans is joined in his new venture by two Flag colleagues — Dan Speight, who will be State Bank’s vice chairman and chief operating officer, and Kim Childers, who will be president and chief credit officer.
Georgia banking experts say the deal marks a turning point for the state’s troubled banking industry, which leads the nation in bank failures over the past year with 16.
“It’s the most positive thing in Georgia banking in the last two years, since the market started to disintegrate,” said Walt Moeling, a banking attorney at Bryan Cave Powell Goldstein. “We have very smart people putting up large amounts of money because they believe the opportunities down the road justify it.”
Security’s rapid rise and even steeper fall stand as a stark symbol of the state’s banking woes.
In a push to cash in on metro Atlanta’s housing boom, Security made what turned out to be a fatal push into the market in 2005 and 2006. The company spent $115 million to buy three banks in the north Atlanta suburbs — Alpharetta, Suwanee and Woodstock.
The bank almost tripled in size between 2005 and 2009, but losses began mounting not too long after the acquisitions closed.
The company lost a staggering $243 million last year. At the end of the first quarter of this year, Security reported $277 million in severely delinquent loans the bank had given up hope of collecting on.
Security raised nearly $70 million last year from existing shareholders and a private equity fund in a bid to survive. Those investments will be wiped out.
The FDIC estimates that the failure will cost its insurance fund $807 million.
The failure will also leave a void in Macon, where Security is the largest bank by market share and plays a sizable role in the city’s business and civic life. A bank executive sits on the board of the Greater Macon Chamber of Commerce.
Security operated six subsidiary banks: Security Bank of Bibb County; Security Bank of Jones County; Security Bank of Gwinnett County; Security Bank of North Metro in Woodstock; and Security Bank of Houston County.
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