A prominent but struggling minority-owned Atlanta bank has received a major investment from the metro area’s largest lender.
Capitol City Bank & Trust, which has been mired in problem loans stemming from the economic collapse, has received a commitment from Atlanta-based SunTrust Banks to invest $4 million, the companies announced this week. SunTrust has already funded $1 million of that commitment.
For a small institution like Capitol City, $4 million is a lifeline that helps replenish some of its capital base, which has deteriorated as the bank absorbed loan losses.
For SunTrust, the investment is a measure of goodwill to help buoy a bank that does much of its business in underserved communities.
Capitol City, with a clientele that is largely African-American, said investing in the bank addresses some requirements of the Community Reinvestment Act, a decades-old federal law designed to encourage banks to meet the credit needs of low- and moderate–income communities where they operate.
Capitol City has been under an order from federal bank regulators since January 2010 to increase its capital and reduce the number of soured loans on its books. The bank’s board has injected more than $1 million and Capitol City received a $600,000 investment from Wells Fargo about two years ago.
Other notable recent investors in the bank include Carolina Panthers quarterback Cam Newton, according to a news release.
“If Capitol City Bank did not have enough capital to survive, our absence from the marketplace would leave a tremendous void,” Capitol City President and CEO George Andrews said in the release.
William H. Rogers, Jr., SunTrust Chairman and CEO, said Andrews, a SunTrust alum, “shares our commitment to serving Atlantans and we are pleased to support the institution he leads as it works to meet the financial needs of the urban and minority communities in the area.”
It's an uncommon move, said Chris Marinac, a bank analyst with FIG Partners.
A SunTrust spokesman said it is the bank’s only investment of its type.
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