Many local bank presidents say that, while the local economy seems to have bottomed out, it won’t be a quick recovery.
Georgia had the highest number of failed banks in the state in 2009, making up one-fifth of the 140 banks that failed across the nation. Woodstock’s Security Bank of North Metro Atlanta failed in July and United Security Bank, of Sparta, of which Bank of Woodstock was a branch, failed in November and was taken over by Ameris Bancorp of Moultrie.
Many more local banks received cease-and-desist and consent orders, either from the Federal Deposit Insurance Corporation, for state-chartered banks, or from the Office of the Comptroller of the Currency, for national banks.
The FDIC’s David Barr told the Ledger-News last week that, although the agency does not make state-specific predictions, “We expect to see the pace of failures continue; maybe even exceeding the number that failed last year.”
He said the FDIC has stepped in to protect customer deposits and find banks to take over the failed banks, so that customers, by and large, are not affected.
“One-third of banks in Georgia are operating under some kind of regulatory order,” said David Oliver, senior vice-president for communications and marketing for the Georgia Bankers Association. “The state continues to deal with a poor and very stressed economy, and that’s going to make it remain a challenging environment for bank performance.”
Oliver said big negatives are the high rate of unemployment and the lack of business demand. However, he said, he’s starting to see a little stabilization in the housing market.
Steve Holcomb, president of United Community Bank of Cherokee, chairman of the Cherokee County Development Authority, and vice-chair of the Development Authority of Cherokee County, said his bank is one of the few in the area that has not gotten any type of regulatory order.
“We’re an $8 billion community bank, and we’re traded actively on the stock exchange; our capital is higher than it’s ever been,” he said. “For that, we’re humbly thankful.”
He said United Community, like all banks operating in areas of former high growth, has had exposure to bad real estate loans, and he’s looking at this year as a year to put those behind the bank.
“I think it will be the fourth quarter before we see much improvement, especially in unemployment rates,” Holcomb said. “The Atlanta metro area lost 105,000 jobs in 2009. In 36 years in banking, I’ve never seen anything like this. Everybody has been affected very negatively; they are pulling back and spending less, and that’s affecting retail and restaurants.”
However, Holcomb said that his work with the development authorities indicates that several new industries still are considering Cherokee; and existing industries are looking at expansion
“There are opportunities to grow jobs this year,” he said. “But we’ve got to see a return to confidence. We can’t take any more losses on the commercial side, and we’ve got to cut pessimism and encourage job growth.”
Oliver said Georgia banks, especially those in the metro area, have had so much trouble, because they were working for 10 years to support a rapidly growing area where population increased by 110,000 people a year.
“Financial services, residential real estate, contractors and construction were geared up; then, in mid-2007, that market came to a halt,” he said.
However, Oliver called the bank atmosphere in Cherokee robust, compared to most areas, with 20-plus banks in the marketplace and 60 locations.
Carl Hames, president of First Cherokee State Bank, said 2010 “is still going to be messy in terms of the market,” but the bank will survive.
He noted his bank has raised $8.2 million in 2009 since it received a regulatory order, and problem loans are less than they were at this time last year.
“North metro is a good place to be, because property values haven’t gone down as low as other areas, and we’re actually getting some absorption in housing; it’s clearly better than it was 12 months ago,” he said.
Hames said he hears about help for community banks from the federal government, but he hasn’t seen any details. “We (the banking community) would like to solve our problems without government help,” he said.
Dennis Burnette, president of Cherokee Bank, said his bank’s level of problem loans has stayed the same, but he said, his bank still has “core profitability.”
Board members put $1.25 million into new stock, and even with the worst-case scenario, Burnette said, the bank will make it with the new capital it has raised.
“We don’t look to 2010 to be any better, as far as loan charge-offs,” Burnette said. “It’s going to be a break-even year. We’re not going to lose money, but we’re not going to make a profit, either. We still have investments and fees from loan income. We’re going to take all the profit we are able to generate from operations and put it into reserve for bad debts.”
Burnette said trades in the community are starting to go under now, as a secondary effect to the developers and contractors that went under last year.
“I can’t blame my customers for taking risks they shouldn’t have taken because I loaned them the money,” he said.
Mark Nay, president of Bank of Canton, said Bank of Canton/Bank of Ellijay’s current capital campaign has been successful, and the bank has made a lot of progress reducing non-performing assets.
“Everybody’s making progress,” Nay said, adding that his bank is making new loans, but restrictions have tightened.
“(Federal Reserve Chairman Ben) Bernanke said this is the worst real estate market since the Great Depression,” Nay said. “It’s absolutely going to be sluggish for another year or so, but this is too good an area to be down for a long period of time.”
