If Ameris picked up the bank so quickly, why couldn't the failed leaders of the bank find a buyer before being seized by the FDIC? Simple answer: the FDIC ultimately offered the new owners a 50% discount by agreeing to eat $44million of the bad assets. The prior owners could not offer such a discount, nor could they (or would they) come up with the equity capital internally that made the Feds comfortable.
American United was operating at an 8:1 average ratio of outstanding loans to internal equity capital. If the FDIC believes the current management and owners have an out-of-balance portfolio of loans, they will seize the bank. That does not typically occur without the knowledge of other larger banks having the interest and ability to absorb the smaller failing bank. When the FDIC sweetens a deal by $44million, they know the larger banks are there to take responsibility of running the reorganized bank.
Was P.I. Joy, American United's Chairman, happy to have the bank seized? Was he relieved to no longer be responsible for an out-of-balance loan portfolio that was 93% in real estate assets? Will he and his partners be required to pay the FDIC any part of the $44million loss it is assuming? We don't have a comment from Mr. Joy or the FDIC, but most Atlantans assume the government will cover the loss out of taxpayer funds.
The $44million loss does not seem much for the FDIC since it projected the next four years of US failures to cost $100billion. If that is only $25billion in cost and losses in 2009, from what source will the cash be derived? The Deposit Insurance Fund (DIF) shrank from a balance of $45billion in June 2008 to only $648million on August 7th, 2009. The FDIC has a $500billion credit line with the Treasury, but they sought pre-payment of premiums for three years from member banks as a better option to increase the fund balance by $45billion.
Georgia continues to be the nation’s leader in failed banks, synonymous with Georgia's under-performing real estate. Its boom in the 90's is correcting itself in equal fashion. 2010 promises more problems, some say three more years of decline. We believe next year will be the opportunity to capitalize on bank reorganization and release of new credit and debt products. Atlanta remains at a new development stand-still while safe products are being brewed.
http://www.ajc.com/business/25th-georgia-bank-fails-171262.html
http://nripulse.com/CityNews/AUB_Review.html
http://bankfailure.com/
http://en.wikipedia.org/wiki/Fdic
