Bank of Georgia Receives “Cease & Desist” from FDIC!

The Bank of Georgia is under some major scrutiny as the FDIC served a “cease and desist” to the Peachtree City-based bank.    The order basically states that the Bank of Georgia has been cited for a number of banking practices that could represent unsound and unsafe banking practices. 

Specifically, the bank was cited for operating with inadequate capitalization for its risk profile.  Additionally, the bank was operating with inadequate management citing that those practices are detrimental to the bank and further jeopardize its deposits. 

Bank of Georgia execs have commented on the situation stating that the dozen complaints had already been address in subsequent bank examinations during 2008 and are considered resolved.  Bank of Georgia also contends that most of their loans are tied to the construction industry and the bank has made no sub-prime housing loans. 

Bank of Georgia is one of 18 banks in Georgia that have received “cease and desist” order this year.  Add that folks to the 16 banks that have failed in Georgia for 2009.  The total banks failed this year has reached 64. The 16 here in Georgia have cost of a whopping $807 million! The tab for all failures in 2009 so far is $13.5 billion nationally!

So why is a state like Georgia home to only 4% of the nation’s banks……account for 20% of the failures?  It seems that the main cause for bank failure here in Georgia is tied to builders, developers and construction loans.  Not only that, Georgia was a state that experienced pretty rapid banking expansion.  Psst…just so you folks know…..it’s not over yet!!  Even as you read this….a number of Georgia banks still have a daunting amount of delinquent loan looming on the horizon and more failures are imminent.   In fact approximately another 30 banks are in jeopardy of failing!

As you might have guess, the future viability of Georgia banking community is now being fought out by bankers, regulators and politicians.  Some banks have even gone as far to complain that Georgia banks have not had adequate access to TARP monies.  Sen. Johnny Issacson has interceded and met privately with regulators to discuss the strict oversight and the future of Georgia banks.  Needless to say, the FDIC and other regulators have still been very assertive although efforts have been made to send real estate specialist to scrutinize these loans.

It should be noted that the Bank of Georgia opened in 2000, operates 9 locations and employes about 2800 people.