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Georgian Bank Could Be Selling Off Atlanta Repo Homes Now

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By : John Cutts    99 or more times read
Georgian Bank could have survived the housing crisis and could be selling off Atlanta repo homes now if its biggest depositor did not cash out.

Based on statements from several bankers in Georgia, the biggest depositor of Georgian Bank was Reliance Trust, a retirement fund management firm operating out of Sandy Springs. At one point, Reliance had over $200 million deposited in Georgian Bank, representing over 10 percent of the total deposits of the bank.

But when the difficulties of Georgian Bank became front page news, Reliance quickly pulled out its huge deposit block, ultimately crippling Georgian and weakening its ability to recover from its spiking losses in residential and commercial mortgage loans.

Bank regulators said that Georgian Bank was not acting prudently when it maintained big deposit relationships with unreliable partners and firms operating in volatile sectors. They also pointed out that Georgian Bank ultimately failed because it did not comply with regulatory limits on real estate development loans.

Throughout its operations, according to analysts, Georgian Bank devoted 50 percent of its loan portfolio to residential development, which is among the riskiest lending subsectors.

When the mortgage lending and housing sectors were being clobbered by Atlanta repo homes in 2008 and 2009, the Atlanta-based bank was still able to post its peak total assets of $2.2 billion in the middle of 2009. Just a few months later, it collapsed and was the third biggest bank in Georgia when it closed in September.

Georgian Bank was eventually sold to First Citizens Bank and Trust of South Carolina and its depositors were paid by the Federal Deposit Insurance Corporation for a total of $798 million.

On the whole, Georgian Bank failed because it pursued growth even at the cost of violating banking regulations and bypassing commonly-known business precepts. The other Georgian banks that failed were also guilty of taking extremely risky moves.

A total of 37 Georgia banks based have already failed since August 2008, the highest number posted by a state. In 2010, seven banks have already failed, including five banks in March.

In the third quarter, partly because of risky lending decisions by banks, the total number of repossessed homes in Georgia reached 13,607 units, including 5,351 repossessed houses for sale in March.

If the failed banks were more prudent, they could be still standing despite selling off lower-priced Atlanta repo homes, just like the other Georgia banks still surviving.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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