Another bank was downed by assets in foreclosure for sale, putting the tally of failed banks in Georgia in 2009 at 17 and total failed banks in the U.S. this year at 78.
Ebank, a community thrift and Internet bank based in Vinings, was closed by the Federal Deposit Insurance Corporation and was sold to Minnesota-based Stearns Bank. Its deposits and lone branch were taken over by Stearns, which has previously acquired another Georgia failed bank. In October last year, it took over failed Alpha Bank and Trust which was based in Alpharetta.
Thrift institution Ebank was founded in 1998 and took the name ebank in 1999 as the Internet banking technology was taking off. Since the collapse of the housing market in 2008, Ebank has become the 22nd failed bank in Georgia.
Like many of the failed banks in Georgia, Ebank was battered by its heavy exposure to residential and commercial real estate loans. Out of Ebank's $95.6 million loan portfolio in the first 3 months of this year, a total of $89.7 million was used to fund residential and commercial property development.
Of the failed banks in metro Atlanta, most of them reported Texas Ratios that surpassed 300 percent. The Texas Ratio refers to the comparison of a bank's total delinquent loans to total equity capital. This measures the ability of the bank to absorb losses.
The ratio was developed in the aftermath of the savings and loan crisis that downed the Texas banking industry and economy in the 1980s and 1990s. A ratio higher than 100 percent is a sign that delinquent loans have exceeded the ability of a bank to absorb losses. The ratio has been helpful in measuring risks but it has not been used as a regulatory measure in financial statements in the banking industry.
In the case of Ebank, the Texas Ratio said a lot because as of the end of March, the Texas Ratio of Ebank had already surpassed 400 percent.
As part of the sale of Ebank's assets to Stearns Bank, the FDIC has signed a loss-share agreement with Stearns on around $111 million of the failed bank's assets. Stearns will share in the asset pool losses.
Meanwhile, the FDIC expects to lose $63 million of its insurance money to cover insured deposits. Ebank will open immediately as a unit of Stearns Bank, but customers can still use their Ebank cards and checks.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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