What's the sound of one bank holding company failing in Georgia? Apparently, it's six subsidiaries hitting the ground. The FDIC announced on Friday it had closed the six bank outlets of Security Bank Corporation of Macon, Ga. Combined with another Friday closure in New York, the grand total of bank failures for the year stands at 64.
The FDIC estimates that the Georgia closures will gouge $807 million out of its deposit insurance fund. Bloomberg provides the context:
Bank failures this year have cost the U.S. deposit insurance fund more than $13.5 billion, including $812.6 million from yesterday’s seizures, straining the FDIC reserves amid the steepest recession since the Great Depression. The FDIC has imposed an emergency fee aimed at raising $5.6 billion to replenish the fund, which fell to $13 billion, the lowest since 1993, at the end of the first quarter.
The FDIC entered into an agreement with the State Bank and Trust Company of Pinehurst, Georgia to assume all of the deposits of the six subsidiaries of Security Bank. The six banks had a total of 20 branches, which all reopened today as State Bank and Trust.
Regulators have shuttered 16 banks in Georgia this year. Bad loans to builders and developers in the Atlanta area seem to be at the root of many of the failures. As with so many of the banks that failed, the Security subsidiaries and the holding company itself were already under enforcement orders from regulators. The orders from both federal and state regulators required the holding company and the subsidiaries to increase their board oversight, money set aside for losses, and improve its lending standards.
Waterford Village Bank of Clarence, New York was the other bank to fail on Friday. The FDIC entered into an agreement with Evans Bank of Angola, New York to assume the deposits. This is the first FDIC-insured bank to fail in New York since 2004. The total cost to the insurance fund was a relatively paltry $5.6 million.