“Bank Failure Friday” struck again last week, shuttering a financial institution with strong ties to Fayette County for the second week in a row.
The Georgia Department of Banking and Finance closed Newnan’s Neighborhood Community Bank June 26. The Federal Deposit Insurance Corporation agreed to enter into a purchase and assumption arrangement with CharterBank of West Point to assume all of the Coweta bank’s deposits.
The failure came exactly one week after Fayetteville’s Southern Community Bank was closed by state authorities. United Community Bank of Blairsville assumed operation of Southern Community’s four local branches June 20.
Now CharterBank is operating the four former Neighborhood Community Bank locations, including one in Peachtree City and another in Tyrone.
“Over the past 18 months we’ve seen quite a few bank closures in places like California, Florida, Georgia, Nevada and Arizona because those were the areas that experienced the most run-up in real estate prices during the housing boom,” said FDIC spokesman David Barr.
“Consequently, those are the same areas that have been hit the hardest by the housing bust.”
Barr added that bad Acquisition, Development and Construction (ADC) Loans played a major role in
Neighborhood Community Bank’s collapse.
“ADC loans are made to developers of neighborhoods, commercial properties and other large scale building projects,” Barr explained.
“Neighborhood Community Bank was pretty heavily concentrated in ADC loans. These loans combined with the weak economy and the real estate collapse to deplete the bank’s earnings and erode capital.
“Problem ADC loans seem to be present in most of the banks that have failed recently. It is a common thread.”
Neighborhood Community’s troubles go back at least one year. According to Barr, the 9-year-old institution was listed last July as one of 305 banks on the FDIC’s ‘Problem List.’ Neighborhood Community made the list after a routine financial inspection revealed serious financial weaknesses.
According to an FDIC news release, Neighborhood Community Bank had assets of $221.6 million and deposits of about $191.3 million at the time of its closing. CharterBank agreed to buy about $209.6 million of the failed bank’s assets.
“We were able to contact almost 440 potential bidders to enter into a purchase and assumption agreement,” Barr stated.
“Of those, we received two qualifying bids. CharterBank’s was the best of the two. By law, the FDIC must enter into the least costly arrangement.”
Neighborhood Community’s collapse will still cost the Federal Insurer $66.7 million. The estimated cost of Southern Community’s collapse one week prior was significantly higher, coming in at $114 million.
An FDIC press release announcing Neighborhood Community’s closure reminded depositors that their investments remain guaranteed. It urged investors to stay calm and explained that account holders at Neighborhood Community Bank have automatically become customers of CharterBank.
Neighborhood Community Bank account holders can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
Customers who have questions about the transaction can call the FDIC toll-free at 1-888-408-4360.
CharterBank CEO Robert Johnson also issued a news release, welcoming Neighborhood Community Bank’s former customers.
“Over the next several weeks we will be working to complete the transition process to CharterBank,” Johnson explained.
“There will be new signage, but the same friendly faces you’ve come to know will be there ready to serve you.”
CharterBank has ten previously existing retail locations along the I-85 corridor in eastern Alabama and western Georgia.
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