Dedicated to Deposits: Deals, Data, and Discussion

Bank Failure - Alpha Bank & Trust in Georgia

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Alpha Bank and Trust in Georgia was closed today by Georgia regulators, and the FDIC was named receiver. Here's the FDIC's press release link, and here's a summary of the closure:
  • Closed Bank: Alpha Bank and Trust
  • Location: Alpharetta, GA
  • Size: 2 branches, $354.1 million assets, $346.2 million deposits
  • Possible Uninsured Deposits: $3.1 million in 59 accounts
  • Acquiring Bank: Stearns Bank, N.A.
  • Cost to Deposit Insurance Fund: $158.1 million (estimated)
  • 2008 closures: 16th bank to be closed this year
  • Financial Ratings: 2 stars at BauerFinancial, 1 star at Bankrate.com
This is the first closure in which the new FDIC limits are important. In the last 4 closures (including WaMu), all deposits were transfered to the new bank including those over the insured limits. In this case there were 59 accounts with $3.1 million in deposits that potentially exceeded the FDIC limits. It appears there will be no immediate payout of uninsured deposits.

The basic coverage is now $250K instead of $100K. Also, all non-interest bearing accounts seem to be fully covered based on what the FDIC describes in this Q&A Guide. Also, the change that removes the requirement that beneficiaries be qualifed may help reduce loss. Some of that $3.1 million may be in POD accounts with multiple beneficiaries. The FDIC Claim Agents should have an easier time to determine if these accounts qualify for the higher coverage. I would think the depositors would only need to show that the beneficiaries are alive. Before they had to show they were qualified by being an immediate family member.

I've posted many times on Alpha Bank & Trust. They've had some nice CD specials over the last year. It was clear they were at risk due to their low financial ratings for soundness. One interesting note about this bank is that it was fairly new. It was established in May 2006. Another interesting note is that this was the third bank based in Alpharetta to fail in the last 13 months.

Here's the FDIC list of all the recent bank failures. For more info on FDIC coverage, please refer to my Facts about FDIC and NCUA post and my recent post on FDIC News, Resources and History. For the recent changes to FDIC coverage, please refer to this post

Thanks to the readers who sent me news of these closures.

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Comments
7 comments.
Comment #1 by marc (anonymous) posted on
marc
3 failures in one city of 50k in a little over a year. Interesting what the connection is, if any.

1
Comment #2 by Anonymous posted on
Anonymous
Almost certainly fraud involved. Not any worse than the idiots at WAMU, but you have to assume this was some kind of scheme.

1
Comment #3 by Bozo (anonymous) posted on
Bozo
My sole contact with Alpha Bank did not inspire a lot of confidence. I called the 800 number and spoke with a woman who seemed a tad mystified about how an out-of-stater might go about opening a CD. I let it go, chalking it up to a bad hair day on her part. Needless to say, I never opened a CD there.

But fraud, well, that's a tad harsh. Probably just another bank that got caught up in the heady days of the real estate bubble. Weren't all these Georgia banks that failed in one of those "hotlanta" suburbs?

No worse than Wachovia, I guess, with all the "pay as you wish" mortgages inherited from Golden West/World Savings.

Bozo

1
Comment #4 by Anonymous posted on
Anonymous
I was one of Alpha Bank & Trust's first customers, and I've had two CD's there (both now matured) with zero problems.

Alpha had stopped accepting accounts from out-of-state residents quite a while ago.

Integrity Bank and NetBank were the other two Alpharetta, GA banks closed.

The problem here was again construction and development loans, which accounted for 75% of the bank's loan portfolio.

Interesting that Stearns Bank is taking over Alpha. I've had a CD at Stearns as well. It's excellent and I recommend it.

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Comment #5 by Anonymous posted on
Anonymous
"$3.1 million in uninsured deposits held in approximately 59 accounts "

Means an average of 52K over the new limit or an average of 250+52 = 302K for these 59 depositors.

Why do people do that?

1
Comment #6 by paul in acworth (anonymous) posted on
paul in acworth
I went into the Alpharetta ALpha branch 3 months ago to open a cd with over $100,000.00. The rep told me I had to open two cd's under $100,000.00 each because the bank was new and that was the rule. So I did. thou never heard of that rule, anyone else hear of this?

1
Comment #7 by Anonymous posted on
Anonymous
I don't see how its possible for THREE banks in the SAME CITY to become insolvent without some fraud involved.

The odds are astronomical.

Don't be so fast to excuse the obvious.

1