Dedicated to Deposits: Deals, Data, and Discussion

7th Bank Failure of 2009: FirstBank Financial Services in Georgia

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FirstBank Financial Services is the first failure for this Friday. We'll see if there will be more today (3 closed last Friday). The bank 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: FirstBank Financial Services
  • Location: McDonough, GA
  • Size: 4 branches, $337 million assets, $279 million deposits
  • Possible Uninsured Deposits: ALL deposits Transfered
  • Acquiring Bank: Regions Bank of AL
  • Cost to Deposit Insurance Fund: $111 million (estimated)
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
Georgia's regulators also have a press release on this closure, but they don't provide any details about why the bank was closed. This Atlanta Journal Constitution article has a few details, and as you might suspect, it probably had too many bad real estate loans:
It appears to have fallen into the same trap that has snagged Georgia's other failed institutions: Its loan portfolio was heavily concentrated in the real estate sector, which has imploded. At the end of the third quarter, the most recent data available, FirstBank reported $53 million in loans 90 or more days late and charged off another $8 million in loans as not collectible.

This is the sixth Georgia bank to fail in the last six months.

This was another All-Deposit Transfer transaction in which all deposits, even those over the FDIC insurance limits, were assumed by the new bank. Unfortunately, Regions Bank has not yet decided what interest rates it will pay on deposits after today. According to this FDIC Q&A:
13. Will I continue to earn interest at the same rate?

All interest on insured deposits accrued through Friday, February 6, 2009, will be paid at your same rate. Regions Bank will be reviewing rates and will provide further information soon.

If you deposited funds through a broker, the interest will accrue and be paid through Friday, February 6, 2009.

Account holders with high-rate long-term CDs are the ones most at risk for these bank closures. They won't lose any principal or interest, and they'll be free to withdraw the money without penalty. However, they will likely have a difficult time finding a replacement CD with a comparable interest rate.

Bankrate and BauerFinancial were on target with the ratings for safety and soundness. Both gave the bank their lowest ratings. The bank also had a very high Texas ratio. It was #10 on this Texas Ratio List. Many of the banks on this list with higher ratios have already failed.

References:
Thanks to the readers who emailed me news of this closure.

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Comments
3 comments.
Comment #1 by Anonymous posted on
Anonymous
Hmmm... 55 miles from Alpharetta (as the crow drives), but on the other side of Atlanta. Has the Alpharetta curse spread?

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Comment #2 by Anonymous posted on
Anonymous
Estimated losses are almost a third of the assets! Seems like a pretty big fraction. It is 18% for the other bank that failed today. How good are the loss estimates?

I was thinking the estimated losses are typically a small percentage of the assets.

Shouldn't the banks be shut down much before we get to a stage where the FDIC has to foot a bill 1/3 of the banks assets.

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Comment #3 by Sector Timing Report (anonymous) posted on
Sector Timing Report
There will be many more bank failures before the government is done trying to regulate and clean up this toxic mess created by wall street. Shorting the Financial ETFs has been one of our best picks over the last 8 months.

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