Dedicated to Deposits: Deals, Data, and Discussion

17th Bank Failure of 2009: Freedom Bank of Georgia

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There was only one bank failure today. The failed bank was closed 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: Freedom Bank of Georgia
  • Location: Commerce, GA
  • Size: 4 branches, $173 million assets, $161 million deposits
  • Possible Uninsured Deposits: ALL deposits Transferred
  • Acquiring Bank: Northeast Georgia Bank, Lavonia, GA
  • Cost to Deposit Insurance Fund: $36.2 million (estimated)
  • Financial Ratings: 0 star (lowest) at BauerFinancial, 1 star (lowest) at Bankrate.com
Georgia regulators have their own press release on this closure, but it doesn't provide any additional details.

This closure involved another All-Deposit Transfer transaction in which all deposits, even those above the FDIC limits, were transferred to the assuming bank. So no depositor should have lost any money. This includes brokered deposits:
As an All-Deposit Transfer transaction, the total of all deposit accounts, including brokered deposits, have been assumed by Northeast Georgia Bank.

Another thing typical with this closure is that the assuming bank hasn't decided if it'll honor existing CD rates to maturity.
Be advised, however, that from and after the date of closing, Northeast Georgia Bank will accrue and pay interest on deposit liabilities at a rate it shall determine; accordingly, Northeast Georgia Bank shall permit depositors, including brokered depositors, to withdraw their deposits without penalty for early withdrawal until you enter into a new deposit agreement with your new bank. Entering into a new deposit agreement can be done by either renewing your CD or making a deposit to, or a withdrawal from, your account.

As this shows, one risk of having your money in a failed bank is the loss of the rate lock. If you had a high-rate long-term CD, it's going to be difficult to find something comparable in today's low-rate environment.

This was the second Georgia bank to fail this year and the seventh Georgia bank to fail in the last 7 months. It's about 50 miles east-northeast from the Georgia city of Alpharetta. There have been three Alpharetta banks that have failed since 2007.

One interesting thing to note is that a bank in Florida with Freedom in the name was closed in Florida just over 4 months ago.

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


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