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23rd Bank Failure of the Year: First Georgia Community Bank


First Georgia Community Bank was closed yesterday 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: First Georgia Community Bank
  • Location: Jackson, GA
  • Size: 4 branches, $237.5 assets, $197.4 million deposits
  • Possible Uninsured Deposits: ALL deposits transferred to acquiring bank
  • Acquiring Bank: United Bank, GA
  • Cost to Deposit Insurance Fund: $72.2 million (estimated)
  • 2008 closures: 23rd bank to be closed this year
  • Financial Ratings: 0 star at BauerFinancial, 1 star at Bankrate.com
This is yet another bank failure in which all deposits including those over the FDIC limits were covered. The last time there was potential loss of uninsured deposits was the October 24th closure of Alpha Bank & Trust. These All-Deposit Transfers seem to be more common these days.

The main risk for CD customers when a bank fails is that the new bank is allowed to change the rate, and it appears United Bank may decide to do this. As described in this Q&A:
All interest on insured deposits accrued through Friday, December 5, 2008, will be paid at your same rate. United 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 December 5, 2008.

So even though the CD customer won't lose any principal or interest, he may lose out on future returns from a high yield. Also, there is a risk that there could be some delay before the new bank allows you to close the CD. A reader of a previous bank failure had his CD changed to a much lower rate at the date of the bank closure, and the new bank didn't provide for a quick way to close the CD by mail.

On a positive side, CD customers will be allowed to withdraw funds out of their CDs without an early withdrawal penalty (see Q&A #11). This is typical of most bank failures. However, it's not guaranteed. JPMorgan Chase did not allow this when it took over WaMu, but Chase also did not change any rates or terms of existing WaMu CDs. That was okay with me since I had opened a 5% 1-year CD at WaMu two months before its closure.

First Georgia Community Bank had been offering some high CD rates. My last post on this bank was in August 2008 when it was offering a 4.75% APY 15-month CD. Hopefully, United Bank will allow customers with this CD to continue earning this rate to maturity. If you opened a CD at First Georgia Community Bank, please leave a comment about how this goes.

Another thing to note from my previous post on First Georgia Community Bank is that both BauerFinancial and Bankrate gave the bank their lowest rating for soundness. The bank had even been noted by the Atlanta newspaper for its problems and its high Texas ratio.

Here's the FDIC list of all the recent bank failures. I just posted on the new documentation from the FDIC and NCUA that covers all the recent deposit insurance changes (see post).

Thanks to the readers who sent me news of this closure.

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Bill M
Bill M   |     |   Comment #1
Seems like there is a lot of banking problems in that region, maybe the FBI will start looking there to see whats going on, to see if maybe there is alot of fraud. Its hard to believe that small region has so many failures versus an area like Cali or Nevada or even Florida that had really bad real estate markets and alot of bad construction loans