Imploded: First Piedmont Bank of Winder, Georgia

First Piedmont Bank, Winder, GA

July 17, 2009 – 3:15 pm

The FDIC is on the march tonight, claiming its 54th victim of 2009 and the 15th in Georgia. First Piedmont Bank of Winder, Georgia, was closed down by the agency tonight. First American Bank and Trust Company will assume all the failed bank’s deposits.

Winder. Ga.-based First Piedmont Bank became the state’s 15th bank failure late Friday, seized by state and federal regulators as part of the Peace State’s on-going banking crisis.

Located in Atlanta’s extreme northeastern suburbs near Athens, First Piedmont’s branches and deposits will be acquired by Athens-based First American Bank and Trust Co., according to a late Friday announcement by the Federal Deposit Insurance Corp.

The bank is the tenth to fail in Georgia this year, and the 15th since the banking crisis began in earnest in August 2008.

First Piedmont, as of July 6, reported $115 million in total assets and $109 million in deposits and two branch offices.

First American will assume all of the deposits of First Piedmont, paying $1.1 million in its bid for the customer accounts.

First American also agreed to purchase $111 million of the failed bank’s assets, with the FDIC agreeing to share in losses on up to $90 million of those assets.

The FDIC expects a $29 million loss to the Deposit Insurance Fund. Customers of First Piedmont will automatically become customers of First American.

The bank, founded in 1998, followed a now-familiar path to failure.

Like each of its predecessors, the bank bet too heavily on now-soured real estate construction loans, according to FDIC data.

Between 2004 and 2008, the bank’s loan portfolio doubled in size to nearly $100 million, primarily on residential construction loans. But those loans began to sour as home sales slumped dramatically through 2007 and into the following years, and the bank’s loan portfolio deteriorated.

By first quarter 2009, roughly one-third of the bank’s loan portfolio was classified as some form of problem, either delinquent or defaulted loans, or had become repossessed real estate.

By March 31, the bank’s Texas Ratio — a comparison of its total loan problems to total equity capital, which measure the bank’s ability to absorb losses — exceeded 400 percent. Any ratio above 100 percent indicates loan problems have outstripped the bank’s ability to absorb the losses.

The bulk of metro Atlanta bank failures so far have reported Texas Ratios in excess of 300 percent, or triple the problems to capital.

The computation came to prominence during the Savings & Loan Crisis of the 1980’s and 1990’s to highlight the loan problems at Texas institutions hard hit by the then-real estate downturn. The name stuck.

For more information, visit the official FDIC webpage for First Piedmont Bank of Winder, Georgia.