One of the three banks was led by a chief executive who was also the one-time chairman and interim CEO of a bank that failed last year. Another had U.S. Rep. Phil Gingrey, R-Marietta, as a founding investor and board member until earlier this year.

All three banks — two in metro Atlanta and one based in extreme North Georgia— succumbed to soured real estate loans in the worst recession in generations.

Peoples Bank of Winder, Bank of Ellijay and First Commerce Community Bank of Douglasville were seized by regulators and sold as a package to Carrollton-based Community & Southern Bank.

Service at the banks will not be affected by the takeover, according to the FDIC, and customers will continue to have access to their accounts. The FDIC insures deposits up to $250,000.

The three failures will cost the FDIC’s insurance fund $225.5 million. Community & Southern agreed to assume all deposits and buy most of the failed banks’ assets under a loss-sharing deal with the FDIC.

Community & Southern was created in January to take over failed banks and with the latest purchase has acquired five in nine months.

"It was too much real estate. Too much of one product type," FIG Partners bank analyst Chris Marinac said of the failures. That has been the common theme with Georgia's bank failures.

Friday was the first time multiple Georgia banks were closed on one day since March 26.

Peoples Bank of Winder (not to be confused with similarly named institutions in Covington, Eatonton and Buford) was founded in 1926 by a group of Barrow County business leaders. It survived the Great Depression, which claimed four rival Barrow County lenders.

Its president and CEO, Christopher Maddox, is part of a respected family of Georgia bankers. His grandfather helped found Peoples, and his father was a founder of the The Bankers Bank (later Silverton Bank). Maddox led Peoples Bank for more than a decade and also was named interim CEO of Silverton Bank shortly before May 2009 when it was the largest bank to fail in state history.

Peoples Bank was a sleepy rural lender for much of its history. But Atlanta’s rapid suburban push and the housing boom helped the bank nearly quadruple in size to $520.7 million in assets by the end of 2008.

Peoples Bank had $447.2 million in assets and $398.2 million in deposits at the time it was closed. Its cost to the FDIC fund is estimated at $71.4 million.

Last January, the FDIC slapped Peoples Bank with a consent order criticizing its lack of board oversight, loan underwriting and portfolio management. By the end June 2010, a quarter of its assets were in some form of distress. It reported a $11.4 million loss for the quarter.

In addition to its bet on local real estate, Peoples Bank was the lead lender on Merrill Ranch, a $100 million, 5,600-acre development in the Arizona desert outside Phoenix. The loan, which was too big for Peoples Bank alone, was marketed by Silverton Bank to more than 60 other community banks, including many from Georgia.

Spearheaded by Atlanta Developer W. Harrison Merrill, Merrill Ranch collapsed when the housing market went under, and the land was sold off in two large chunks for $36 million, resulting in heavy losses for the banks.

"With hindsight, everything is clear, but at that point it was a great loan," Maddox told The Atlanta Journal-Constitution last year.

Marinac, the bank analyst, said Peoples Bank tried to right itself but couldn't attract investors to help replenish its reserves.

Bank of Ellijay was founded in 2006 with a roster of directors that included Gingrey, the doctor and congressman from the 11th District. It operated a subsidiary, Bank of Canton, which also was taken over by Community & Southern. Bank of Ellijay lent heavily to Cherokee County developers and builders of mountain homes.

Bank of Ellijay had $168.8 million in assets and $160.7 million in deposits when it was closed. Its loss to the FDIC is estimated at $55.2 million.

Losses started to mount after a May 2009 regulatory exam, and the bank was ordered by the FDIC in December 2009 to improve its operations.

Loans unlikely to be repaid grew to $23.4 million by the end of 2009 and $37.1 million by the second quarter of this year. Before Bank of Ellijay failed, half of its assets were in some form of delinquency, default or had been foreclosed.

For the past two quarters, Bank of Ellijay had the state’s highest Texas Ratio. The ratio, which compares a bank’s problem assets with its cash reserves, grew to 1,050 in second quarter, meaning the bank had 10 times as many problems as reserves.

Gingrey left the board sometime before June. A spokeswoman for the congressman did not respond to a request for comment Friday.

Gingrey remains on the board of WestSide Bank in Hiram.

No law prevents members of Congress from being on a bank’s board.

Gingrey voted against the bank bailout of late 2008 and it does not appear Bank of Ellijay applied for federal assistance.

The bank’s chairman, Brent Baker, also organized several other Georgia banks.

The third of Friday's failed banks, First Commerce Community Bank, was founded in Douglasville in 2003 and also devoted much of its capital to real estate development loans, according to FDIC data.

It had two branches and $248.2 million in assets and $242.8 million in deposits when it failed.

Loans started to sour in 2007 along as the housing market eroded.  It received a regulatory order in June 2009.

The Bank lost $22.6 million in the first two quarters of 2010. As of June 2010, half of the bank’s assets were in some form of distress.

www.ajc.com/business/trio-of-georgia-banks-616022.html

Sept. 18, 2010