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Published Saturday, June 27, 2009 in Local

Local bank shut down by regulators

By Winston Skinner

The Times-Herald

Following months of speculation about its future, Neighborhood Community Bank was closed Friday by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation as receiver.

To protect the depositors, the FDIC entered into a purchase and assumption agreement with CharterBank in West Point to assume all of the deposits of Neighborhood Community Bank. FDIC officials and representatives of CharterBank, which was founded in 1954, were at the former NCB main office in Newnan on Millard Farmer Industrial Boulevard on Friday afternoon.

Food from Sprayberry’s Barbecue was being served to workers taking part in the changeover from NCB to Charter.

The change officially took place at 6 p.m. Friday. A “welcome” message to NCB customers was on the CharterBank Web site Friday afternoon.

The main Newnan and Peachtree City offices of Neighborhood Community Bank are set to reopen today as branches of CharterBank. All of the offices will maintain normal business hours. On Monday, the former downtown Newnan and Tyrone offices of Neighborhood Community Bank locations will reopen as branches of CharterBank.

Depositors of Neighborhood Community Bank will automatically become depositors of CharterBank. Deposits will continue to be insured by the FDIC. NCB customers should continue to use their existing branches until CharterBank can fully integrate the deposit records of Neighborhood Community Bank into Charter’s system.

Depositors of Neighborhood Community Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

Information on the CharterBank Web site indicated NCB depositors with more than $250,000 might want to talk with someone at one of the former NCB branches about how much of their deposits are insured.

Accounts that were fully insured Friday at both CharterBank and Neighborhood Community will be separately insured for at least six months after the closing of NCB.

Certificates of Deposit started at NCB will be insured through the earliest maturity date after the end of the six-month grace period. Direct deposits of paychecks and Social Security checks will continue — as will automatic bill payment.

As of March 31, Neighborhood Community Bank had total assets of $221.6 million and total deposits of approximately $191.3 million. In addition to assuming all of the deposits of the failed bank, CharterBank agreed to purchase approximately $209.6 million of assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and CharterBank entered into a loss-share transaction on approximately $178.5 million of Neighborhood Community Bank’s assets. CharterBank will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector.

The agreement also is expected to minimize disruptions for loan customers.

Customers who have questions about today’s transaction can call the FDIC toll-free at 1-888-408-4360. The phone number will be operational today from 9 a.m.-6 p.m., on Sunday from noon-6 p.m., and then from 8 a.m.-8 p.m. There is also detailed information at www.fdic.gov/bank/individual/failed/neighbor.html .

The FDIC estimated cost to the Deposit Insurance Fund will be $66.7 million. The FDIC deemed CharterBank’s acquisition of all the deposits was the “least costly” resolution for the FDIC’s DIF compared to alternatives.

Neighborhood Community Bank is the 42nd FDIC-insured institution to fail in the nation this year, and the ninth in Georgia. The last FDIC-insured institution to be closed in the state was Community Bank of West Georgia in Villa Rica, which also closed on Friday.

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation’s banking system during the Depression. The FDIC insures deposits at the nation’s 8,246 banks and savings associations.

The FDIC receives no federal tax dollars. Insured financial institutions fund its operations.

Neighborhood Community Bank as well as Newnan-based First Coweta Bank were on a list of area banks with troubling “Texas ratios” in February. A Texas ratio above 100 percent implies that potential losses could wipe out a bank’s capital and cash reserves and cause it to fail.

Neighborhood Community Bank’s Texas ratio jumped from 186 percent in the third quarter of 2007 to 218 percent in the fourth quarter. According to The Atlanta Business Chronicle, NCB’s Texas ratio was 346 percent when it closed.

A securities analyst developed the Texas ratio to predict bank and thrift failures during the savings and loan crisis that centered on the state two decades ago. The ratio compares a financial institution’s total problem loans and related assets to its capital and reserves set aside for loan losses.

In September 2008 Neighborhood Community Bank/ Newnan-Coweta Bancshares, Inc. signed an agreement with the Federal Reserve Bank of Atlanta and the Georgia Banking Commissioner aimed at “maintaining the financial soundness” of the bank.

The 17-page agreement set forth a number of deadlines for the bank to come into compliance with Federal Reserve mandates.

In May, the Board of Governors of the Federal Reserve issued an order requiring NCB to take “prompt corrective action” within a few weeks. The order stated NCB’s proposed capital restoration plan “was not acceptable.”

The May effort by the Federal Reserve required NCB to increase its equity through the sale of shares or contributions to surplus “in an amount sufficient to make the bank adequately capitalized” or to “enter into and close a contract to be acquired by a depository institution holding company or combine with another insured depository institution.”

Neighborhood Community Bank was given 30 days from the date the directive was issued, on May 27, to “submit to the Reserve Bank written progress reports detailing the steps taken to comply with this Directive.”

NCB, founded in 2000, lost $3.4 million in the first quarter, according to data from FDIC.

CharterBank is not technically acquiring NCB. The Troup County bank is assuming the deposits and loans of Neighborhood Community Bank from the FDIC as the receiver of NCB.

Late Friday, the CharterBank Web site featured an open letter from Robert L. Johnson, the bank’s chief executive officer. “CharterBank is one of the strongest community banks in West Georgia and East Alabama. We’re not a huge national conglomerate, but we’re secure and ... solid,” Johnson wrote.

He noted that the bank was offered — but did not accept — federal bailout funds earlier this year. “We are well capitalized, profitable and focused on our customers and the communities we serve,” he stated. “There will be new signage, but the same friendly faces you’ve come to know will be there ready to serve you.”