Georgia's Alpha Bank & Trust Seized as U.S. Closings Rise to 16

By Ian Katz and Alison Vekshin

Oct. 25 (Bloomberg) -- Alpha Bank & Trust in Alpharetta, Georgia, with $346 million in deposits, was seized by regulators and closed as the collapse of the housing market and loan defaults claimed a 16th U.S. bank this year.

Alpha, with $354 million in assets, was shut by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. sold the deposits to Stearns Bank N.A., of St. Cloud, Minnesota. Alpha's two offices north of Atlanta will open on Oct. 27 as branches of Stearns Bank, the FDIC said yesterday.

Regulators have closed the most banks in 15 years, and the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. were among the biggest in history. About 4.4 percent of Alpha's assets were defaulted real-estate loans it took back on its balance sheet, quadruple the total for most U.S. banks, based on data compiled by Charlottesville, Virginia-based SNL Financial.

Alpha ``could no longer meet the regulatory minimum to ensure safety and soundness,'' Robert Braswell, commissioner of the Georgia Department of Banking and Finance, said in an interview. He declined to discuss what activities or failed investments led to the bank's collapse.

Stearns is assuming Alpha's insured deposits and will acquire about $38.9 million, or 11 percent, of the assets as of Sept. 30, the FDIC said. Stearns didn't pay a premium, the FDIC said. The agency said it will retain the remaining assets and $3.1 million in uninsured deposits held in 59 accounts.

Alpha Bank had $16.8 million in brokered deposits, excluded from the sale to Stearns, the FDIC said. Brokers will be paid by the FDIC for insured funds. Construction and development loans accounted for 76 percent of its $305.7 million in total loans.

Second Bank

The cost to the FDIC deposit insurance fund will be $158 million, the agency said.

Alpha is the second Alpharetta-based bank closed by the government this year. In August, Integrity Bank was closed after failing to raise $40 million to cover losses on residential and commercial development loans.

Stearns Bank had $723 million in deposits as of June 30, a 24 percent drop from a year earlier, and $1 billion in assets, a 21 percent decline from a year ago, according to FDIC statistics.

The FDIC oversees 8,451 institutions with $13.3 trillion in assets, and insures deposits of as much as $250,000 per depositor per bank and the same amount for some retirement accounts. The agency has proposed doubling premiums charged to banks for coverage to replenish its reserves amid forecasts bank failures through 2013 will cost almost $40 billion.

WaMu, National City

Washington Mutual, the biggest savings and loan, sold its assets to JPMorgan Chase & Co. Sept. 25 after customers drained $16.7 billion in deposits in less than two weeks. Wachovia Corp., the sixth-biggest bank, agreed to be acquired by Wells Fargo & Co. for $11.7 billion, a deal that trumped an FDIC- brokered sale of banking operations to Citigroup Inc.

PNC Financial Services Group Inc., the biggest bank in Pennsylvania, bought National City Corp. of Cleveland yesteday for $5.2 billion, with $7.7 billion from the Treasury bailout fund. National City dropped 83 percent in trading before today.

The Treasury is buying preferred shares in nine banks: Citigroup, Wells Fargo, JPMorgan, Bank of America Corp., Merrill Lynch & Co. Morgan Stanley, Goldman Sachs Group Inc., Bank of New York Mellon Corp. and State Street Corp.

The FDIC is running a successor to California lender IndyMac, closed in July, and through this week had eased mortgage terms for more than 3,500 borrowers. The failure drained more than 10 percent from the U.S. insurance fund that had $45.2 billion at the end of the second quarter.

The agency in August said 117 banks were classified as ``problem'' in the second quarter, a 30 percent jump from the first quarter. The agency doesn't name the ``problem'' lenders.

``Banks overall are very well-capitalized,'' FDIC Chairman Sheila Bair told the Senate Banking Committee on Oct. 23. ``We have some banks with some challenges, but the vast majority are well-capitalized.''

The U.S. closed 27 banks from October 2000 through the end of last year, according to a list at fdic.gov.

To contact the reporters on this story: Ian Katz in Washington at ikatz2@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net