Georgia Primary Bank (GPB) sent an investor update on February 15 that piqued some interest from investors and I therefore contacted Mark DiLuzio at the bank to get some more information.
Basically, the letter stated that the FDIC had given them a Consent Order, which Mark spelled out in the letter (it was a generic order with nothing out of the ordinary) which came from a rather strict examination last year. Apparently, the FDIC is really cracking down on banks in the Atlanta area as this continues to be ground zero for bank failures.
Other than what was in the letter, Mark explained that the bank had $22 million in loans that are classified by the FDIC, $10 million of which are still accruing interest, but the FDIC forced them to classify the loans nonetheless. While the bank continues to work through their problem loans, Mark mentioned that they have several problem loans that have personal guarantees from very wealthy individuals that are servicing the loans.
Mark mentioned that this quarter they should earn about $1 million in net earnings and this will be a crucial quarter to have some problem loans worked out or refinanced, etc. He expects the bank to earn about $7 million for the year, assuming no further deterioration of the loan portfolio. Finally, he told me that the bank has good, core earnings and ample capital ratios to meet regulatory requirements going forward.
Of the 77 (actually 80, but 3 are large banks) Community banks in Atlanta as of 12/31/2010, 9 were profitable, including GPB. Mark mentioned that Atlanta continues to struggle economically, but he has seen recent strength in certain sectors, but he indicated that the recent spike in oil prices could negatively effect the fragile economy.
He expects the first quarter of 2011 to be a key quarter for the bank and its ability to work out loans and improve and strengthen its position. I have attached a spreadsheet of Atlanta bank’s earnings for 2010.
