Greater Atlantic Bank seized by regulators
Saturday, December 5, 2009
Regulators closed Reston-based Greater Atlantic Bank on Friday night, the first bank failure in Virginia since 1993.
The failure does not affect the bank's customers. The Federal Deposit Insurance Corp. sold the bank's deposits and virtually all of its assets to Sonabank, based in McLean, which will reopen Greater Atlantic's four branches on their normal schedules. Customers can continue to write checks and withdraw money from ATMs over the weekend.
Greater Atlantic was sunk by rising losses on commercial real estate loans, both its own and those it purchased from other banks, according to FDIC spokesman David Barr.
Lending to real estate developers was a common focus for small banks in recent years, particularly in high-growth areas. Now defaults on those loans have emerged as an outstanding threat to banks, particularly in the overdeveloped suburbs of Sun Belt cities.
Local banks have so far fared relatively well. Greater Atlantic is only the second to fail, following the January seizure of Suburban Federal Savings Bank in Crofton. Several troubled banks, including Chevy Chase Bank, have been sold to rivals.
Regulators seized five other banks across the country last night, raising the number of bank failures this year to 130. The largest, AmTrust Bank of Cleveland, held about $12 billion in assets.
Greater Atlantic was founded as the Greater Baltimore Savings and Loan Association in 1887. It moved to Reston in 1999.
The company's chairman, Charles Calomiris, is a well-known finance professor at the Columbia Business School. Calomiris, also a major shareholder, inherited the role from his father.
The bank's failure was not a surprise. In April 2008, its regulator, the Office of Thrift Supervision, ordered Greater Atlantic to improve its operations. In May of this year, the agency ordered the bank to raise more capital or face seizure. The company announced in June that it would be sold to a group of private investors, but the deal was never consummated.
The bank was closed by the OTS and then turned over to the FDIC. Greater Atlantic held about $203 million in loans and other assets.
Sonabank agreed to take ownership of virtually that entire portfolio, but the FDIC will share in any losses.
The bank's slogan now sounds like an elegy. It read, "Nice doing business with you."