FDIC Sues Former Georgia Bank Executives

The FDIC has launched a suit against 11 executives of former Georgia-based Alpha Bank & Trust hoping to recover $23.92 million in damages as a result of the bank’s “failure to use ordinary care and gross negligence,” the FDIC states in its filing.

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The Georgia Department of Banking and Finance closed Alpha Bank & Trust in October 2008 after less than 30 months of operation “making it the fastest-failing bank between 1992 and 2008,” according to the FDIC’s Friday filing with a U.S. District Court in Atlanta.

The filing specifically targets 13 commercial loans, which were approved despite “plainly inadequate, incomplete, or outdated financials of the borrowers and/or guarantors, resulting in loans advanced to borrowers with no apparent ability to repay or otherwise service the loans.”

The bank approved loans that were not in keeping with its statutory lending limits, loan to value ratio limits. The FDIC also cites “insufficient borrower repayment information and repayment sources,” “inadequate real estate appraisals,” and “insufficient analyses of collateral or inadequate collateral.”

“Defendants approved the Loss Loans despite underwriting deficiencies and loan policy violations that were or should have been readily apparent to even a casual reviewer,” the court filing notes.

The FDIC estimates its loss to its insurance fund resulting from Alpha Bank is $214.5 million.

The bank’s “aggressive growth strategy” contributed to its decline, and in fact the strategy “significantly departed from the Bank’s business plan submitted with its applications to the FDIC for deposit insurance . . . and deviated from safe and sound banking practices, as well,” states the FDIC in its filing.