This morning's news that the Coastal Bank agreed to a consent order with the FDIC rattled commercial real estate agents.
This news usually means a bank has six months to live, and The Coastal Bank is where some borrowers took their business when First National Bank and Darby Bank and Trust closed.
In a meeting I attended with agents from three CRE offices, the general feeling was concern that this news would help create a chilling effect among potential local investors. It’s no secret that I prefer to work with local lenders. Everyone knows that lending is already constrained. But when a bank fails because it’s not making an adequate profit, it appears that there is little to no chance for an investor to obtain a loan for a project that makes good sound financial sense.
We've all seen an increase in CRE activity- investors looking for good cash deals, interest in leasing property, and multi-family housing, for example- and there is concern that local lending is getting tighter. I have three lenders I work with on my deals and only one (Workmen's Circle Credit Union) assures me the vaults are open.
I spoke with Mike Lee, past president of Savannah’s United Community Bank, who now works with the FDIC in Knoxville. He told me that this information about The Coastal Bank should not be extrapolated. He said there are too many banks in Georgia to begin with, which is the fault of the Georgia Department of Banking and Finance. When there’s an economic crunch in a crowded field only the economically fit will survive. He said there are more banks will fail, but the worst is behind us.
There’ve been 46 bank failures in 2011 so far and four recently in Georgia (Bartow County Bank, First Georgia, Atlantic Southern and New Horizon Bank). Atlantic Bank and Trust, a small South Carolina Bank which has an office on East York Street, was closed on June 3rd and reopened as First Citizens. The government and lenders can both say that the economy is picking up, but then again, they have to give loans on real estate, not rhetoric, to convince people otherwise.
