Alpha Bank : Closed for Business

By Abhishek on 7:20 PM

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Regulators said late Friday they've closed Alpharetta, Ga.-based Alpha Bank & Trust -- the 16th U.S. bank this year to succumb to the ongoing credit crisis.

    Another day, another American bank collapse. one of Georgia's fastest-growing banks, Alpha Bank & Trust, based in Alpharetta, Georgia, was closed by state regulators yesterday, making it the 16th US bank seized this year amid a collapse in the housing markets that led to a $700-billion rescue plan to unfreeze financial markets.

The Federal Deposit Insurance Corporation said in a statement yesterday, "To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St Cloud, Minnesota, to assume the insured deposits of Alpha Bank & Trust," and added that the cost to its Deposit Insurance Fund would be $158.1 million.

Alpha, with $354.1 million in assets and $346.2 million in deposits, was shut by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. (FDIC) was named receiver.

Depositors of the failed bank would automatically become depositors of Stearns Bank and the deposits would continue to be insured by the FDIC.Over the weekend, customers can continue accessing their deposits by writing checks or using ATMs and their debit cards. Checks drawn on the bank will continue to be processed.

Apart from taking over Alpha's insured deposits, Stearns Bank will also purchase approximately $38.9 million of Alpha's assets, with the FDIC retaining the rest for disposing-off once the financial system stabilises.

Stearns Bank of St. Cloud, Minnesota, which will assume deposits from Alpha, is a strongly capitalised bank with over $1 billion in asets, and $250 million in capital, amounting to 23-per cent capital in its banking system, or three times the average capital of all commercial banks in the United States, and almost 10 times what some troubled investment banks have or had, Stearns CEO Norman C. Skalicky said in a statement on the bank's website.

"We have a very sound and diversified asset portfolio in about six different financial products. Also, we have no exposure to sub-prime or Fannie Mae / Freddie Mac equity investments," Skalicky said.

The failed bank's two offices will open on 27 October as branches of Stearns Bank, the FDIC said. Over the weekend, Alpha Bank & Trust customers can access their insured deposits by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

Founded in 1879 as the banking department of the J F Costopoulos, Alpha Bank is the second largest bank in Greece, and the largest private bank with a branch network of 450. It becam Alpha Bank in Cyprus in 1998 with the acquisition of Lombard Natwest Bank and was later renamed Alpha Bank Cyprus Ltd.

Alpha Bank opened in the US May 2006, opened in May 2006 at the height of the local bank expansion boom, has been one of metro Atlanta's most aggressive lenders and had acquired nearly $371 million in assets within 19 months of its opening, with a substantial presence in residential real estate loans, the sector hardest hit by the housing collapse, driving its growth.

Even as the as the housing market slowed since December 2006, Alpha Bank's construction loan portfolio continued to expand while its rivals started cutting down their loan business - Alpha's real estate construction and development loans rose a phenomenal 1,700 per cent from $12 million on 30 June 2006, to $218 million by 30 June 2007, according to FDIC data and constitute 79 per cent of the bank's total portfolio.

Those loans typically back lot development and other construction projects, which have been hardest hit by the housing market's ongoing collapse, and may be the slowest to recover.

That period coincides with the end of what bankers now call the most speculative and exuberant period in Atlanta residential development lending.

Alpha Bank has grown considerably over the ten years and managed to establish its presence and claim the position of third largest bank in Cyprus. Beyond providing competitive products and services, the Bank's success was reinforced through continuous and pioneering strategic moves.

In 1999 Metropolitan insurance company was acquired by the Alpha Bank Group and began to operate under the name of Alpha Insurance Ltd.

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