By John Schaffner
The auditors of Buckhead Community Bancorp raised doubts in a recent filing as part of the banking company’s 2009 annual report that the parent of the Buckhead Community Bank and Sandy Springs Community Bank can survive losses stemming from the recession.
The auditors’ report said the bank suffered “significant losses from operations due to the economic downturn, which has resulted in declining levels of capital. This raises substantial doubt about the company’s ability to continue as a going concern.”
Buckhead Community Bancorp’s CEO, Marvin Cosgray, has strongly disagreed with the assessment by Birmingham, Ala.-based Mauldin & Jenkins, claiming the auditors paint far too negative a picture of the bank’s viability.
According to the report, Buckhead Community Bancorp saw its business sour in 2008. Residential real estate loan problems worsened throughout the second half of 2008 for the bank, which reported a $36.4 million loss, driven by rising loan loss reserves and noncash impairment charges.
The report said a fifth of Buckhead Community’s $724 million in total loans are in some form of delinquency or default, and the amount of problem loans doubled in the fourth quarter of 2008.
Cosgray explained that the majority of problem real estate loans the banking company has are with its banks in Alpharetta, Forsyth County and in Gainesville, where there has been a great deal of residential real estate growth in recent years.
Much of that trouble, he said, stemmed from the banks in Forsyth and Gainesville that Buckhead Community Bancorp obtained through a purchase from Allied Bankshares.
Cosgray said neither the Buckhead Community Bank nor the Sandy Springs Community Bank had an excessive inventory of problem residential real estate loans. He characterized both the Buckhead and Sandy Springs banks as “experiencing less difficulties caused by the real estate market” than other banks. In fact, he said the Sandy Springs bank is doing very well, with deposits of more than $100 million, “and those have grown by $23 million just this year.”
Cosgray blames much of the bank’s trouble on what he considers faulty accounting rules implemented during the economic boom. He cites mark-to-market accounting, which requires companies to write down the value of certain assets from their original values to newer market prices.
Buckhead Community now also is operating under an agreement with the Georgia Department of Banking & Finance and the Federal Deposit Insurance Corp. to correct its weakening business.