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.
Cosgray said he is working on increasing the capitalization of the company, but he also said the Sandy Springs Community Bank and Buckhead Community Bank are not experiencing the severe problems many other banks are seeing, especially involving residential real estate loans.
According to President C.W. “Bill” Holden, the Sandy Springs Community Bank has more than $100 million in deposits and “has grown by $23 million just this year. Things are looking very good in Sandy Springs.”
Holden explained that most of the problems with real estate loans have been with the company’s banks in Alpharetta, Forsyth County and Gainesville, where there was a lot of residential real estate growth.”
Cosgray pointed out that Buckhead Community Bancorp purchased the banks of Allied Bankshares, which did have a substantial inventory of residential real estate loans in Forsyth County and Gainesville.
According to the audit 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 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.