Morgan Akin told The Associated Press in a recent interview that Bartow County Bank took an $875,000 hit on the loan when U.S. Rep. Tom Graves and state Senate Majority Leader Chip Rogers defaulted. The bank went under in April.
“Was it the only loan we had default? No,” Akin said. “But it was one of the larger loans, and it contributed significantly (to the bank’s failure).”
Graves and Rogers recently settled a lawsuit filed against them by the bank, but both sides have signed a confidentiality agreement and declined to provide specifics of the settlement.
Neither Graves nor Rogers would respond directly to Akin’s claims.
“As the congressman said, all parties involved have reached a positive agreement and have moved on,” Graves spokesman John Donnelly said.
In a statement, Rogers said Hamilton State Bank, which took over Bartow County Bank after it failed in April, “helped facilitate a resolution that has allowed everyone to move forward and in agreement.”
Akin said that while the arrangement may be fair and equitable for Graves and Rogers, it hasn’t been good for Bartow shareholders who saw the nearly 40-year-old community bank sink. Nor has it been fair, he said, to the FDIC, which says the bank’s failure is expected to cost $69.5 million. The FDIC is funded by insurance fees from banks.
Akin said he was speaking up because he felt only one side of the story had been represented. He said he was disappointed with Graves and Rogers, who cast themselves as champions of fiscal responsibility.
“They talk up the tea party stuff, but when it comes to their own finances they’re irresponsible and leave the bank on the hook,” he said.
Another former board member, Lehmann Smith, backed up Akin’s claim that the default helped bring the bank down.
“We were just a small community bank, and that’s a whole lot of money,” Smith said.
Akin was chairman of the Cartersville-based bank in 2007 when it made a $2.2 million loan to Graves, then a state lawmaker, and Rogers. Akin said he signed off on the loan, in part, because he never imagined such prominent political figures would default.
“They were well-respected members of the community, and we took that into account,” Akin said.
Graves and Rogers’ limited liability company, Tich Hospitality, took out the loan in 2007 to buy and renovate The Oglethorpe Inn, a two-story motel along I-75 in Calhoun. While the loan was made to Tich, Graves and Rogers also signed personal guarantees.
But in 2009, as the economy soured, they stopped making payments. Later that year the bank placed the loan in default, eventually suing the pair to recoup the money.
Graves and Rogers have argued the bank reneged on a promise to refinance.
The bank has countered that Graves and Rogers sold Tich Hospitality without informing them, which invalidated the refinancing deal.
Graves and Rogers sold Tich Hospitality to John Edens, who had been running the hotel for them. Edens assumed the loan, but as guarantors, Graves and Rogers were also on the hook for the money.
Although the settlement was confidential, Akin said it is almost certainly for less than the full amount they owed in the loan. Calhoun City Attorney Bill Bailey stated in a letter dated Aug. 12 that the note was reduced to $1,185,000 and that the maturation date of the loan was extended to Feb. 7, 2015.
Akin said when the loan moved into default in late 2009, the bank was forced to reassess the property. It had dramatically depreciated, and the bank had to absorb an $875,000 loss in property value, he said.
The loss came at a precarious time for the bank, which had been in difficult financial straits for some time.
Bartow Bank had $330 million in total assets when regulators shut it down April 15. But it had just $21.4 million in capital, or shareholder equity, records show. Akin said the capital figure is critical to showing a bank’s financial health.
Former bank chief executive officer Gary Fox declined to answer questions about the loan when approached by the AP at a recent congressional hearing on bank failures in Georgia, which has seen 67 banks collapse since 2008 — more than any other state.
Bartow County Bank was started in 1974 by a group of local businessmen. As the local economy flourished, its lending increased. The bank’s total assets increased from about $200 million in 2000 to more than $400 million in 2009.
It was not immediately clear if Akin was paid for his role on the bank’s board, but shareholders lost millions of dollars in equity when the bank collapsed. Akin’s Cartersville-based law firm, Akin and Tate, has contributed money to both Democratic and Republican candidates, according to state campaign finance records.