The Federal Deposit Insurance Corporation is suing Aaron’s founder Charlie Loudermilk over his tenure as chairman of Buckhead Community Bank, alleging the bank made millions in risky loans prior to its failure.
The lawsuit, filed in federal court on Nov. 30, seeks $21.8 million in damages. It alleges the bank’s board “recklessly” approved millions of dollars worth of loans that violated bank polices and banking regulations, loaned money to borrowers who weren’t credit worthy and permitted unsafe concentrations of credit.
Robert Long, an attorney for the bank’s board, said “The complaint and the allegations are without merit and we will demonstrate that in court.” He declined further comment.
Loudermilk has not returned messages seeking comment.
The lawsuit also names other prominent figures in the Buckhead and the surrounding community who served as board members. Board members named in the lawsuit are: Hugh Aldredge; David B. Allman, Chairman of the Buckhead Community Improvement District; Marvin Cosgray, the bank’s former CEO; Louis J. Douglass III; Gregory W. Holden, President of Sandy Springs Bank, a branch of Buckhead Community Bank; John D. Margeson; Larry Martindale; and Darryl Overall.
Loudermilk, in addition to being the bank’s chairman since 1998, was also the largest shareholder in the bank’s holding company, the lawsuit says. Loudermilk in September retired from Aaron’s, the company he founded in 1955.
The lawsuit alleges that the bank, which opened in 1998, began an aggressive expansion in 2005, increasing its assets by more than 240 percent between 2005 and 2007, far surpassing loans issued by banks of a similar size. The Buckhead Community Bank board knew as early as 2006 that the real estate market was peaking, but continued to make high-risk loans, the lawsuit alleges.
It also alleges regulators made recommendations about ways to decrease the risk posed by the bank’s loans, but the board took no action. The FDIC claims a lack of due diligence on the loans resulted in “catastrophic” losses. The bank closed in 2009.
Buckhead Community Bank
– Founded in 1998 by Charlie Loudermilk
– Sandy Springs Community Bank, a branch of Buckhead Community Bank, opened in 2000.
– FDIC alleges in 2005 bank began an aggressive growth strategy, approving millions in high-risk loans
– From 2005 to 2007, bank’s assets increased by more than 240 percent, lawsuit alleges
– Lawsuit alleges that bank board members knew as early as 2006 that real estate market was in decline
– In 2007, the bank’s holding company purchased First National Bank of Forsyth County.
– In 2008, Buckhead Community Bank cut one fifth of its workforce. At the time, Bank reported $920 million in total assets
– Bank failed in December 2009, closing seven full service locations in Metro Atlanta
– September 2012, Loudermilk retires from Aaron’s
– November 2012, FDIC files lawsuit against Buckhead Community Bank, seeking $21.8 million in damages
Sources: FDIC lawsuit, Buckhead Reporter archives