The final legal chapter in the Habersham Bank saga is coming to an end. The Federal Deposit Insurance Corp. and eight former executives of the bank say they’re close to a settlement in a $15.3 million lawsuit stemming from bad real estate loans issued by the bank.
Attorneys for the FDIC and the defendants on Tuesday notified US District Court Judge William O’Kelley that they’d reached a “settlement in principle.” Details of the settlement are still being worked out and the case is on hold until all parties agree.
The suit, filed in February, named David D. Stovall, Edward D. Ariail, Bonnie C. Bowling, Michael C. Martin, Michael L. Owen, M. Edward Hoyle, Frank E. Felker and Andrew Corker.
Stovall was the CEO, a director and later president of the bank. Ariail was a director and president. The others named in the suit were directors or held executive positions.
Habersham Bank was founded in 1904 in Clarkesville and had 12 branches across our area by 2007. The feds moved in and closed it down in February of 2011. The FDIC reports it paid out an estimated $141 million on insured deposits.
The FDIC lawsuit contends the former Habersham execs breached their fiduciary duty by approving negligent commercial real estate loans.
Like many other financial institutions, Habersham began making high volumes of “commercial real estate” and “acquisition, development and construction” loans just after the turn of the century. The FDIC says those loans eventually reached 1,052% of the bank’s total capital.
Among other things, the FDIC suit alleges executives –
- Failed to properly oversee the Bank’s lending function
- Improperly extended credit to borrowers who were not creditworthy
- Extended credit based on inadequate information about the financial condition of prospective borrowers and guarantors and without adequately analyzing cash flow and other critical financial information, resulting in loans advanced to borrowers with no apparent ability to repay or otherwise service the loans
According to this week’s filing in the case, “The Parties engaged in mediation on July 1, 2015, and reached a settlement in principle. The Parties are now preparing a written settlement agreement. Once the settlement agreement is finalized and executed, the FDIC-R will file a stipulation of dismissal.”
