Beaufort County borrowers say Bank of the Ozarks is squeezing them

dburley@islandpacket.comOctober 19, 2013 

Bank of the Ozarks is drawing complaints from commercial borrowers in Beaufort County who say the lender is aggressively pushing for full repayment of troubled or maturing loans.

The borrowers say the Little Rock, Ark.-based bank is choosing to foreclose on many loans without attempting to restructure the notes, even as it is getting financial help from the federal government to reduce the loans' risks.

"They're foreclosing at an alarming rate and coming up with terms that are completely unreasonable," said Ben Gecy, who owns River City Real Estate in Port Royal and has been fighting the bank in court for more than three years.

Susan Blair, a spokeswoman for Ozarks, said the bank could not comment on pending litigation.

Gecy and other borrowers' concerns focus on an arrangement the bank has had with the Federal Deposit Insurance Corp. since the bank opened a Bluffton branch in 2010 after assuming the assets of the failed Woodlands Bank.

The arrangement, known as a shared-loss agreement, is designed by the FDIC to assist banks that are willing to acquire a troubled lender with failing loans. At the same time, shared-loss agreements help the FDIC save money by selling troubled assets to a healthy bank instead of liquidating them on the open market. The agreements also ensure customers don't see interruptions in their service, the FDIC says.

In the agreement, the FDIC agrees to absorb a portion of the banks' exposure to losses for a five-year period in a effort to minimize risk for the assuming bank.

But borrowers in Beaufort County said they think it has provided Bank of the Ozarks an incentive to foreclose on troubled loans and collect its reimbursement from the FDIC -- usually 80 percent of the original principal -- without consulting in good faith with customers.

Gecy took out a $569,000 loan in 2008 from Woodlands Bank, according to court records.

He planned to build a 26-home subdivision on 13 acres on Lady's Island, he said, and completed the engineering and surveying.

When Bank of the Ozarks took over Woodlands in 2010, he "might have been a month behind, no big deal," he said.

Four days after Ozarks assumed Woodlands loans, Gecy's loan matured and Bank of the Ozarks called his note. He protested, as he was only one month behind in payments. The bank countered with an offer to change his loan, but it would have nearly doubled his monthly payments, he said.

Ozarks says the terms of Gecy's loan were defined by Woodlands, before Ozarks was involved, according to court records. Gecy says the bank acted with ill-intent.

"I knew what they were doing," Gecy said. "I'm in this business. They were forcing the loan into default. There was no way I could pay on those terms."

Other businesses in Beaufort County are also involved in litigation with the Ozarks.

Beaufort's City Loft Hotel, JoCo Construction and The Meridian Company are all listed as defendants and plaintiffs in the lawsuits dating back to 2010 between the bank and businesses, according to Beaufort County court records.

Representatives from City Loft Hotel and The Meridian Company declined to comment.

Attempts Friday to reach a spokesman for Joco Construction were unsuccessful.

Bank of the Ozarks has entered into shared-loss agreements throughout the Southeast, according to the FDIC.

Along with its location in Bluffton, the bank has assumed the assets of five failed lenders in Georgia and one in Bradenton, Fla., according to the FDIC website.

Greg Hernandez, an FDIC spokesman, said the agency monitors all of its shared-loss agreements, but could not comment on open and operating banks.

For his part, Gecy said he expects Bank of the Ozarks to leave town once its shared-loss agreement, which usually lasts five years for commercial assets, ends.

"They came in right away and set the standard -- 'It's our way or the highway,' " he said. "They got paid tens of millions upfront to take over the assets. They have no intention of staying."

Follow reporter Dan Burley on Twitter at twitter.com/IPBG_Dan.

Related content:

A video that explains shared-loss agreements

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