SunTrust will provide funds for Capitol City

SunTrust Banks, Inc., has agreed to provide a $4 million investment into Capitol City Bank and Trust Company, which has a branch located at 301 W. Oglethorpe Blvd. in Albany.

SunTrust Banks, Inc., has agreed to provide a $4 million investment into Capitol City Bank and Trust Company, which has a branch located at 301 W. Oglethorpe Blvd. in Albany.

ATLANTA -- SunTrust Banks, Inc. has made a commitment to provide up to a $4 million investment to Capitol City Bank & Trust Company, of which $1 million has already been funded, according to George Andrews, president and CEO of Capitol City.

Created in 1994 to serve the minority community of Atlanta, Capitol City has expanded service to other cities, including a branch in Albany.

According to John Hayes, vice president and regional manager of the Albany branch, while Capitol has always had an "aggressive" approach to raising capital in order to strengthen its balance sheet, efforts were increased in 2011 in order to satisfy federal regulatory requirements and to reduce the impact made on the bank from nonperforming assets. Hayes said Capitol did not receive federal TARP assistance and the lack of it contributed to Capitol's financial situation.

Andrews called SunTrust's purchase of Capitol City's preferred stock "historic," saying he was unaware of another time a mainstream bank had given financial assistance to a smaller minority-oriented bank.

"It's refreshing that an institution having benefited so greatly from TARP is willing to step up to the plate and do something to help Capitol Bank," Andrews said. "They realized the importance of the mission we serve."

Andrews stressed that Capitol City Bank is on solid ground financially with insolvency "nowhere on the radar screen."

"Capitol City Bank was already adequately capitalized," Andrews said. "The regulators wanted us to be well capitalized."

According to Andrews, in addition to SunTrust acting from a sense of "community partnership," by investing in Capitol Bank, the larger institution stands to benefit in other ways, including the advancement of its "CRA" rating. CRA refers to the 1977 Community Reinvestment Act, intended to encourage depository institutions to help meet the credit needs of the community in which they operate. In addition, by the nature of Capitol Bank's method of loaning money, today's Capitol customers may one day be SunTrust borrowers.

"It's like the difference in a junior college and a four-year institution," Andrews said. "While the larger banks will loan more money, either the applicant receives the loan or he doesn't. Like a two-year college, we offer a lot of 'remedial courses.'"

Andrews said Capitol borrowers are given more help with basic business issues such as directing them toward proper locations or setting up their books. Eventually, many of Capitol borrowers "outgrow" the type of help available from Capitol and graduate to banks like SunTrust, which are able to fill higher capital needs.

While the SunTrust commitment is the largest, it's by no means the only source of capital infusion. According to Capitol Bank sources, Wells Fargo made a $600,000 equity investment in 2010 which proved "invaluable" in terms of stabilizing the bank at a "critical" time of under capitalization. Personal investments have been made by Ali Mohammed, Michael Thurmond, former Georgia labor commissioner; Kenneth Chestnut and Cameron "Cam" Newton, player with the Carolina Panthers.

Andrews said that Capitol City Bank expects to raise a total of $8 million, which will satisfy current financial needs.

"We're well on our way to getting where we need to go," Andrews said.