2 Bank Closings Mark First Ga. Bank Failures of 2010

4:54 PM, Jan 30, 2010   |    comments
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ATLANTA -- The Office of the Comptroller of the Currency on Friday shut down First National Bank of Georgia, the first Peach State bank to fail in 2010.

Carrollton, Ga.-based First National, a subsidiary of WGNB Corp., was sold to Community & Southern Bank, an investment group led by former bank regulator and noted turnaround specialist Patrick Frawley.

The bank's 11 branches will reopen Jan. 30 as Community & Southern, a newly chartered state institution founded to acquire failed banks.

Georgia has led the nation in failed banks since August 2008. First National is the first to fail this year, and the 31st to falter since the current financial crisis began. The failure comes on the heels of the publication of regulatory actions against five more state banks.

First National had $832.6 million in assets and $757.9 million in deposits, which were acquired by Citizens & Southern the Federal Deposit Insurance Corp. Citizens & Southern entered into a loss-share transaction on $607.4 million of the failed bank's assets.

The FDIC said it expects the loss to its Deposit Insurance Fund to be $260.4 million.

First National was founded as West Georgia National Bank Of Carrollton in 1946, changing its name in July 2007 after it acquired the First National Bank of Georgia in Buchanan.

First National, like other failed and struggling Georgia banks, was plagued by souring residential development loans and a capital base that eroded from its losses.

Of its $587.8 million in total loans at the end of the third quarter of 2009, the bank reported $168.6 million (28.6 percent) in delinquency, default or foreclosure.

First National/West Georgia nearly quadrupled in size from 2000 to 2007 when the bank's assets reached their peak.

During 2009, the bank voluntarily delisted from the NASDAQ stock exchange and fell under the regulatory oversight of the Federal Reserve Bank of Georgia.

As the economy worsened, the bank's financial condition dwindled. First National lost $53.6 million through the first nine months of 2009, according to FDIC data.

Frawley, a former Office of the Comptroller of Currency regulator and C&S/Sovran Corp. executive, is well-respected in banking circles.

The investment in First National is a shot in the arm for an industry in desperate need of good news.

Private equity has been seen as a potential savior in the clean-up process of Georgia banks. A private equity buy of a failed lender in Florida Jan. 22 had the banking industry in Georgia buzzing that a similar deal might soon be in store for the Peach State.

In October, Frawley applied for a de novo bank charter with the Department of Banking and Finance listing $200 million in capital sourced from blind pools of investors.


Regulators seized and sold Cornelia, Ga.-based Community Bank & Trust Friday, the second Georgia bank failure of 2010. The bank will reopen under its current name and under the operation of a South Carolina bank.

It is the second bank to fail in Georgia Friday, following the acquisition of Carrollton-based First National Bank of Georgia by Community & Southern Bank, an investment group led by former bank regulator and noted turnaround specialist Patrick Frawley.

Community Bank & Trust is the 32nd to fail since August 2008, a tally that leads the nation during that time.

Community Bank & Trust, a subsidiary of Community Bankshares Inc., operated 36 locations under the names Community Bank & Trust and Bulldog Bank & Trust in Northeast and West Georgia.

The banking company had $1.21 billion in assets and $ 1.11 billion in deposits, which were acquired by Columbia, S.C.-based SCBT N.A., parent company of South Carolina Bank & Trust, the Federal Deposit Insurance Corp. said. SCBT assumed $827.7 million of Community Bank and Trust's assets under a loss-share agreement.

Branches of Community Bank & Trust will reopen Jan. 30 under their current name.

The FDIC estimates a $354.5 million hit to its Deposit Insurance Fund (DIF)

Community Bank & Trust was founded in Cornelia in Habersham County in 1900. The bank prided itself on being an innovator.

It was an early adopter of Automated Teller Machines and was the first bank in the nation to license grocery store banking centers, which fueled a lot of the company's growth. Its Financial Supermarkets, Inc. subsidiary introduced supermarket banking to Europe.

Community Bank & Trust operated more than 20 branches inside grocers and Wal-Marts, and the banking company is the first with such a heavy dependence on retail store branches to fail in Georgia, though analysts say that is not likely a contributing cause to failure.

Community Bank & Trust, like many failed and struggling Georgia lenders, overextended on residential development loans.

After losing $5 million in the first six months of 2009, its losses soared to $59.4 million, as it funneled money into its loan loss reserves. Total provision expense grew 1,556 percent from $3.3 million to $50.4 million from third to fourth quarter.

Problem loans–those delinquent, defaulted or foreclosed–nearly doubled in six months, soaring to $251.3 million in third quarter 2009 from $132.8 million in the first quarter of 2009.

The acquisition is SCBT's first foray into Georgia. The $2.8 billion bank has 48 branches across its network in South Carolina and North Carolina. It is a subsidiary of SCBT Financial Corp.

Correction: Corrects earlier version to say the bank had branches in Northern and Western Georgia, the Community Bank & Trust of Alabama was not affected

(The Atlanta Business Chronicle)

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