First Volunteer plans to buy Gateway Bank

One of Chattanooga's biggest community banks plans to expand south of the border by acquiring Gateway Bank & Trust in Ringgold, Ga.

First Volunteer Corp. said it will buy Gateway Bancshares and convert the three Gateway Bank offices to First Volunteer Bank branches by this spring if regulators and shareholders approve the purchase.

Merging the two banks will bring more locations and services for customers of both banks, First Volunteer President Patti Steele said.

"Gateway Bank & Trust is a healthy bank with a strong franchise in a growing market," she said. "We know that people bank with people, and we want Gateway customers to know that the people who are taking care of them today are still going to be taking care of them after this merger."

The acquisition of the 15-year-old Gateway Bank will boost First Volunteer's assets above $900 million and expand its footprint outside Tennessee for the first time.

Robert Peck, one of a pair of former Northwest Georgia Bank managers who helped start Gateway Bank in Ringgold, said Gateway Bank directors decided to sell in the face of more stringent and expensive regulatory requirements for smaller banks.

"This transaction enables us to join forces with a strong and trusted bank that has long been a friendly competitor," said Peck, who plans to retire as CEO of Gateway Bancshares once the merger is complete. "With the uncertainty of the economic environment, you realize there is strength in numbers. It really is going to be hard for small banks to absorb the regulatory pressures and costs. We felt we had a fiduciary duty to our shareholders to make a return for them."

Officials declined to disclose terms of the sale until shareholders are notified for a vote on the proposed sale. Federal and state regulators also must approve the merger of the two state-chartered banks, but Steele said she anticipates the purchase to be completed in 60 days.

From its start as Marion Trust and Banking in Jasper, Tenn., First Volunteer has grown over the past three decades by buying nine banks and insurance agencies across nine counties in East and Middle Tennessee. First Volunteer operates five of its 22 Tennessee offices in Chattanooga and also owns First Volunteer Insurance.

Gateway Bank was started in 1997 by Peck and Harle Green, both former managers at Northwest Georgia Bank. The bank has grown to include 26 percent of the deposits in Catoosa County and assets of more than $267 million - second only to Northwest Georgia Bank in size.

Gateway has offices in Ringgold, Fort Oglethorpe and LaFayette, Ga., but it outsourced most of its data processing and back office operations, which First Volunteer plans to absorb.

"We'll bring a full-service insurance operation and several other services that Gateway doesn't now offer," Steele said. "This will also allow customers of Gateway to do their banking when they are in Chattanooga and allow our First Volunteer customers to go to a bank branch or ATM when they are in North Georgia."

The purchase of Gateway will be the biggest yet for First Volunteer.

Todd Wanner, chief financial officer at First Volunteer, said he and other First Volunteer executives have looked at more than a dozen banks for possible acquisition in the past four years since the bank's last purchase of the former Benton Banking Co. in Polk County.

First Volunteer earned more than $3.2 million in the first nine months of 2011, up nearly 10 percent from the previous year, according to the latest filings with the Federal Deposit Insurance Corp.

In the same period, Gateway Bank & Trust reported a loss last year of $890,000, compared with a profit of $801,000 in the same period of 2010.