One of the fastest growing community banks in East Tennessee headed south of the border over the weekend to rescue the second bank to fail this year in the Blue Ridge mountains of North Georgia.
Peoples Bank of East Tennessee, a 13-year-old bank based in Madisonsonville, Tenn., acquired the assets of the failed Appalachian Community Bank in McCaysville, Ga., to boost its asset size by nearly a third and gain a foothold in the growing mountain communities of North Georgia.
"The real estate market decline has hit a lot of younger banks that didn't have the time to grow their capital for this financial storm that we have just been through," Peoples Bank President Chris White said while working this week in the new McCaysville bank office. "We're still sorting what we need going forward. But we're excited about this expansion and being positioned for the growth we know will return to this area."
The Appalachian Community Bank of McCaysville, which began only three years ago, lost $14.2 million during the first nine months of this year because of losses in real estate and other loans. The Federal Deposit Insurance Corp., which seized the Appalachian Community Bank and two other Georgia banks last week, expects to lose $26 million through the transaction.
When the FDIC orders a bank closed, all FDIC-insured deposits are fully protected up to $250,000 per depositor. But shareholders of the failed bank lose their investment in the bank and the loan portfolio is usually divided up between the acquiring bank that takes over the offices and staff of the failed bank and the FDIC.
Sign of the Times
White said temporary Peoples Bank signs were placed on the branches of the Appalachian Community Bank in McCaysville, Copperhill and Ducktown over the weekend. Peoples Bank will consolidate the Ducktown storefront office previously operated by Appalachian Community Bank with its own
free-standing Ducktown office, which it acquired from the former Home Bank before it was acquired by BB&T in 2009.
North Georgia Bank Failures* Appalachian Community Bank in McCaysville: Failed Dec. 17, taken over by Peoples Bank of East Tennessee* Bank of Ellijay in Ellijay: Failed Sept. 17, taken over by Community & Southern Bank* Crescent Bank & Trust Co., in Jasper: Failed on July 23, taken over by Renasant Bank* Unity National Bank in Cartersville: Failed on March 26, taken over by the Bank of the Ozarks* Bank of Hiawassee in Hiawassee: Failed on March 19, taken over by Citizens South Bank* Appalachian Community Bank in Ellijay: Failed on March 19, taken over by Community & Southern Bank* Community Bank and Trust in Cornelia: Failed on Jan. 29, taken over by SCBT National AssociationBy the numbers* 21 - Number of Georgia bank failures in 2010* 0 - Number of Tennessee bank failures in 2010* 157 - Number of U.S. bank failures so far this year* 49 - Percent of Georgia banks profitable in the third quarter* 80 - Percent of U.S. banks profitable in the third quarter* 82 - Percent of Tennessee banks profitable in the third quarterSource: Federal Deposit Insurance Corp., Georgia Bankers Association
Peoples Bank was started in 1997 and, with the acquisition, will grow to about $225 million in assets.
Appalachian Community is the 21st Georgia bank to fail this year, seven in North Georgia including the sister Appalachian Community Bank in Ellijay which shut down in March. Since the recession began, 51 banks have failed in Georgia -- the highest number of any state.
"When the market collapsed, builders and developers were just unable to repay their loans," said Joe Brannen, president of the Georgia Bankers Association. "The principle reason that some of these banks didn't make it is because their customers didn't make it."
Georgia feels the brunt
With 312 banks, Georgia has more banks than any other bank in the Southeast and nearly half of those banks are under some type of regulatory order to improve their performance or raise more capital to shore up their balance sheet.
Georgia didn't allow cross-county banking until 1996, which kept more small banks in the state, and the boom of the 1990s encouraged many investors to start up more banks.
"Community banks, by their very name, serve a local market and if that local market is stressed then that bank is going to be stressed," Brannen said.
Less than half of Georgia's banks were profitable in the third quarter, according to the FDIC.
But Tennessee banks have fared much better during the recession, according to Tim Amos, senior vice president of the Tennessee Banker Association. Amos said more than 80 percent of Tennessee's banks were profitable in the third quarter.
"We didn't have the kind of rapid expansion in real estate that you saw in Georgia, so our banks weren't hit has hard by the downturn," he said.
The last bank to close in Tennessee was the Bank of Alamo in November 2002.
Contact Dave Flessner at 757-6340 or at dflessner@timesfreepress.com