Three more Georgia community banks failed on Friday, including two based in the North Georgia mountain region that’s been battered by the collapsed market for second homes.
Federal and state regulators seized the two mountain banks – Bank of Hiawassee and Appalachian Community Bank in Ellijay – along with Century Security Bank, a tiny bank based in north Fulton County.
With the closings, 35 banks have failed in Georgia since August 2008, more than in any other state.
The Hiawassee and Ellijay banks lent heavily to developers building vacation homes and retirement communities. Many of those deals went bust amid the recession and real estate downturn, fatally wounding the banks.
The closures come seven weeks after the failure of another mountain lender, Community Bank and Trust in Cornelia.
Bank of Hiawassee was taken over by Citizens South Bank of Gastonia, N.C., while Appalachian was picked up by Community & Southern Bank of Carrollton. Century Security, one of the state’s smallest banks, was absorbed by Thomaston-based Bank of Upson.
All banks will reopen Saturday under their new names and ownership.
Bank of Hiawassee survived the Great Depression and a number of recessions during its 100-year history before struggling mightily amid the collapse of Georgia’s real estate market.
In an interview earlier this year, the bank’s board chair, Elois Anderson, told The Atlanta Journal-Constitution that there was little industry to speak of in the area, leaving the bank dependent on real estate loans.
“That’s just our one product here in the mountains; it’s just real estate,” she said. “We had all our eggs in one basket.”
Appalachian Community opened in 1995 as Gilmer County Bank and grew to be one of the state’s larger community banks with $1 billion in assets. It was publicly traded until last fall, when the bank voluntarily de-listed its stock after shares — which traded at over $20 in 2007 – sank below $1.
In recent months, the bank’s CEO and two other top executives resigned after being put on leave for possible violations of bank policy.
Appalachian’s lawyer, Walt Moeling of Bryan Cave Powell Goldstein, said wealthy people in Atlanta, Florida and elsewhere simply quit buying retirement homes and vacation property when the economy tumbled.
Appalachian’s new owner, Community & Southern, formed in January with a $200 million war chest to acquire troubled banks.
Appalachian’s failure is expected to cost the Federal Deposit Insurance Fund $419.3 million, while the seizure of Bank of Hiawassee will cost $137.7 million. The failure of Century Security is expected to cost $29.9 million.
About the Author
