A small North Georgia bank was seized and sold by regulators Friday, the fourth failure in the state this year.
Covenant Bank & Trust of Rock Spring was sold to Stearns Bank of St. Cloud, Minn. The two former Covenant branches will reopen under the Stearns flag beginning Monday, according to the Federal Deposit Insurance Corp.
Covenant is the 78th bank in Georgia to fail since mid-2008, the most of any state in that period.
Stearns Bank agreed to acquire all of the failed bank’s $90.6 million in deposits and the bulk of its $95.7 million in assets in a loss-share transaction, the FDIC said. The regulator estimated Covenant Bank’s failure will result in a $31.5 million loss to its Deposit Insurance Fund, the backstop that protects depositors.
Covenant, based in Rock Spring, about 20 miles south of Chattanooga,, was founded in June 2006. The bank also had a branch in Dalton.
Covenant started business near the end of the economic boom and ramped up as the national economy was winding down. The bank more than doubled in assets between December 2006 and December 2007, the month the Great Recession officially started.
Like many failed Georgia banks, Covenant did a substantial amount of its business in commercial real estate and land acquisition, and development loans.
The bank lost more than $8 million over its final three years as loan losses mounted, according to FDIC data.
Stearns Bank has now acquired three failed institutions in Georgia from the FDIC during the current community banking crisis.
