Sometimes, branches are jettisoned after failed bank acquisition

When Alpharetta-based Alpha Bank failed a year ago, its deposits were gobbled up by a Minnesota bank eager to break into the lucrative north Atlanta market.

But in March, Stearns Bank of St. Cloud, Minn., quietly closed both former Alpha branches, one in Alpharetta and another in Marietta. Alpha, it turned out, didn’t have a strong enough customer base to form a viable business, Stearns executives said.

As the number of Georgia bank failures continues to climb, acquiring banks like Stearns must decide what to do with the failed bank’s branches.

Most branches have remained open as they provide the acquiring bank with access to new markets. But a growing number of branches have closed down or been absorbed into a buyer’s existing banking network.

It’s a little-noted fallout from the state’s banking crisis, which has claimed 25 banks since 2008, the most of any state. Dozens of other Georgia banks are struggling with huge losses tied to the collapsed real estate market.

In the standard failed bank transaction, the acquiring bank has 90 days to decide which branches to buy, according to the Federal Deposit Insurance Corp.

Most decisions to close branches have been made because of location: The newly acquired branches are too close to a buyer’s existing branches.

Birmingham-based Regions Bank, which acquired Integrity Bank of Alpharetta in 2008, opted to close one of Integrity’s five branches because it sat directly across the street from a Regions office.

The other branches served areas in which Regions wanted more exposure, said Bill Linginfelter, Regions’ top executive in Atlanta and North Georgia.

“When it comes to a market like Atlanta, we want to build out branch presence,” Linginfelter said.

Regions also took over Henry County-based FirstBank Financial Services, choosing to close on of that bank’s four branches.

State Bank & Trust, which acquired the failed Security Bank in July, recently decided to close three of Security’s four metro Atlanta branches, keeping a location in Alpharetta, with plans to open a new location in Buckhead.

State Bank’s CEO Joe Evans said that branch was performing well and that he has had success banking in Alpharetta at his previous bank, Flag Financial. State Bank plans to retain Security’s branches in middle Georgia.

Stearns Bank’s CEO, Norm Skalicky, said when he decided to acquire Alpha Bank last year he knew the bank had a fairly weak core business.

But when he got into the bank he learned that most of the bank’s customers were what he calls “rate shoppers” ready to run to the next bank to offer better returns. Too few were the kind of loyal depositors a bank needs to thrive, he said.

“This bank had almost no core business,” Skalicky said. “We tried to make it work, but it was hopeless.”

Stearns did not pay a premium to the FDIC for the right to assume Alpha’s $346 million in deposits and only acquired a tiny fraction of the bank’s loans. Skalicky said Stearns did not lose money on the deal.