F’ville-based bank becomes 7th to go bust in Ga. in ‘09

Sat, 06/20/2009 - 10:55am
By: Cal Beverly

Ga. Banking Department closes Southern Community Bank; branches reopen as United Community Bank; depositors said to be fully protected from losses

Fayetteville-based Southern Community Bank joined the growing list of failed banks in Georgia and the U.S. when a state agency — the Georgia Department of Banking and Finance — swooped in Friday and closed it down. It’s the first bank failure in Fayette County in modern times.

The SCB branches were picked up by another bank operating locally — United Community Banks with current branch locations in Fayetteville, Peachtree City, Newnan, Tyrone, Union City, Fairburn, Palmetto, Stockbridge and McDonough.

“The FDIC has acted to protect all of the deposits of Southern Community Bank’s customers, which is essential to the overall stability and confidence in the banking system,” according to Joe Brannen, president and CEO of Georgia Bankers Association. “No one has ever lost a penny of FDIC-insured deposits, and the system in place to protect depositors in times of economic stress is working well. The most important thing for customers to know right now is all deposits, including those that exceed FDIC insurance limits, have been transferred to United Community Bank, Blairsville,” Brannen said.

“According to the FDIC, the five offices of Southern Community Bank will reopen for normal business hours, starting Saturday, as branches of United Community Bank,” Brannen said. “Depositors of Southern Community Bank will automatically become depositors of United Community Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until United Community Bank can fully integrate the deposit records of Southern Community Bank. Depositors of Southern Community Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.”

A news release from the Ga. Department of Banking and Finance said, “All deposit accounts of Southern Community Bank have been transferred to United Community Bank and will be available immediately. On Saturday, June 20, 2009, depositors will be able to access their accounts at the former main office and branch locations of Southern Community Bank. Customers of both banks should continue to use their existing branches until United Community Bank can fully integrate the deposit records of Southern Community Bank. Additionally, the former depositors of Southern Community Bank can continue to access their accounts through automated teller machine transactions, checks and debit transactions.”

“All deposits will be transferred to United Community Bank and, therefore, it is not anticipated that there will be any loss exposure to former Southern Community Bank depositors that have deposits exceeding the FDIC Deposit Insurance amounts,” the DBF statement said.

“The former Southern Community Bank locations will open for business as always ... as United Community Bank,” according to a UCB email news release late Friday afternoon. “Southern Community Bank customers can continue to bank as normal. As of now, however, former Southern Community Bank customers will not be able to use United Community Bank locations. Likewise, existing United Community Bank customers will not be able to use Southern Community Bank branches at this time.”

Southern Community Bank is the seventh Georgia bank closed in 2009, mostly due to high levels of distressed construction and development loans, according to a statement from the Ga. Bankers Association.

UCB paid a premium of 1 percent — $3 million — to buy all of the $307 million in SCB deposits, and also bought the failed bank’s assets of $377 million, according to published reports.

The FDIC also will share with UCB for any future losses on up to $253 million of the failed bank’s assets, which includes unpaid loans.

The big losers are the bank’s shareholders, many of whom are well-known business leaders in Fayette County.

The bank’s parent holding company had been put on notice last fall because of its precarious financial situation. Southern Community Bancshares, Inc. announced Oct. 10 that its bank subsidiary, Southern Community Bank, had agreed to the entry of a ”cease and desist” order with the Federal Deposit Insurance Corporation and the Georgia Department of Banking and Finance.

According to the news release last fall, the bank’s holding company sold $2 million in common stock to inject new capital into the bank to comply with the order.

The buyers of the common stock were members of the bank’s board of directors and represented a Who’s Who of Fayette area businessmen.

Most notably, the bank increased its Tier 1 capital by $2 million on Sept. 25, 2008. This capital was injected from the bank’s holding company, which on the same day sold 500,000 shares of its common stock to a group of directors at a per share price of $4, representing a 2.5 percent premium to the reported closing price of the holding company’s common stock on that day. The shares were sold in a private placement transaction.

“We are delighted to welcome the customers of Southern Community Bank to the family of valued customers of United Community Bank,” said C.B. Fair, executive vice president, Atlanta Region for UCB. “It is our number one objective to make this transition as transparent and easy as possible for both Southern Community Bank customers and employees.

“I want to personally assure all Southern Community Bank customers that every penny of their money is safe and secure at United Community Bank,” Fair continued. “Because United Community Bank elected to assume both insured AND non-insured deposits, no customers of Southern Community Bank will lose any of their deposits. Southern Community Bank customers will also have the convenience of more than 100 additional bank locations, enhanced services and a vastly larger network of ATMs.”

The following is from UCB’s email announcing the transfer:

United Community Banks, Inc. (NASDAQ: UCBI) announced [Friday] that its wholly-owned subsidiary, United Community Bank, has entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase the assets and assume the deposit liabilities and secured wholesale borrowings of Southern Community Bank.

The Georgia Department of Banking and Finance declared Southern Community Bank closed [June 19] and appointed the FDIC as receiver. The FDIC then assigned the assets, deposit liabilities and secured wholesale borrowings of Southern Community Bank to United Community Bank under a loss sharing agreement.

“This transaction was very attractive to United since it fits perfectly into our south metro Atlanta markets by complementing the bank’s existing locations and adding new locations where we do not currently have a presence,” said Jimmy Tallent, president and CEO of UCB.

Under the terms of the sales agreement, these customers also have the right to withdraw their funds without penalty at any time until they enter into a new deposit agreement with United Community Bank.

“United Community Bank staff members will be on hand at all former Southern Community Bank locations to answer any questions and to assist Southern Community Bank customers in any way possible,” Fair says. “If any customer has any questions or concerns, I encourage them to visit their usual bank location.”

United Community Bank currently operates south metro locations in Fayetteville, Peachtree City, Newnan, Tyrone, Union City, Fairburn, Palmetto, Stockbridge and McDonough. This complements Southern Community Bank locations in Fayetteville, Newman, Peachtree City, and Locust Grove.

About United Community Banks, Inc.

Headquartered in Blairsville, United Community Banks is the third-largest bank holding company in Georgia. United Community Banks has assets of $8.1 billion and operates 27 community banks with 105 banking offices located throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina and east Tennessee. The company specializes in providing personalized community banking services to individuals and small to mid-size businesses. United Community Banks also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United Community Banks common stock is listed on the Nasdaq Global Select Market under the symbol UCBI. Additional information may be found at the company’s web site at www.ucbi.com.

Southern Community Bancshares, Inc., is the holding company for Southern Community Bank, headquartered in Fayetteville, Ga. The bank began operations on June 2, 2000.

Gary D. McGaha, an organizer of Southern Community Bank who served as its first president and chief executive officer, retired almost exactly one year ago as the bank was experiencing trouble with problem real estate loans.

As of one year ago, Southern Community Bank employed 78 and managed more than $400 million in total assets.

In response to FDIC demands, the bank hired a new CEO last October. David R. Coxon came in to turn the floundering bank around.

Members of the failed bank’s board of directors include the following:

Thomas D. Reese — chairman of the board of the company and the bank. Reese is a resident of Senoia, Ga. Since 1990, he has been the owner of Reese Builders & Developers, Inc. where he serves as president.

Vice Chairman Robert B. Dixon, Jr. of Fayetteville since 1971 has been a home builder and developer.

James S. Cameron of Jonesboro, served as a real estate attorney from 1980 through 1999 with the law firm of McNally, Fox & Cameron, P.C., in Fayetteville. Since 1994, Cameron has been a partner and the president of Cameron Development Corporation, a real estate development corporation located in McDonough, Ga.

George Ronald Davis, Sr. of Fayetteville is the owner of Smith & Davis Fabric & Clothing, Inc.

Richard J. Dumas of Fayetteville is the president and chief executive officer of J&R Clothing, Inc.

William Wayne Leslie of Griffin is an owner in and CEO of Leslie Contracting, Inc. and Leslie Environmental Inc.

Jackie L. Mask of Brooks, since 1969, has been the owner of Mask Tire, a retail tire business in Fayetteville.

Dr. William M. Strain of Fayetteville is a gastroenterologist for Digestive Healthcare of Georgia.

— Posted 2nd revision at 11:55 a.m., Saturday, June 20, 2009

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MajorMike's picture
Submitted by MajorMike on Mon, 06/22/2009 - 7:06pm.

I was advised ten months ago that one builder/developer alone would bring that bank down. What a strange world we live in. Perhaps some people have learned their lesson about the "good old boy" network.


Steve Brown's picture
Submitted by Steve Brown on Tue, 06/23/2009 - 12:59am.

You are correct. This was the bank behind the failed TDK Extension. Just imagine what the consequences would have been for us had the citizenry not rebelled.

A few of us took a beating fending-off the extension. The Direct PAC was foaming at the mouth over that one.

Buckwheat Rules's picture
Submitted by Buckwheat Rules on Sat, 06/20/2009 - 8:39am.

With towns like Fayetteville putting banks and pharmacies on every other street corner over the past 8 years, I don't think it was ever a question in anyone's mind that some would sooner or later need to go.

Submitted by wheeljc on Sat, 06/20/2009 - 8:31am.

Thank you Cal for the timely information -- though not good news. Very helpful!!

Submitted by pravin404 on Fri, 06/19/2009 - 6:32pm.

FDIC closed 3 banks today (19 June)

65 banks failed since 2008, 25 in 2008 and 40 in 2009 till now.

Friday means FDIC is in action on some bank.

Check the list of all the failed banks at :

And on google map see where the banks are failing at :

Some statistics about the bank failures :

Southern Community Bank, Fayetteville, GA :
# 38th bank to fail this year in USA
# 7th bank to fail this year and 12th since 2008 from Georgia state.
# Georgia has the maximum bank failures in USA
# As of May 29 has $377 million in assets and $307 million in deposits

Cooperative Bank, Wilmington, NC :
# 39th bank to fail this year in USA
# 2nd bank from North Carolina to fail this year
# As of May 31 has $970 million in assets and $774 million in deposits

First National Bank of Anthony, Anthony, KS :
# 40th bank to fail this year in USA
# 2nd bank from Kansas to fail this year
# As of March 31 has $157 million in assets and $142 million in deposits

cogitoergofay's picture
Submitted by cogitoergofay on Sat, 06/20/2009 - 6:59am.

Thank you for the article, Mr. Beverly, and thank you for the statistics, pravin404.

Though we may be in a deep recession/near depression, the bank failures are not yet numerous enough or large enough to cause great concern.

Even during the Great Depression when there was a 10-12 year failure of numerous banks it was approximately 10% of the total. Remember also that we had nearly no bank protections and no insurance. At that point, many of the banks had no business being in business and were simply the product of the rapid expansion of banking from the late 1800's to the early 1900's.

Three factors in the bank failures in the 20's and 30's are not present now: (1) no fed insurance; (2) fragility; (3) contagion. #2 is the fact that banks were simply unstable then, and now they are regulated to some extent and managed much better. #3, the tendency of one bank failure to induce another through the "run on the banks" is not occurring now.

Perhaps some of this is a market adjustment. Hopefully we will see this as a correction and not a disaster.

Cyclist's picture
Submitted by Cyclist on Sat, 06/20/2009 - 7:27am.

745 savings and loan operations failed. Our economy still had the wherewithal to absorb the $160 billion loss but we had to endure the 1990 and 1991 recession.
Caution - The Surgeon General has determined that constant blogging is an addiction that can cause a sedentary life style.

NUK_1's picture
Submitted by NUK_1 on Sat, 06/20/2009 - 7:24am.

I don't think after you cut through the BS on balance sheets and accounting smoke that banks today are in any better position in terms of solvency than during the Depression. They are probably in many cases in worse shape since they are dramatically over-leveraged and some of their listed assets are worth far less at times than what they state. The big difference is the perception by their customers now that their money is pretty safe and there is no need to have a run on the banks to get money out of them. You take away the FDIC and suddenly it's not pretty.

While the failure of some dinky bank somewhere means little as it doesn't affect other banks, the failure of big financial institutions sure has had an effect on others. That has included the biggest banks out there and they are hurting and rounding up additional cash. The feds have done a very effective job of not giving the public and even shareholders in those banks much information about the true financial picture at those institutions, but you don't order a company like Bank of America to raise money right now on a whim.

I'd list the reasons for no bank runs and subsequently banks crumbling as being:
1) What will cause a bank to fail these days is investors fleeing the bank, not the ordinary banking customer.
2) The govt infusing banks with $$$ and not allowing the release of the details. That definitely indicates that the govt feels these banks would take major damage if information got out to the public and it's better they not know any of the underlying facts. That withholding of info is especially critical on Wall Street where investors don't really care about platitudes and plans and vote instead with their money and have the power to cause the collapse of any company rather quickly if they lose all confidence in that company's outlook.
3) FDIC and the perception that the govt isn't going to let big banks like Citi or BOA fail.

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