Darby Bank & Trust Co, Vidalia, GA, Closed By Regulators

November 12, 2010 -83 year old Darby Bank & Trust Co, Vidalia, Georgia, was closed today by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver.  The FDIC entered into a purchase and assumption agreement with Ameris Bank, Moultrie, GA, which will acquire the banking operations of failed Darby Bank.   Ameris will assume all deposits and purchase all assets of Darby Bank.  Ameris also acquired another failed bank today, Tifton Banking Company of Tifton, Georgia.

All branches of Darby will reopen under normal business hours and all depositors of Darby will automatically become depositors of Ameris with no interruption in FDIC deposit insurance coverage.

According to Darby’s website,

“Darby Bank & Trust Co. began its operations on May 28, 1927 as the J.F. Darby Bank which was started by J. Frank Darby. On June 22, 1934, the bank was incorporated under the name of Darby Banking Co. and became a state-charted bank.  DBT Holding Company is the parent for Darby Bank & Trust Co. with its headquarters in Vidalia, Georgia. The bank serves Toombs County, Chatham County and surrounding territories. Since 1995, DBT Holding Company has expanded the operations of Darby Bank by opening one office in Lyons, Georgia and three offices in Savannah, Georgia. The third Savannah location opened in 2000”.

Darby Bank’s last published Annual Report on the Bank’s website was issued in 2007 and shows that the Bank’s assets increased by 700% in the 10 years ending 2007.

As has been the case with many failed banks, a very rapid expansion of loans was accompanied by loose underwriting and aggressive lending practices which lead to a large number of defaults and bank failure as real estate markets crashed.  Darby Bank’s  large amount of loan delinquencies and defaults is shown by the Bank’s astronomical troubled asset ratio of 400% compared to a national average of 15%.  At September 30, 2010, Darby Bank had total assets of $654.7 million and total deposits of $587.6 million.

Ameris Bank is a wholly-owned subsidiary of Ameris Bancorp (ABCB), headquartered in Moultrie, Georgia. President & CEO of Ameris Bank, Edwin Hortman, said, “We are appreciative of the opportunity to welcome customers and employees of both Darby Bank & Trust Co. and Tifton Banking Company to the Ameris Bank family. Customers can be confident that their deposits are safe and readily accessible. Ameris Bank has supported the financial needs of local communities since 1971″.

As is typical with the purchase of failed bank purchases, the FDIC provides substantial loss protection to the acquiring bank through the use of loss-share transactions. In the acquisition of Tifton Banking and Darby Bank by Ameris Bank, the FDIC will provide loss protection on $560.2 million (70%) of the assets purchased by Ameris Bank.  In addition, Ameris did not pay the FDIC a premium on the acquisition of Darby Bank and Tifton Banking Co. deposits.

There has been much discussion in the press lately about the increased competition for failed banks by buyers, but this may be more hype than reality.  Consider that Ameris Bank was the recipient of TARP money, receiving $52 million dollars in November 2008 from the US Treasury in exchange for Ameris preferred stock and warrants under the Capital Purchase Program.  Ameris Bancorp still owes the US Treasury $47.5 million dollars, although they have been making the required dividend payments on time and to date, have paid the US Treasury $4.5 million.   It would seem logical that if the FDIC had a large number of suitors for each failed bank, they would select the financially strongest buyer and exclude institutions that have not paid back government TARP money.

Although Ameris still owes the US Treasury $47.5 million, they only recently stopped paying dividends in September 2010.   Ameris President Edwin Hortman, commenting on the dividend suspension said that “We understand that our stock dividend is important to many of our shareholders. However, we believe it is the right decision for all shareholders to avoid further dilution to tangible book value and earnings per share. We look forward to reinstating an appropriate cash dividend in the future as we work through this cycle and return to profitability.”

Ameris Bancorp, a $2.4 billion asset institution, reported a net loss of $1.7 million for the quarter ended September 30, 2010, compared to a net loss of $.9 million for the third quarter of 2009.  Bank President and CEO, Edwin Hortman, noted that  “Our operations continue to produce strong levels of pre-tax, pre-provision earnings, at levels close to 2.00% on average assets. This is due to higher net interest margins and reduced levels of operating expenses. With respect to credit quality, we are seeing positive trends in classified assets and problem loan formation and we believe that efforts to sell OREO will yield results in the coming quarters.”

Ameris Bancorp had previously acquired two other failed banks, $135.7 million asset Satilla Community Bank, Saint Marys, GA in May 2010 and $81 million asset First Bank of Jacksonville, Jacksonville, FL, in October 2010.

Darby Bank is the 145th banking failure of the year. The FDIC estimates the loss to the Deposit Insurance Fund for closing Darby at $136.2 million. Georgia now has a total of 18 banking failures this year, second only to Florida with 27.