September 17, 2010 – First Commerce Community Bank, Douglasville, Georgia, was closed today by the Georgia Department of Banking and Finance and the FDIC was named as receiver.
First Commerce Bank was acquired by Community & Southern Bank, Carrollton, Georgia under a purchase and assumption agreement with the FDIC. Community & Southern will assume all deposits and purchase essentially all of the assets of failed First Commerce. All depositors of First Commerce will automatically become depositors of Community & Southern.
Community & Southern Bank is a new bank, chartered in early 2010, and funded with private investor capital of about $250 million. The new bank was founded with the purpose of acquiring failed Georgia banks, consolidating their operations and building a major banking franchise in the state of Georgia.
In addition to today’s three acquisitions, Community & Southern acquired two failed Georgia banks earlier this year, shortly after being chartered. On January 29, 2010, Community & Southern acquired failed First National Bank of Georgia and on March 19, 2010, acquired failed Appalachian Community Bank. Acquisition of these two failed banks instantly turned Community & Southern into a $1.8 billion asset bank with 20 branches. Backed by the private equity start up capital and protected from losses on the acquisition of failed bank asset through loss-share agreements with the FDIC, Community & Southern has instantly become one of the healthiest and biggest lenders in Georgia.
With today’s acquisition of three additional failed banks, Community & Southern has become the fourth largest bank in Georgia with assets of $2.8 billion and 40 branch offices. In a press release from Community & Southern, President and CEO Patrick Frawley stated “We’re very pleased to announce the acquisition of Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank from the FDIC. The addition of these banks will allow us to serve a wider community throughout Georgia. As we stated previously, our goal is to build a new banking franchise for Georgia, with the strong traditions of service excellence and community support”.
CEO Patrick Frawley is a former regulator with the Office of the Comptroller of the Currency and has been involved in turning around other failed banks. The board of Community & Southern includes John Spiegel, former CFO of SunTrust Banks and Joe Edwards, former CEO of United Bank of Zebulon. A recovering economy and loss-share agreements with the FDIC that protect Community & Southern from losses on the purchase of failed bank assets could result in huge profits for the owners of Community & Southern (see OneWest Makes Billions on Failed Bank Purchases).
In March, after the second acquisition of a failed bank, Community & Southern CEO Patrick Frawley said that “It’s not just about making money. It’s about saving jobs and rehabilitating the banking system in Georgia and letting capital start flowing from other sources”.
At June 30, 2010 First Commerce had total assets of $248.2 million and total deposits of $242.8 million. Community & Southern paid the FDIC a premium of 1.0% to acquire the deposits of First Commerce Community Bank.
The FDIC agreed to a loss-share transaction with Community & Southern that will cover $602.5 million of the three failed banks’ assets. The three failed banks acquired by Community & Southern had a total of $864.2 million in assets. The loss-share agreement covers 70% of the failed bank assets purchased by Community & Southern, somewhat less generous than loss-share agreements for other failed banks on which the loss-share percentage had generally been at 80%.
The loss to the FDIC Deposit Insurance Fund on the failure of First Commerce is estimated at $71.4 million or 29% of the bank’s total assets. First Commerce is the 122st banking failure of the year and the 13th in Georgia.