Jasper Banking Company, Jasper, GA, an independent, locally owned and managed bank was closed today by the Georgia Department of Banking and Finance. Jasper Banking had been in business since 1945 serving residents of Jasper through three local branches.
The FDIC, appointed as receiver sold the failed bank to Stearns Bank National Association, St. Cloud, Minnesota, which will assume all deposits of Jasper Banking. All three branches of Jasper Banking will reopen on Saturday as branches of Stearns and all depositors of Jasper will automatically become depositors of Stearns. FDIC deposit insurance coverage will continue without interruption up to the applicable deposit limits. Customers of Jasper Banking will also have access to their money over the weekend through the use of checks, ATM and debit cards.
Jasper Banking Company, at March 31, 2012, had total assets of $216.7 million and total deposits of $213.1 million.
Jasper Banking Company made a disastrous series of lending decisions over the past years which resulting in a tidal wave of nonperforming loans. At March 31, 2012, Jasper had a sky high troubled asset ratio of 652% and the troubled asset ratio has been over 100% since the end of 2009. Since a bank with a troubled asset ratio of over 100% rarely winds up avoiding failure, it is of interest that banking regulators allowed this troubled bank to remain open long after it became insolvent (see Regulators Let Zombie Banks Remain Open).
Stearns Bank agreed to purchase all of Jasper’s assets subject to a loss-share transaction with the FDIC covering $106.0 million of the asset pool acquired. Under the loss-share agreement, Stearns agreed to share in future losses on the asset pool acquired. The FDIC maintains that keeping failed bank assets in the private sector minimizes losses and disruptions to loan customers.
Including Jasper Banking Company, Stearns Bank has now acquired a total of 8 failed banks since October 2008 as well as a $730 million failed bank loan portfolio from the FDIC. Stearns Bank is an example of a superbly run bank that did not engage in reckless lending during the real estate lending mania. Lead by super banker Norman C. Skalicky, Stearns Chairman and CEO, the Bank has profited by feasting on the remains of failed banks.
In 2009, Mr. Skalicky said “We have been preparing for opportunities, such as this, since late 2006. We began to curtail lending and increase our capital ratios and really focused on this beginning in August 2007. One of our main strategies during that time was to be prepared to capitalize on opportunities prior to the end of this banking cycle.” Too bad the rest of the banking industry did not share Mr. Skalicky’s views on properly assessing lending risks.
The Stearns Bank website provides some insight on the Bank’s outstanding performance:
A common question asked by many outside the organization, “how does Stearns Bank perform so well year after year?” Many people wonder how Stearns Bank consistently remains a high performing banking company, especially when coupled with significant growth. This phenomenon is rare whereby many high performing banks achieve such success at the price of growth.
As in the case of most high performing companies, it is the people that achieve the results. But the environment of Stearns Bank mirrors the values and beliefs of the chief executive officer, Norman C. Skalicky. Under Norm’s leadership, the company has grown from a small rural bank to a very aggressive profit oriented commercial banking company utilizing a keen appreciation for risk and reward. It is Norm’s style that has developed through the entire organization, and it is his style that has become the culture of the company.
Stearns Bank, N.A., was founded in 1912, is one of the best capitalized banks in the nation with a Tier One Leverage Capital ratio of over 16% and has over $1.3 billion in assets.
The loss to the FDIC Deposit Insurance Fund for the failure of Jasper Banking is $58.1 million. Jasper Banking becomes the nation’s 39th banking failure and the ninth in Georgia which leads the nation in banking failures.