McIntosh State Bank, Jackson, Georgia, established in 1964 as a community oriented, full service commercial bank, was closed today by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver. The FDIC sold the failed bank to Hamilton State Bank, Hoschton, Georgia. Hamilton State Bank will assume all deposits and purchase all assets of failed McIntosh State Bank.
In early 2009, McIntosh State Bank warned shareholders that the Bank had a large concentration in loans to finance the acquisition, development and construction (AD&C) of commercial, residential and multifamily real estate. In late 2008, McIntosh had 24% of its loans in AD&C, which were highly vulnerable to the health of the real estate market. McIntosh made a large bet on risky development loans at the peak of the market and the result was the failure of the bank.
A Cease and Desist Order was issued to McIntosh by regulators in October 2009 citing numerous violations of safe and sound banking practices. McIntosh’s failure appeared to be inevitable but regulators appeared to be in no hurry to close the insolvent Bank. At the time of McIntosh’s failure, the bank had a sky high troubled asset ratio of 716% and the troubled asset ratio had been over 100% since late 2008. A bank with a troubled asset ratio exceeding 100% has little statistical chance of recovery and ultimately winds up as a failed bank.
McIntosh State Bank is owned by its holding company, McIntosh Bancshares, Inc. Shares of the holding company last traded on the pink sheets, closing at $0.05 per share at Friday’s close. The 3.2 million outstanding shares were owned by approximately 665 local investors whose investment is now effectively worthless.
The four branches of failed McIntosh State Bank will reopen on Saturday as branches of Hamilton Bank and depositors will have full access to their funds.
At March 31, 2011, McIntosh had total assets of $339.9 million and total deposits of $324.4 million. Hamilton State Bank will pay the FDIC a premium of 0.50% for the McIntosh deposits.
Hamilton State Bank will be protected from losses on the purchase of failed McIntosh assets through a loss-share agreement entered into with the FDIC that covers $242.1 million of McIntosh’s assets. The FDIC position on loss-share arrangements is that ultimate losses on failed bank loan portfolios are minimized by keeping assets in the private sector.
Hamilton State Bank is a relatively new bank, having commenced operations in September 2004. The Bank specializes in providing commercial banking services to businesses in North Georgia. Hamilton State Bank previously acquired the failed Bartow County Bank in April 2011.
Hamilton State Bank has over a quarter billion dollars in assets and has lost money for the past two years ending December 2010. Hamilton had borrowed $7 million under the TARP program but paid the loan off in April 2011 after completing a private offering that raised additional capital.
The loss on the failure of McIntosh State Bank is estimated at $80.0 million. McIntosh State Bank is the nation’s 46th banking failure this year and the 13th in Georgia.