The FDIC acted as receiver during the April 15, 2011, closing of Bartow County Bank, which was assumed by Hamilton State Bank. The closing cost the FDIC deposit insurance fund an estimated $69.5 million.
In the lawsuit, the FDIC “seeks to collect damages flowing from Defendants’ negligence, gross negligence and breaches of their fiduciary duties, which damages include, among other things, lost operating capital, lost profits, and lost investment opportunities.”
Six defendants are named in the suit: William M. Akin, director from 1980 to April 2011; Gary L. Fox, president and CEO from May 1983 to April 2011; Barry S. Justus, senior vice president of lending April 2006 to April 2011; Jimmy L. Nelson, director from 1980 to April 2011; L. Lehmann Smith, a member of the bank’s loan committee and director; and Harry B. White, a member of the bank’s loan committee and director.
According to the lawsuit, the defendants pursued a strategy of rapid growth by funding high-risk loans — seven examples were provided in the filing.
It also alleges Bartow County Bank’s loan policy and rules and regulations outlined standards the six were required to follow in approving the subject loans. According to the suit, the defendants were negligent in approving subject loans violating those policies and prudent banking practices.
Opening in June 1973 as a state-chartered nonmember bank headquartered in Cartersville, Bartow County Bank had four locations by 2005.
Bartow County Bank’s demise was a long time coming. The almost 40-year-old banking business had felt the effects of a down economy for a time before it closed.
In 2010, the bank entered into a consent order with the FDIC and the Georgia Department of Banking and Finance in an effort to strengthen its financial position.
The consent order said the bank agreed to work under regulator advisement to continue to raise its Tier 1 capital to at least 8 percent and its total risk-based capital to at least 10 percent, among other changes.
Bartow County Bank’s decline in performance was related to the economic downturn marked with declined real estate values and high unemployment rates.
The bank underwent capital-raising efforts with private investors as well as businesses within the community following the consent agreement, but those efforts were not enough.
Once billed as Bartow County’s largest bank, Bartow County Bank lost more than $11.6 million in 2009 and slipped to adequately capitalized from a well-capitalized status by the end of that year.
In 2009, the institution expensed more than $15 million to deal with more than $11.7 million in charge-offs and increase its reserve by about $3.5 million.
From December 2007 to late 2010, the bank’s troubled loans rose. While Bartow County Bank’s troubled asset ratio — which measures how much stress problem loans put on a bank — as just above the national median at 15.5 at the end of 2007, it had grown to 114.1 by the end of 2009.
It took another hike by the end of the first quarter of 2010 to 143.2. Also in the first quarter of 2010, capital continued to dip and Bartow County Bank hovered just above the borderline of being classified as under-capitalized.
In the one year preceding the end of the first quarter of 2010, the bank’s capital had taken more than a $10 million hit. In the same time period, troubled assets grew more than 80 percent and sat just below $40 million at the end of March 2010.