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48 Banks Closed First Part of 2011


The 14th bank to fail in George this year brings bank failures up to 48 approaching the first six months of 2011. The bank was the 65th since the 2008 financial crisis. Normally banks are closed on Fridays, and this Friday being July 1st the start of a long holiday, it is unlikely there will be any then, as well it will be the start of the second part of the year.

140 banks were closed in 2009, 157 banks in 2010, and if the trend continues, this may be signs of a recovery. However, in writing Bank Beat since September, 2008, using the FDIC financial records, it indicates banks have had problems for at least three year and a half years, and some, particularly Florida, four years. This small bank is a good example of the programs community and regional banks have been experiencing.


The two branches of Mountain Heritage Bank, Clayton, Georgia were closed with First American Bank and Trust Company, Athens, Georgia to assume all the deposits. The bank was founded November 10, 2003 originally in Clayton then opened up an office in 2008 in Dillard. It has 20 full time employees when it was closed.

As of March 31, 2011, Mountain Heritage Bank had approximately $103.7 million in total assets and $89.6 million in total deposits. In addition to assuming all of the deposits of the failed bank, First American Bank and Trust Company agreed to purchase essentially all of the assets.

As you will note below the banks problems began in 2008 and were quite obvious by year-end 2009.

(in millions, unless otherwise noted)

Bank Equity


Charge Offs
(609,000 Constr./land dev/$206,000 1-4 family, $336,00
($1 Million constr./land dev; $628,000 R/E/ $488,000 indiv. loans)


( $1.2 Million constr./land dev/ $268,000 indiv. loans)

($715,000 commercial/industrial/$263,000 const./land dev/ $258,000)

Noncurrent loans

Tier 1 Risk Capital  
2006 11.96%
2006 10.62%
2006 8.89%
2006 5.66%
2006 3.76%
2006 2.85%

In August of the 2009, the bank had received a Cease and Desist Order by the FDIC, which according to the Clayton Tribune, received this reaction from Mountain Heritage President Jim Wallis:


“That just means we have to do a lot more reporting to the government. Several other banks around here have the same thing.”

The reaction perhaps was typical about “banking regulations” and wanting less “interference.” He may have been right about other banks in the area having the same problems, as all of the state was particularly hit hard being overextended in land and construction loans. Georgia represents 30% of all the bank failures in the U.S. for 2011.

Wallis graduated Mississippi State University with a degree in accounting, 1970, and the was a partner for 15 years, 5 months KPMG Accounting (June,1979-October, 1985), then Executive Vice President and Chief Financial Officer for Provident Bank (September, 1995-October,1999) then joining Mountain Heritage Bank as President & CFO

As with all bank closing, all the investors in the bank lost everything they had invested.

The FDIC and First American Bank and Trust Company entered into a loss-share transaction on $69.2 million of Mountain Heritage Bank's assets.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $41.1 million.

Tracking Bank Failures Map:

List of Bank Failures:

Bank Beat:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: Bank Failures for first six months of the year; investors lose, too. Good example.