Bank Failure Friday: Saturday Edition

The FDIC has closed the doors to Covenant Bank in Rock Spring, GA on Friday.  Covenant Bank was Walker County’s 3rd largest bank and was open since 2006.  From the Chattanooga Times Free Press:

The two-branch bank, with assets of about $95.7 million, will reopen Monday as a branch of Stearns Bank, National Association, based in St. Cloud, Minn., according to the Federal Deposit Insurance Corp.

The Georgia Department of Banking and Finance pulled Covenant Bank’s charter and closed the bank, said FDIC spokesman Greg Hernandez.

The FDIC and Stearns Bank entered into a loss-share transaction on $71.6 million of Covenant’s troubled assets. Hernandez said that figure was the estimate of how much it would cost the deposit insurance fund if the bank was liquidated.

Covenant depositors automatically will become Stearns Bank customers. Covenant deposits, put at about $90.6 million, will continue to be insured by the FDIC.

Over the weekend, the FDIC said Covenant depositors can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed, while loan customers should make their payments as usual.

The bank will maintain its regular business hours, and customers may continue to use the services to which they previously had access, such as safe deposit boxes, night deposit boxes, and wire services, according to the FDIC.

Covenant Bank opened in 2006 and was the third largest bank in Walker County, Ga. It also has a branch in Dalton, Ga.

I had heard that Covenant Bank had been on the FDIC’s watch list for a few months.  This makes for the 4th bank closure in Georgia so far this year.  15 banks have been closed so far nationwide by the FDIC in 2012.  The closure list can be found over at the FDIC’s website.


Alan Painter passed along this presser from the Superior Court in Walker County that appointed the FDIC as receiver of Covenant Bank:

Atlanta, Georgia – The Georgia Department of Banking and Finance (“Department”) took possession of Covenant Bank & Trust, Rock Spring, Georgia on March 23, 2012.  The Superior Court of Walker County issued an Order appointing the Federal Deposit Insurance Corporation (“FDIC”) as Receiver of the Bank effective upon the Department taking possession of Covenant Bank & Trust.

The Department took possession of Covenant Bank & Trust pursuant to the Official Code of Georgia, Section 7-1-150(a) which authorizes the Department in its discretion to take possession of the business and property of any state chartered financial institution whenever such financial institution is either insolvent or operating in an unsafe or unsound condition to transact its business, is operating in violation of any court order, statute, rule or regulation, or requests the Department to take possession of its business and property.

Through an agreement with the FDIC, Covenant Bank & Trust will be acquired byStearns Bank, N.A., St. Cloud, Minnesota.

All deposit accounts of Covenant Bank & Trust have been transferred to Stearns Bank, N.A. and will be available immediately. Depositors will be able to access their accounts at the former main office and branch location of Covenant Bank & Trust during regular business hours. Customers of both banks should continue to use their existing branches until Stearns Bank, N.A. can fully integrate the deposit records of Covenant Bank & Trust. Additionally, the former depositors of Covenant Bank & Trust can continue to access their accounts through automated teller machine transactions, checks and debit transactions.

All deposits will be transferred to Stearns Bank, N.A. and, therefore, it is not anticipated that there will be any loss exposure to former Covenant Bank & Trust depositors that have deposits exceeding the FDIC Deposit Insurance amounts.

The Department’s Commissioner, Robert M. Braswell, reminds depositors that deposits of all Georgia banks are insured by the FDIC up to $250,000. Special rules are in place for accounts held in trust status and joint accounts that may further expand deposit insurance coverage.  Additional information on FDIC Deposit Insurance may be found at

The FDIC has established a website and a toll-free phone number to answer questions from depositors, creditors and other interested parties regarding the receivership of Covenant Bank & Trust. Please refer to the FDIC’s website for further information regarding the details of the purchase and assumption transaction. The website is and the toll-free phone number is 1-800-537-4048. The phone number is operational this evening until 9 p.m. Eastern Standard Time, on Saturday from 9 a.m. until 6 p.m., on Sunday from noon to 6 p.m., on Monday from 8 a.m. to 8 p.m.; and thereafter from 9:00 a.m. to 5:00 p.m.


  1. My brother had been Senior VP over their commerical loan division… he was able to land somewhere else a couple of weeks ago. This is clearly a case of bad economy killing their loan portfollio, but they would have still survived if the FDIC had not tightened capitlization ratios on the banking industry.

    • John Konop says:

      …. if the FDIC had not tightened capitlization ratios on the banking industry….

      What ratios do you think it should be knowing tax payers are on the hook for the deposits, loans……?

      I find it rather bizarre, how in one moment many of you complain about the bank bailout in which 70% of the lending is guaranteed by tax payers, and yet in the next breath you want to loosing ratios which covers tax payers against having to bailout the loans. Deregulation is fine if it is 100% private money, not fraud and we have full disclosure. But I am all for strict regulations when tax payer money is at risk ie no more no bid contacts at cost plus pricing, no more tax payers taking extreme loan risk ……………..

  2. xdog says:

    That makes 78 banks in Georgia to fail since mid-2008, the most in the country. Most of the failures are newer banks too.

    Is there something in the water here? Or something that made managing risk more difficult than other states? Or more likely, some oversight in the chartering qualifications when banks were first set up? Anyone have any ideas?

    • Dave Bearse says:

      The Georgia Department of Banking and Finance is the state agency that has regulatory and/or licensing authority over mortgage brokers, lenders, and bank holding companies conducting business in Georgia. The Department regulates and examines banks, credit unions, and trust companies chartered by the State of Georgia.

      I expect a majority of Georgia bank failures have been state-chartered banks.

      “Anyone have any ideas?”

      1 – Priorities. Even after three years of nearly two Georgia banks failures a month, the GaGOP spent more time in 2012 tightening abortion regulation than it’s spent over the past three years investigating the banking failures of state chartered banks. See 2.

      2 – I expect there’s a robust compliment of General Assembly representation sitting on local bank boards, having local bank investments, local bank loans, and/or local bank connections, and bank officers campaign contributions and support.

  3. I always felt like Covenant was started to get bought out.

    They opened in Rock Spring with a huge, gaudy two-story brick building that looks like a small courthouse, which likely shows their poor planning, and then quickly opened a branch in Dalton, where the money actually is. I’ve yet to meet anybody who actually had an account there, short of the local real estate and insurance people who started it.

    Another local bank, Gateway, was bought out by First Tennessee earlier this year and it was only going to be a matter of time before Covenant also sold out or went under. We heard back in January they wouldn’t survive past March. And someone who worked there says many of the founders and their relatives/friends started moving money to other accounts earlier this month.
    — LU

    • Nathan says:

      Admittedly, I found it strange that they had a huge bank building for the area that they were located. Nice building, but it just seemed a bit big. Same for the Gateway branch in Ringgold.

      • And despite having the huge building, their name out front was just a sticker, not cut into the stone or even stuck on individual letters. Meant to be replaced by something else within a short time. If _I_ was able to start a bank, I’d want the name to last on the building for a generation. But they weren’t looking to build a bank to last, just something another bank would want to buy out.

        That’s where I sit anyway..

        — LU

  4. saltycracker says:

    What would be the interest by a bank as far a Minn. ?
    Must be some serious money to be made picking up select pieces on high bid.

    Didn’t we get into some numbers last year that Georgia chartered a lot more banks to play flip my bank, than other states, they were highly leveraged in real estate and could not withstand much of a decline ?

    Then there is Georgia’s guiding light of banking, our “$70 million gone in sixty seconds” Chairman and still Chairman, Sen. Jack Murphy.

  5. The Last Democrat in Georgia says:

    Doggone it! I hate missing out on Bank Failure Fridays, especially seeing as they have become such a frequent ritual around these parts and all.

    Oh well, I guess I’ll just see you all next Friday.

    Bank Failure Fridays: So exciting!

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