First Guaranty Bank & Trust Co. announced a deal Wednesday to sell seven of its eight branches to a South Carolina-based bank.
But the deal allows Jacksonville’s oldest bank, founded in 1947, to continue operating as an independent community bank.
First Guaranty is selling seven branches to Greenville, S.C.-based CertusBank N.A. for an undisclosed price.
It will keep its branch in the Kendall Town Center in Arlington and continue operating as First Guaranty Bank.
“This option was appealing to us and CertusBank,” said First Guaranty Chairman and CEO Jay Fant.
“I think we definitely plan on keeping it as a community bank. That’s what we live and breathe,” said First Guaranty Chairman Emeritus Julian “Hickory” Fant Jr., whose father organized the bank 64 years ago and whose son now runs the bank.
The sale of the seven branches allows First Guaranty to raise much needed capital and will give the bank time to work through its large number of bad loans.
“It allows us to do that on our time,” Fant said.
First Guaranty had a total of about $349 million in deposits and $277 million in loans outstanding as of Sept. 30, according to the bank’s latest report filed with the Federal Deposit Insurance Corp.
CertusBank will be taking over $211 million in deposits and $96 million in loans from First Guaranty.
First Guaranty has been under orders from federal regulators to raise capital since August 2010. The bank has been losing money for the past four years, including a net loss of $6.2 million in the first nine months this year.
With the losses, the bank’s ratio of core capital to assets fell to 1.64 percent as of Sept. 30. The average capital-to-asset ratio of its peer banks was 9.49 percent, according to FDIC data.
First Guaranty’s loan portfolio has been hit hard by the real estate market collapse of the past few years.
The amount of non-current loans – loans that are 90 days or more past due or not being repaid at all – has risen from 1.66 percent of all loans at the end of 2007 to 31.49 percent as of Sept. 30, according to the bank’s last FDIC report.
Although CertusBank is taking on some of First Guaranty’s good loans and was not interested in taking on the bad loans, “we’re also keeping a share of our performing loans as well,” Jay Fant said.
CertusBank, a subsidiary of Blue Ridge Holding Inc., was formed last year by a group of former bankers from Bank of America and Wachovia Bank.
It raised $500 million in capital from a group of New York institutional investors with the goal of investing in troubled banks.
It went into operation in January with an FDIC-assisted acquisition of a South Carolina bank.
Then in May it bought two Georgia-based banks in FDIC-assisted deals, including Atlantic Southern Bank, which had one branch in Jacksonville. That branch had $44 million in deposits as of June 30, according to FDIC data.
CertusBank was interested in expanding in the area.
“Jacksonville is so important to us,” said Angela Webb, chief administrative officer for CertusBank.
“This one (the First Guaranty deal) was a really good match for us,” she said.
CertusBank now has $1.8 billion in assets and 35 branches in North Carolina, South Carolina, Georgia and Florida, before the First Guaranty deal (that will still need regulatory approval before completion).
Webb said the bank is interested mainly in markets along the Interstate 85 corridor between Atlanta and North Carolina and Southeast coastal cities. It’s not looking south of Jacksonville, she said.
“We prefer North Florida. It’s a market we know. It’s a market we’ve banked before,” she said.
Webb said CertusBank is interested in expanding in Jacksonville, either through further acquisitions or building new branches.
“Although we’re excited about these eight locations, it’s not enough to serve the entire Jacksonville market,” she said.
Customers of the seven First Guaranty branches being sold will become customers of CertusBank once the deal is completed, and employees of those branches will also join CertusBank.
Jay Fant said he did not know how many employees will join CertusBank and how many will stay with First Guaranty.
He said CertusBank is a good bank and that customers and employees will be happy with it.
“Our employees seem to be quite pleased and interested and excited,” he said.
The transition is expected to take place during the first half of 2012.
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