Published: December 29, 2009 07:18 pm      

Bank reacts to FDIC consent order

Board chairman optimistic about 2010

The chairman of the board of a Dalton bank says management issues have been addressed following a consent order entered into with the FDIC last month, but concerns about past due loans will take longer to resolve.

“The one you can’t change overnight is a loan that is past due,” said Larry Swanson, chairman of the board and CEO of First Bank of Dalton. “When people are out of work you can’t just instantly change that situation. It will take time and I would estimate it will be 18 months from today before I can say to you that problem has been solved.”

First Bank of Dalton (www.firstbankofdalton.com/), with a main office at 118 N. Hamilton St. and three area branches, has been around for almost 14 years. Bank officials entered into the consent order with the Federal Deposit Insurance Corp. on Nov. 12. The order outlined several changes the bank had to make, including increased participation by the board of directors in the bank’s operations and creation of a board committee to oversee compliance with the order.

“This was not a surprise to us,” Swanson said. “The last examination we had was as of Dec. 31, 2008, and from that examination the FDIC asked us to do certain things. We’ve known about these certain things since last April.”

Part of the bank’s response was to name Swanson as chairman of the board in May. His previous relationship with the bank was as a stockholder and he said he was “semi-retired” when he became chairman.

Swanson said he has lived in Dalton “all my life. My grandfather banked in the same building and the same room where I’m sitting right now, and I hope my grandchildren will,” he said.

The bank also added a new board member, Tom Peeples, made some other changes in management, and raised $7 million in capital this year, “which is a very, very important part of the entire order,” Swanson said. “We have raised $7 million during 2009 to increase our capital to a level in excess of 10 percent of what is called Tier 1 capital ratio. To put that in perspective, you’re required to have 8 percent to be in a well capitalized bank, and so rather than raise money through TARP (the Troubled Asset Relief Program) — if you will, government money, taxpayers money — we raised this money from our stockholders and from our board.

“So the capital issue is certainly one of the more important issues as far as I think people in general are concerned.”

Swanson said the bank’s capital will be in the $15-16 million range once all money raised is factored in. The bank had total assets on Tuesday of $142 million.

As for the past due loans, “you can’t live in this community without knowing we have a high unemployment rate which we estimate to be between 13 and 15 percent effectively, and because of that people are having a tough time paying their bills,” Swanson said. “That causes us to have more past due loans than we would like, but at the same time we have to listen to our customers and try to accommodate them through these tough times. We’re in the most difficult economic times of the last 60 years in our community.”

Swanson credits city and county officials with doing “what’s necessary” to help improve things locally. He said the city has reduced taxes by $7-8 million: “That puts discretionary money in people’s pockets.” He said the county “is in the process of reducing certain (inventory) taxes to encourage people to come to our community to do business.

“I think both of those bodies are doing what’s necessary to help us through this global economic crisis.”

Swanson also commended the message from area churches.

“Our local churches are encouraging us, they ask us to be thankful for the past,” he said. “We’ve had 60 years of a little bit of ups and downs, but basically always a great and strong economy and a wonderful community to live in and work in and raise our families in. And I think the churches are asking us to be thankful for that and be a little bit patient as the economy improves, rather than things are going to happen in the morning.”

Looking toward 2010, Swanson said First Bank of Dalton is “certainly financially strong, the issue is going to be how strong is our community, and I think our community will continue to get stronger through 2010. I’m more optimistic than perhaps some other people are, but I do believe by the second quarter of 2010 we will see the unemployment rate heading down and our industries getting stronger.”

Also on a list of banks the FDIC said Tuesday needed to improve their finances and operations were the Bank of Ellijay and Northwest Georgia Bank in Ringgold.