Community Bank of the South was just like any other community bank back in the early 2000s, the economy was booming, and real estate was the bread and butter of its loan portfolio.
"We opened in 1999, and as the bank progressed, the housing industry progressed, and we got pretty heavily invested in construction and development loans," said Community Bank President and CEO Lee Scroggins. "Seventy-five percent of our loans were collateralized with real estate in some form or fashion."
Then along came The Great Recession.
"It was a fun ride while it lasted," Scroggins said.
Four years ago, the Smyrna-based Community Bank had upwards of $430 million in assets. Today the bank's assets are $360 million.
"We've downsized just because we haven't had the loan opportunities to put those assets to work," Scroggins said. "We haven't made a development loan in four years."
The construction industry is beginning to show signs of life, however, with available lots in Cobb, Fulton and Forsyth counties being absorbed at a high rate, according to Scroggins, who said his bank is ready to get back in business with builders — with a caveat or two.
“We, of course, tried to learn from experience, and we require a greater amount of equity from builders,” he said. “Anyone we do business with is going to need a substantial investment in the project.”
Just down the street, Vinings Bank CEO Dan Oliver said the four builders his bank is doing business with have experienced a recent rebound in sales.
“They’re doing very well at the moment,” he said.
Describing his one-branch bank on Atlanta Road as a “true commercial bank,” Oliver said Vinings Bank backs small entrepreneurs with companies whose sales range from $2 million to $50 million annually. Industries represented include distribution, commercial contracting and professional services, among many others.
“We bank well over 100 companies scattered around Atlanta,” he said. “We’ve been in business almost six years, and our original business plan of serving this niche is still our plan.”
With $20 million in original capital, Vinings Bank now boasts assets of $240 million and capital of $27 million through earnings.
Oliver is predicting modest growth this year of around 9 percent, plus or minus a few percentage points.
“The vast majority of our customers are having at least as good a year as they’ve had in the past several years,” he said. “Most of them are seeing stable to improving revenues. Generally, speaking, most of our clients are doing quite well.”
While hindsight may be 20/20, in the world of banking foresight is even more valuable.
Launched in March of 2008, principals with Marietta-based First Landmark Bank saw the beginning of the real estate collapse, so they were able to avoid many of the pitfalls some of their competitors couldn’t, according to President and COO Terry DeWitt.
“That said, our 2007 business plan did not anticipate the financial crisis, so we haven’t grown as quickly as we thought we would, but we haven’t had any problem loans to deal with either,” DeWitt said. “Our target customers are small-to-medium-size businesses that we can be the total relationship bank for.”
DeWitt estimated 65 percent of Landmark’s loan portfolio consists of lines of credit and owner-occupied building loans, but residential construction loans are becoming a part of the bank’s portfolio once again.
“In areas close to the Perimeter, with good school districts, there is a tremendous amount of real estate activity now,” he said. “Of the builders that are left out there, many are selling houses as quickly as they can complete them. Of course, it’s at a much lower level than pre-crisis.”
Despite a more than 10 percent growth rate, and projections of year-end assets totaling $225 million, the slow rate of growth in the economy and historically low interest rates create new risks for banks, as well as fierce competition for good loans.
“The expectation is rates will finally start to rise once the unemployment rate gets under 7 percent,” DeWitt said. “Projections for that happening are sometime in 2015.”
According to the Federal Deposit Insurance Corp. website, 85 banks in Georgia have failed, whether closed voluntarily or by federal regulators since August of 2012.
But these three Cobb County-based banks are standing strong. We’ve weathered the storm, and we’re going to be here,” Scroggins said. “We’re still in the banking business, and we’re excited about our future.”