Georgia's diversity of small banks was an asset when the economy was strong, with consumers benefiting from competitive rates and broader sources of credit, said James Verbrugge, a professor emeritus of finance at the University of Georgia's Terry College of Business. It became a liability when the bottom fell out of the housing market and smaller banks had less capital to weather the crisis.
"If the development comes to a screeching halt and even half of your loan portfolio is concentrated in that one basket, then you're in trouble," Verbrugge said.
With the financial meltdown centered on Atlanta, nobody in Gibson expected to feel the fallout in tiny Glascock County, which has the third-smallest population of any in Georgia. But bad loans took a toll there, too, after the bank was sold to new owners who moved its headquarters to the Atlanta area.
The town's bank was founded in 1905 as the Bank of Gibson. It survived two world wars and the Great Depression under the local ownership of Erasmus Eggleston Griffin Sr. and two succeeding generations — until family members with a controlling interest opted to sell the bank in 2000. Then, it was renamed FirstCity.
When FirstCity closed, residents felt it immediately. Customers' ATM cards no longer worked. Outstanding checks were worthless. Until the FDIC issued checks the next week for the insured amount of residents accounts, people were left with nothing but the cash in their pockets.
Audra Mason, who styles hair at a salon two blocks from the bank, had several customers cancel haircut appointments because they didn't have cash to pay her. Jennie Veazey, a cook at a local diner, got her boss to pay her in cash until she received checks and a new ATM card for her new account.
Hazel Bedingfield, 79, fretted over the 24-mile trip to claim her Social Security payment from Thomson, where the FDIC re-routed direct deposits for government checks to a new account at a SunTrust Bank in a nearby county.
"It does gall you," Bedingfield said. "Just because we're a little bitty county doesn't mean we don't need a bank. It wasn't our fault."
Faltering loans played a role in the demise of FirstCity, said Robert E. Maloney Jr., the bank's attorney. The bank had $24.6 million in nonperforming loans in 2008, meaning no payments had been made for 90 days or more, and a loss of $8.3 million last year.
"Smaller banks make loans to people that can't get loans at larger banks," Maloney said. "Did we put our eggs too much in the real estate development market? Obviously we did."
Anthony Griswell, chairman of the Glascock County Commission, said he's confident another bank will move into Gibson. Residents, meanwhile, are moving money to banks outside the county. Judy McDonald, a retired county employee, said she and her husband opened two accounts — with different banks.
"We weren't going to go through that mess again," McDonald said.