First Volunteer Corp. in Chattanooga, Tenn., has bought a century-old community bank in Benton, Tenn., that lost millions of dollars in an apparent loan fraud scheme.
The $548 million-asset First Volunteer said Thursday that it closed the deal for the $104 million-asset Benton Banking Co., a unit of Benton Bancshares, on Dec. 31. It did not disclose the price.
A story in Sunday's Cleveland (Tenn.) Daily Banner said that Benton had recently told investors it was about $6 million in the red after discovering that a bank employee had issued fake loans in small amounts totaling $18 million.
The story also said that the bank's president, Jimmy Goddard, disappeared for a few days last month before being found in North Carolina. He was subsequently fired.
The employee who signed off on the loans has not been named. The Federal Bureau of Investigation told American Banker Thursday that the matter is under investigation.
In a statement issued three days before the deal closed, First Volunteer president and chief executive officer Patti Steele said, "We realize this was a challenging situation for [Benton] shareholders and employees."
The bank "is financially sound, as it has been for the last 101 years," she said, and "customers can continue to expect the same great service they have always received. It is unfortunate the shareholders were placed in this situation."
More than 90% of Benton's shareholders live in Polk County, according to the Daily Banner.
The deal instantly gives First Volunteer the No. 1 deposit share in Polk County. At June 30, Benton held 49% of the bank deposits in the county, according to Federal Deposit Insurance Corp. data. First Volunteer also gains two Benton subsidiaries, T.B. Isbell Insurance Agency and Benton Banking Mortgage Co.
