The increasing cost of regulation is causing another small bank to give up its independence.
Gateway Bancshares Inc. in Ringgold, Ga., is selling itself to rival First Volunteer Corp. in Chattanooga, Tenn., and its chief executive said that the decision was driven largely by the need for scale.
"The reality is that it is increasingly difficult for small banks to absorb the financial burden of more stringent regulatory requirements," Robert G. Peck, the president and chief executive of the $267 million-asset Gateway, said in a news release announcing the deal last week. "And when you couple that with the uncertainty of the economic environment, you realize there is strength in numbers."
The increased cost of regulation stemming from the passage of the Dodd-Frank Act in 2010 is forcing many small community banks to find merger partners and most industry experts expect the trend to accelerate over the next few years.
For First Volunteer, the deal would be the largest in its 108-year history and first outside of its home state. The acquisition would boost its assets by more than 40%, to $910 million, and give it three branches in north Georgia, to go along with its 23 in Tennessee. Gateway's bank subsidiary, Gateway Bank & Trust, has the No. 2 market share in Catoosa County, Ga., with 26% of its deposits.
"I'm excited about the opportunities this merger gives our company to serve the growing north Georgia market," First Volunteer President and CEO Patti Steele said in a news release. "Gateway Bank & Trust is a healthy bank with a strong franchise in a growing market."
The companies did not disclose a sale price. The deal is expected to close by the end of this quarter.