GB&T Bancshares Inc. said that the fourth-quarter profit it reported last month has been wiped out by the subsequent writedown of several loans made by the president of a subsidiary bank.
The $1.9 billion-asset Gainesville, Ga., company restated its fourth-quarter results Tuesday and is now reporting a loss of $1.9 million, or 13 cents a share. GB&T had said last month that it earned $4 million in the fourth quarter.
The adjustment resulted from a 542% increase in the loan-loss reserve it reported for the fourth quarter, to about $11.5 million.
Two analysts said the restatement - the latest in a series of credit-quality problems over the past few years - might prompt GB&T to consider selling itself.
But Richard A. Hunt, its president and chief executive officer, said in an interview Tuesday that selling is not in his company's game plan.
"We think we can pull out of this and have a much more valuable stock in the future," he said.
GB&T's stock price fell 4.1% Tuesday, to $20.61 a share. Analysts said the drop was not as big as it could have been, given the magnitude of the restatement.
Jennifer H. Demba, an analyst at SunTrust Robinson Humphrey, said she believes the stock held up well because GB&T has a valuable branch network and likely would fetch a price in the mid- or high 20s a share if it were sold.
David B. Scharf, an analyst at First Horizon National Corp.'s FTN Midwest Research, agreed that the company has a "very valuable" branch network in the high-growth Atlanta region, and he said that the board could be getting impatient with its performance.
GB&T has been underperforming compared with other Georgia community banking companies for a while, he said. Its ratio of net chargeoffs to average loans was 36 basis points last year, compared with 11 basis points for the others. In 2005, GB&T's ratio was 47 basis points, versus 12 basis points for the others.
"You can only underperform for so long before the board of directors steps in and decides to consider the strategic options," Mr. Scharf said.
But Samuel Caldwell, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said that he doubts GB&T is giving any serious consideration to a sale. "I have not gotten the sense that they are feeling the pressure."
Mr. Hunt said a recent Federal Deposit Insurance Corp. examination "raised some red flags" about loans made by one of GB&T's seven subsidiary banks, HomeTown Bank of Villa Rica.
The company subsequently identified several troublesome loan relationships originated by the bank president, S. Pope Cleghorn Jr. The loans failed to comply with numerous policies and procedures, including collateral requirements, and Mr. Cleghorn has been fired as a result, GB&T said.
Mr. Hunt said he would be hesitant to describe the loans as fraudulent before the company concludes the investigation. "We are pursuing all avenues and diligently trying to determine what the president of that bank was doing."
HomeTown Bank of Villa Rica, which GB&T acquired in 2002, came with a history of credit-quality issues, he said.
"It was a troubled bank at the time, and we negotiated some conditions that made us comfortable with the acquisition," Mr. Hunt said. "One of those conditions was the senior management at the bank would not continue with us, so they left as part of the deal."
GB&T appointed Mr. Cleghorn as the president in December 2002, shortly after the deal closed.
"We hired our successor who helped us clean up the mess that prior management had left, but he was making a mess of his own, apparently, in the meantime," Mr. Hunt said.
