Though its nonperforming loans grew dramatically in the second quarter, Appalachian Bancshares Inc. in Ellijay, Ga., said Thursday that it expects to bring in enough capital to satisfy a regulatory order.

"We have several different plans on the table," Tracy Newton, Appalachian's president and chief executive, said on a conference call. He declined to give details, saying the $1.2 billion-asset company would disclose information when appropriate.

Appalachian reported its fourth consecutive quarterly loss as nonperformers shot up to 15.11% of total loans, from 5.76% at March 31. Most of the trouble was with acquisition and development loans.

Its net loss widened 14-fold from the first quarter, to $25.8 million, or $4.71 a share. It had earned $701,000, or 13 cents a share, the year earlier.

Newton said that in recent months the recession has started to pinch even the best customers, compounding the stress of the real estate meltdown.

One bright spot was a rise in the number of home shoppers. Traffic is up, Newton said, particularly for homes under $250,000 — "the majority of our market."

The company did not report capital ratios at its Appalachian Community Bank, which got a cease-and-desist order April 24 from regulators. The order gave the bank 90 days to boost its leverage ratio to 8% and its total risk-based capital ratio to 10%. At March 31 its leverage ratio was 5.99% and its total risk-based capital ratio was 10.08%.

Newton blamed some of Appalachian's capital trouble on accounting rules. He said he is frustrated that banks were prevented from building reserves in profitable years because accounting rules dictated that loss provisions must be calculated mainly from historic loan losses, which had been very low until lately.

"Now the shoe is on the other foot," he said. "We have losses, but we're unprepared for it."

He said this made it impossible to maintain proper capital ratios without an outside capital injection.

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