Bank South will swap debt for preferred stock in Commercial Bank. (Bank South Corp. will receive Commercial Bank of Douglasville's stocks as payment)

Bank South will swap debt for preferred stock in Commercial Bank

Bank South Corp. will take an equity stake in Commercial Bank of Douglasville in exchange for retiring a called $4.5 million loan Commercial Bank had outstanding with Bank South, bank officials confirm.

Bank South will receive a new class of Commercial Bank preferred stock as payment, and takes the non-performing loan off its books. Commercial Bank, meanwhile, can convert that debt into a form of additional capital for the bank. "It is a win-win situation for both banks," says Bo Spalding, spokesman for Bank South.

The settlement ends months of tricky negotiations between the two banks that …