Community Bank of West Georgia needs to improve, feds say

Federal and state regulators have ordered a community bank in Villa Rica to improve its management and lending practices.

Community Bank of West Georgia, founded in 2003, has been hard hit by the real estate downturn, reporting $2.2 million in losses during the first six months of the year.

Like many small Georgia banks, Community Bank of West Georgia rode the real estate boom, funding residential construction and development on metro Atlanta’s suburban fringe.

But when the subprime mortgage crisis hit last year, houses stopped selling and many of the bank’s borrowers stopped paying their debts, said Richard C. Hayden, Community Bank’s president and CEO.

“One thing, if you look in the rear-view mirror, we’d do differently is not have so many eggs in the real estate construction business,” Hayden said. “But I don’t think anyone could have thought the switch would turn off like it has.”

The bank wrote off nearly $1 million in real estate-related loans in the first half of the year, compared to none in all of 2007, according to its most recent regulatory filing. In addition, the bank had $10.8 million in loans at least 90 days overdue as of June 30, the filing said.

Regulators on Tuesday made public a 15-page agreement in which the Carroll County bank consented to review its management structure, strengthen its loan underwriting and credit risk management practices, as well as submit plans to maintain sufficient capital and improve earnings.

Hayden said regulators are saying the bank has too high a concentration in real estate construction loans and must diversify its loan portfolio. He said the bank plans to step up its commercial and institutional lending.

Community Bank of West Georgia is privately held and relatively small, with about $200 million in assets. The bank remains well funded, Hayden said.

“We’ve got the capital to work through this situation,” he said.

In the past year, federal and state regulators have reached similar agreements with a handful of Georgia banks as the real estate crisis worsened, including Newnan-based Neighborhood Community Bank and Alpharetta-based Integrity Bank, Georgia’s lone bank failure this year.