Regulators crack down on 3 Georgia banks

By Paul Donsky

The Atlanta Journal-Constitution

Federal regulators have served three small Georgia banks with “cease and desist” orders, the most serious type of enforcement action short of a failure, another sign that the state’s banking crisis is far from over.

Regulators said they believed the banks — The Bank of Georgia in Peachtree City, Mountain Heritage Bank of Clayton and Satilla Community Bank of St. Marys — were engaging in “unsafe and unsound” banking practices and ordered a host of reforms.

The banks have been told to boost capital, more aggressively write off bad loans and improve lending practices and board oversight. The actions were taken in June but made public Friday by the Federal Deposit Insurance Corp.

It’s the latest in an ongoing wave of regulatory action against Georgia banks, many of which gambled heavily on the booming real estate market earlier this decade only to suffer mounting losses after housing prices collapsed.

This year alone, the FDIC has issued 18 cease and desist orders to Georgia-based banks. And 16 banks have been shut down in the past year, more than in any other state, including last month’s failure of Security Bank, the fourth-largest bank based in Georgia.

The largest of the three banks served with cease and desist orders in June, Bank of Georgia, has $408 million in assets and reported a $1.5 million loss in the first quarter along with $10.5 million in problem loans the bank has given up collecting on.

“We’ve been affected by the real estate and economic downturn just like all the other banks,” said Pat Shepherd, Bank of Georgia’s president and CEO.

Shepherd said the bank has already fulfilled a number of the order’s requirements, remains “highly liquid” and plans to raise up to $10 million by selling bonds.

“We’ll come out of this a much better bank,” he said.

Satilla Community, with assets of $156 million, lost $1.8 million in the first quarter and reported $4.6 million in problem loans. Mountain Heritage, a $137 million asset bank, lost $43,000 in the first quarter and reported $3.3 million in problem loans.