Eight more Georgia banks under tighter control

The list of Georgia banks under heightened regulatory scrutiny continues to grow.

Federal regulators have issued consent orders to eight more small Georgia banks, requiring them to improve operations and shore up capital levels.

About two-thirds of the state’s more than 300 banks are under such orders, said Rhajeev Dhawan, an economist at Georgia State University. Most of the problems are tied to real estate loans made during the housing boom.

The eight new banks are Capitol City Bank & Trust Co., Atlanta; Farmers & Merchants Bank, Eatonton; Heritage Bank, Jonesboro; First Choice Community Bank, Newnan; The Patterson Bank, Patterson; Bank of Valdosta; CreekSide Bank, Woodstock; and Bank of Wrightsville.

The orders were issued in January and made public Friday by the Federal Deposit Insurance Corp.

The orders typically run for a dozen or more pages and require a range of actions, from charging off bad loans to limits on issuing dividends and using wholesale, or “brokered,” deposits.

The orders also require the banks to improve capital levels, something usually achieved by reducing the amount of loans kept on the books or by raising new cash.

Leonard Moreland, president and CEO of Heritage Bank in Jonesboro, said real estate losses began to stabilize in the second half of 2009.

“Things are much better today than they were a year ago or six months ago, both with our bank and the local economy,” Moreland said. “You can start to see light at the end of the tunnel.”

The top executive of First Choice Community Bank in Newnan said despite some bad real estate loans, his bank is in relatively good shape and remains “well capitalized” by regulatory standards.

The bank’s capital levels will improve at the end of March, when his bank merges with its sister bank, First Choice Community Bank of Dallas, Ga., said Mike Chaffin, the bank’s president and CEO.

The Dallas branch opened in 2007 after the real estate market began to crash and as a result has “an excess” of capital that will help the bottom line of the newly merged entity, Chaffin said.