The Federal Deposit Insurance Corp. is suing the former president and directors of Southern Community Bank in Fayetteville for more than $10 million, claiming they had a role in the failure of the bank in 2009,
The bank’s former chairman, however, called the suit “ridiculous and unfounded” and said officials did everything they could to keep the bank afloat.
Southern Community Bank’s failure cost the FDIC $114 million. The bank was taken over by United Community Bank.
The FDIC said the former officials named in the suit violated the bank’s internal policies and regulations in approving risky loans to commercial real estate developers, builders and speculators despite fluctuating real estate values, and loans forother commercial projects that lacked cash flow.
The agency’s lawsuit filed in U.S. District Court says the FDIC isn’t seeking outstanding balances from the failed loans, but damages that resulted from the actions of the individuals who approved them.
The officials named in the suit include former President and Chief Executive Officer Gary D. McGaha of Suches, Ga.; and former directors Richard J. Dumas of Fayetteville; George R. Davis Sr. of Fayetteville; Robert B. Dixon Jr. of Newnan; William W. Leslie of Senoia; Jackie L. Mask of Fayetteville; Thomas D. Reese of Senoia; William M. Strain of Fayetteville; and James S. Cameron of Pensacola, Fla.
Dumas, who was chairman at the time the bank was seized, called the FDIC’s claims are “ridiculous and unfounded.” He said the bank depended on a strong local economy to make it profitable but suffered along with other community banks when the economy and housing market suffered. He said directors and senior managers raised $2 million among themselves in 2008 to put toward capital to keep the bank afloat.
“We did everything that the regulators asked us to do,” Dumas told The Atlanta Journal-Constitution on Thursday. “We had always gotten good ratings on our loans and never had any major problems broght to our attention from the regulators.”
Dumas also said the bank applied for Troubled Asset Relief Program (TARP) funds from the federal government but was denied.
“I really felt we were going to have the time to get things worked out,” Dumas said.
The FDIC, which was appointed receiver of Southern Community Bank in July 2009, said all of the officials were responsible for analyzing underwriting documents to ensure loans complied with the lending policies, regulations and prudent banking practices.
In April, the FDIC announced bank directors and officers, lawyers and insurers involved in the failure of 11 Georgia banks paid the agency $27.3 million in settlements. More than $11 million of the settlements came from individual bank directors and officers. The rest was from insurance companies, attorneys and a real estate firm.
The FDIC recovered $569 million in 2011 and 2012, while bank failures have cost the fund at least $86.9 billion since 2008.
