The Federal Deposit Insurance Corp. has charged nine former directors of Southern Community Bank in Fayetteville, Ga., with approving risky loans that later led to its collapse in 2009.

Over roughly seven years starting in 2001, Gary McGaha, George Davis Sr., James Cameron, Robert Dixon Jr., Richard Dumas, William Leslie, Jackie Mask, Thomas Reese and William Strain allegedly endorsed a series of loans for the acquisition, development and construction of commercial real estate, or ADC loans, that contravened the bank's lending guidelines and federal rules, the FDIC alleged in a lawsuit filed Tuesday with the U.S. District Court in Newnan, Ga.

As members of the bank's loan committee, the directors "were responsible for analyzing underwriting memoranda and supporting documentation to ensure that loans complied with the bank's guidelines, regulations and prudent lending practices," the FDIC charged in court papers.

By 2008, ADC loans in Southern Community's portfolio reached 563% of total capital, compared with 111% for peer banks, according to the FDIC, which aims to recover $10.3 million in damages from the defendants. Southern Community failed about a year later and the FDIC was named receiver.

An FDIC spokesman declined to comment on the lawsuit. Lawyers for the defendants could not be immediately identified.

Southern Community's loan policy established several guidelines, including eliminating high risk loans, ensuring that sound credit analysis preceded decisions to lend for real estate development, and taking loan documentation seriously, the FDIC charged. The policy also limited loans to the bank's officers and directors.

According to the FDIC, members of the loan committee approved roughly $23 million in loans that contravened Southern Community's lending guidelines.

They included a $2.3 million series of loans to Reese, a real estate developer who served as Southern Community's chairman, over three years starting in 2004. Each of the loans exceeded a $100,000 limit on loans to executive officers for purposes other than an education or a home, the FDIC charged.

The defendants also allegedly approved roughly $6 million in loans to an unnamed developer of residential real estate, $5.2 million in loans to a mortgage funding company and about $9.4 million in loans to other developers despite deficiencies in documentation submitted in connection with the loan applications.

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