An oversight report cited the Federal Deposit Insurance Corp. Monday for being slow to address problems at a Georgia community bank, which failed in December.

The FDIC's inspector general said the $207 million-asset Haven Trust Bank in Duluth failed after big bets on risky construction loans and certain "improper practices" including loans to bank insiders.

The questionable insider lending included four loans totaling roughly $2 million to each of four children of one of the bank's owners.

"The four children were all students with insufficient income sources to repay the debt," the IG said.

While regulators conducted routine examinations, and issued actions shortly before the bank's failure, "the FDIC's supervision of Haven was not effective in identifying and addressing problems early enough to prevent a material loss to the" Deposit Insurance Fund, according to the report.

The review is one of nearly 20 "material loss reviews" by inspectors general that have criticized all the agencies for their supervision of institutions that have failed during the crisis. Just on Thursday, the FDIC's watchdog issued two other reports: for the November failure of the $653 million-asset Community Bank in Loganville, Ga., and the January failure of the $468 million-asset Bank of Clark County in Vancouver, Wash.

The Haven report said that as early as 2004 examiners saw troubling signs of "improper insider dealings," concentrations of risky assets and high-cost deposits. But it was not until 2008 that the FDIC took any serious action, the IG said.

"The high apparent earnings and high apparent capital levels and an overreliance by regulators on bank ownership to infuse capital when needed, combined to delay effective supervisory actions," the report said.

In a July 31 letter to the watchdog, the FDIC's supervision director, Sandra Thompson, agreed that "despite Haven Trust's apparently strong financial condition, earlier enforcement actions and management component rating downgrades could have been used to address the persistent risk-management weaknesses."

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