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Then came the boom. Property prices on lots adjoining the region's man-made lakes soared to $1 million and beyond. Initially, the bank did well, as bank-backed developers sold second homes to buyers from Atlanta, 65 miles (105 km) to the southwest. From 2006 to 2008, the bank's bets on development and commercial real estate ballooned from $338 million to $563 millionmore than half of all its loans. By 2009, its commercial real estate loans alone equaled 657% of its capital, well above FDIC guidelines.
Just as the land boom hit, the bank's longtime president died and a series of weaker leaders took over, according to a September 2010 report by the FDIC's inspector general. Headquarters stopped checking the loans its officers were peddling to businesses and homeowners, the IG found. One-fifth of CBT's loans went to residential mortgages, and the bank renewed interest-only commercial loans every year, leading borrowers to believe the underlying debts would never come due, bank clients allege. CBT kept terrible records, classifying home loans as business loans and vice versa, and losing key data like collateral-property addresses and historical loan payments.
Cornelians themselves got caught up in the vacation-land boom too, as experienced builders and amateurs alike started borrowing money to buy lots and build spec homes. William Crawford, who owned the Oak & More furniture store with his wife Samantha, says the no-money-down credit tap from CBT was open for "whatever we wanted. I mean, we had bass boats, runabouts. I had a houseboat. We had jet skis. [Samantha] had a Harley." Crawford borrowed for a dump truck and a bucket loader and for land and money to build spec houses, eventually digging himself a $1.4 million hole.
Some bankers crossed the line from dangerously sloppy to potentially criminally fraudulent, lending to one another and favored friends and concealing lines of credit, according to the IG report. R. Randy Jones, 50, a local boy who rose to become chief lending officer, went the furthest of all, allegedly conspiring to defraud the bank of millions of dollars with three accomplicesan illiterate concrete salesman with an IQ of 79, a self-described recovering alcoholic and drug addict, and a successful local developeraccording to public testimony in federal court. In 2005, Jones got a kickback worth $371,139.84 from the developer and the concrete salesman for loans Jones made from the bank, according to the court testimony and descriptions provided by lawyers in the case. In 2008, Jones made $2.8 million in fraudulent loans to straw companies controlled by the recovering drug addict in an attempt to hide other failing loans, according to court testimony. Jones and his lawyer declined to comment.
At first, state and federal regulators didn't notice what was going on in Cornelia. In 2006 and '07, examiners looked at the bank's profits more closely than the risks it was taking, and CBT was making good money; the FDIC reported that the bank was "well-capitalized." With the fall of Lehman Brothers in September 2008, however, regulators woke up, and at its October 2008 examination of CBT, the FDIC discovered that credit officers had been writing and renewing troubled loans with little or no oversight. It found that at least $2 million of unpaid interest had been rolled over into new loans.
After the October 2008 examination, the FDIC abruptly lowered CBT's rating from its second highest to its second lowest, a precipitous drop that the IG's office says "was unusual even for these worst-case scenarios." Then, on May 1, 2009, the FDIC issued a cease and desist order requiring the bank to build up its capital. The actions had the effect of radically constraining lending at the bank: suddenly, loans that had been rolled over year in and year out weren't renewed because there wasn't enough capital to cover the risks. In July 2009, Randy Jones resigned. What had looked like a boom just a few months earlier became a bust virtually overnight. The cleared subdivisions with unfinished homes on them no longer signaled huge profits to come; they represented tanking real estate valuations and loans that couldn't be repaid. By the end of 2009, 26.3% of all CBT loans, worth some $300 million, were past due. The FDIC later classified more than $100 million other assets as fraudulent. A decade after its centennial year, CBT was on an irreversible path to insolvency. Daniel Bell began assembling his team.