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Chestatee State CEO responds to FDIC report
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DAWSONVILLE — The president and chief executive of Chestatee State Bank said Tuesday that his bank has taken steps to address most of the practices cited in a recent report from the Federal Deposit Insurance Corp.



Philip Hester said Chestatee State, like other banks in the region, has felt the effects of the sluggish economy.



“We’re well prepared to get through this,” Hester said. “With our capital, reserves and liquidity, we’re sound.”



The 26-page Cease and Desist order addresses nine issues centering on Chestatee State’s loan policies and the performance of its management and board of directors.



The order, dated Aug. 21, was based on a written summary of a routine FDIC examination conducted in September 2007, for which a report was issued on Oct. 29, 2007.



Hester said the Dawsonville community has been ripe with rumors that the FDIC was seizing the bank, which he vehemently denies.



“We understand everyone’s concern, but we are on top of the problem,” he said, adding that the release of the order could not have come at a worse time, on the heels of the FDIC seizure of Washington Mutual, the largest bank failure in U.S. history.



“The FDIC and the State Banking Department want us to succeed,” he said, noting that there is a respectful relationship between regulators and the bank.



He said the collapse of the housing market has left the bank and its borrowers with a number of unsold residential sites.



“The problem is with building lots and raw land being developed into lots,” he said. “Out of a $295 million loan portfolio at this time last year, we have about $5 million in foreclosures in a mixture of houses and lots as of June 30.”



He said the bank has been liquidating those as it can. In addition, the bank has tripled its loan loss reserves.



Hester said the bank’s directors have taken an active role in the bank and have been just as active in stressful times.



He conceded there were about a half-dozen ethical breaches, when directors should have recused themselves from voting on a loan.



“The bank has not suffered a loss as a result of these,” he said. “It was an oversight. It was a mistake.”



Hester said in none of the cases did the single vote decide the fate of a loan.

He said the bank is working to comply with the directives of the order.



“The practices they cited are practices we would have changed ourselves for the most part,” Hester said, adding that the bank had complied with 85 percent of the order. “Most of these were done in the first quarter of this year.”



Chestatee State Bank was formed in 1997 and opened for business a year later.

Hester, who has been in Dawson County for 18 years, is the bank’s founding president and CEO. The bank operates three offices in Dawson County and one in Forsyth County.