Aug. 10 (Bloomberg) -- U.S. bank regulators failed to follow up numerous recommendations for resolving weaknesses at Georgia’s Haven Trust Bank, which collapsed in December amid mounting losses on real-estate loans, an agency watchdog said.

The Federal Deposit Insurance Corp. failed to prevent losses related to the bank’s commercial real estate and development lending, which expanded ninefold in seven years through 2008, the agency’s inspector general said in a report posted today on the Web site. Examiners noted “questionable insider dealings” since the bank was formed in 2000.

“Examiners did not always follow up on red flags” such as “numerous insider deals” and deficient loan policies at the Duluth, Georgia-based lender, the report concluded. “A more in- depth review by examiners could have revealed the problems earlier, and supervisory action might have been taken sooner.”

The FDIC has been faulted this year for lack of timely action before a dozen bank failures in the past 12 months, including Bank of Clark County in Washington state and Community Bank in Georgia. Haven Trust had $572 million in assets and $515 million deposits when it was shut Dec. 12, and its four offices became BB&T Corp. branches. The agency’s deposit insurance fund paid $207 million.

The FDIC, in a three-paragraph response, agreed that Haven failed because managers didn’t control risks noted by examiners and failed to take actions recommended by the regulator. Earlier enforcement action might have limited the losses, said Sandra Thompson, director of the FDIC’s Division of Supervision and Consumer Protection.

“Haven’s apparently high earnings and apparently adequate capital levels, along with an expectation by regulators that bank ownership would infuse capital when needed as they had done in the past combined to delay effective supervisory actions,” the report said.

Insider Transactions

The agency’s review showed four of five examinations from 2002 found violations related to insider transactions. In the year before it failed, Haven originated or renewed more than $175 million of real-estate loans, a majority with underwriting deficiencies and some “for apparently insider benefit,” the report said without providing details.

In 2005, the FDIC examinations made five recommendations to revise the bank’s loan policies, and none were adopted or put into effect, the inspector general said.

To contact the reporter on this story: Steve Geimann in Washington at sgeimann@bloomberg.net.

Last Updated: August 10, 2009 12:31 EDT