Georgia’s Community Bankshares Faces Regulatory Action Over Lending Practices
Community Bankshares, a Georgia-based community bank that has made significant strides in expanding its government-guaranteed lending operations, is facing regulatory challenges. The bank, based in LaGrange, Ga., has found itself in a precarious position with the Federal Reserve, following a series of credit-quality issues that have been building over the past year. This predicament came to the fore after the company launched Phoenix Lender Services amidst its expansion efforts.
Exploring the Issue
According to data, towards the close of 2025, Community Bankshares had a ratio of nonperforming assets to total loans exceeding 10%. This was a clear indicator of the bank’s credit-quality issues, especially given that this figure was significantly higher than the industry-wide average of 1.56%. The bank’s struggles with nonperforming loans were not a new phenomenon. In fact, records from the Federal Deposit Insurance Corp. show that the bank grappled with a high level of nonperforming loans throughout 2024.
The Expansion and Launch of Phoenix Lender Services
Despite these challenges, Community Bankshares embarked on a major expansion of its lending operations in January 2025. As part of this expansion, the bank unveiled Phoenix Lender Services, a new subsidiary intended to serve as a full-spectrum provider to Community Bank & Trust and other Main Street lenders. Phoenix’s role was to originate, service, and sell both Small Business Administration (SBA) and United States Department of Agriculture (USDA) loans.
Phoenix Lender Services reported significant loan volume, having aided in the origination of $325 million in SBA and USDA loans during the government’s 2025 fiscal year. Despite the bank’s ongoing credit-quality issues, this expansion led to a notable growth in its assets, from $216.6 million at the end of 2024 to $288.2 million by Dec. 31, 2025.
The Aftermath and Legal Battles
However, this growth was not without its share of issues. Chris Hurn, who was hired to serve as Phoenix’s president and CEO, left the company in October. Subsequently, he filed a lawsuit against Community Bankshares in the U.S. District Court for the Northwest District of Georgia, claiming that he was terminated following a dispute over compensation. Hurn is now seeking the return of his $2 million investment, among other claims.
The Bank’s Current Position and Future Steps
Following these developments, the Federal Reserve announced a cease-and-desist order against Community Bankshares. This action, the first of its kind in 2026, requires the bank to strengthen its senior management, improve board oversight, and consider raising capital. As part of this order, Community Bankshares is prohibited from paying dividends, repurchasing shares, or engaging in any other capital distributions.
Despite these challenges, Community Bank & Trust was profitable in 2025, with a reported full-year net income of $4.5 million. However, the bank’s Common Equity Tier 1 capital ratio has been on a decline, standing at 8.41% as of Dec. 31, 2025, down from 9.45% at the end of 2024.
As the bank faces this regulatory action, its future growth and profitability will hinge on its ability to address the issues raised by the Federal Reserve and improve its credit quality.
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