A community banker and a local real estate developer in Hammond, La., were charged with conspiracy to commit bank fraud by hiding delinquent mortgages.

Reginald Harper, the former First Community Bank of Hammond CEO, and Troy Fouquet, an area real estate developer, allegedly began the conspiracy in 2005.

After the crisis struck in 2007, First Community applied for and was approved for $3.3 million in Troubled Asset Relief Program bailouts, but the bank withdrew its application after the approval, according to the TARP Special Inspector General.

In 2005, the two struggled to find qualified homebuyers for houses built on land Foquet bought using $2 million in loans from Harper, according to court documents. Hammond is located between Baton Rouge, La. and New Orleans East.

Rather than recognize the losses, the two allegedly developed methods to avoid reporting the delinquent loans Harper wrote.

They allegedly used "straw" borrowers to create the appearance a homebuyer was taking out a mortgage. The proceeds from the fake loans went to pay off the original amount for the land. Often, Foquet simply wrote bad checks to Harper, who then allegedly credited the payments to the First Community books knowing Foquet didn't have the funds behind the checks.

Harper and Fouquet face a maximum penalty of five years in prison and a $250,000 fine.

"Instead of living up to his fiduciary duties as the president and CEO of the bank, Harper concealed the true status of the loans from the bank, regulators, and the United States Department of the Treasury in the bank's TARP application," said SIGTARP Deputy Christy Romero. "During the financial crisis, many bank executives faced losses on non-performing loans but did not choose to commit bank fraud."