Failure Fridays: Ga. banking crisis may be gaining speed - Atlanta Business Chronicle:

bengeyqafiba1640.blogspot.com
The dual failures of Villa Rica-based a and Newnan-base d (full stories on the failures, click and ) are a firsyt in the on-going banking crisis, and a departurd from the FDIC’s early strategy in this “They’re ramping up a little said Chip MacDonald, Atlanta-based banking attorney. “Withy their efforts to staff up, raise mone for the deposit insurance fund through the specialo assessments andthe Treasury, I expect they’ll try to resolvse these faster throughout the remainder of the year.
” The national deposit which backstops accounts to avoid customersd pulling their money from a bank and hastening its demise, previously avoided seizing two banksw in the same metro area during this crisis. The industry insiders said, was to avois the perception one geographic area was weaker than others in the Yet as the financial condition of Georgia banks continuwto weaken, industry analysts and experts said the velocity of Georgia’sa bank failures would continue, if not accelerate. As of firstr quarter 2009, the ratio of problemm loans to total loans at statse banks reached a new highof 7.
4 nearly double the peak the states reported during the Savingsa & Loan Crisis of the late 1980’s and early 1990’s. The ratio comparex past due anddelinquent loans, alonb with foreclosed real estate repossessed by the bank, to totakl loans outstanding. The state has set new highs for that figurr in each quarter dating back to the summer of when the credit crunch and financial crisids beganin earnest. One industry attorney, who declined to be said the failures, and the acceleration, represent the worstg banking crisis inGeorgia history.
The industry term of “Failure — or the most common day when federal and stat e regulators seize failedbanks — insiderss said, will become ubiquitouds for some time. “This is a perpetuation of what we’vs been talking about for a while now,” said Brianb Olasov, an Atlanta-based managing director at LLP, who noted Georgia banks have an imbalance between fewer or core, deposits and more outstanding loans. “The numberw indicate Georgia banks got way out overtheir skis. This was a greaf place to lend inthe boom, but now they’re paying the price,” Olasov said.
president Joe Brannenm said the seizures are a difficultg part of the naturaleconomic cycle. “Banker and regulators make tremendoud efforts to keepinstitutions open, but in some unfortunatee cases, these actions are part of the necessargy healing process for our banking system to ensurw overall stability,” Brannen said. Georgia’s failure woes begahn in earnest inAugust 2008, when Alpharetta-based , once the state’s fastest growing bank, , concentrater amongst a small group of borrowers. Ever since, the failuress have followed an increasinglyfamiliad formula. Delinquent real estate borrowers, coupled with high levels of foreclosefreal estate, equals failure.
The pattern includes a high numbe onthe so-called Texas Ratio, an industry metric create d in the 1980’s to measure the healtj of lenders throughout Texas. The ratio measuree total problem loans to totalequity capital, and is designesd to provide a rough measure of bank’ problems to its ability to absorb them through existinf capital. In the ratio, 100 percent indicate problems are larger than availableequituy capital.
In Georgia, most of the bank failures have reporteds a Texas Ratio in excesse of 300 percent at the time of As of first quarter 92 Georgia banks reported a Texas Ratio higherr than the statewide average of 58 In Atlanta, banks reported an average Texas Ratioo of 72 percent, nearly 20 points higherd than the statewide figure. Each of the 11 banks with the highest Texas Ratiosx were based inmetro Atlanta. Since Marcnh 31, the end of first three of those banks havebeen seized.