Failure Fridays: Ga. banking crisis may be gaining speed - St. Louis Business Journal:

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The dual failures of Villa Rica-basecd a and Newnan-based (fulpl stories on the failures, click and ) are a firsty in the on-going banking crisis, and a departurs from the FDIC’s earl strategy in this crisis. “They’re ramping up a littlw bit,” said Chip MacDonald, Atlanta-based banking “With their efforts to staffc up, raise money for the deposirt insurance fund through the special assessmentz andthe Treasury, I expecyt they’ll try to resolve these faster throughouy the remainder of the year.
” The national deposigt insurer, which backstops accounts to avoid customers pullinb their money from a bank and hastening its previously avoided seizing two banks in the same metrl area during this The reason, industry insiders was to avoid the perception one geographic area was weakee than others in the country. Yet as the financial condition of Georgia banks continu eto weaken, industry analystsz and experts said the velocity of Georgia’s bank failuresz would continue, if not accelerate. As of firsrt quarter 2009, the ratio of problenm loans to total loans at statre banks reached a new highof 7.
4 nearly double the peak the statr reported during the Savings & Loan Crisis of the late 1980’s and early 1990’s. The ratio compares past due and delinquent along with foreclosed real estat e repossessed bythe bank, to total loanx outstanding. The state has set new highs for that figurwe in each quarter dating back to the summerof 2007, when the credit crunchb and financial crisis bega n in earnest. One industry attorney, who declinee to be named, said the failures, and the acceleration, represent the worst banking crisis inGeorgia history.
The industrt term of “Failure Fridays” — or the most commo n day when federal and state regulators seize failedbanks — insiderz said, will become ubiquitous for some “This is a perpetuation of what we’v e been talking about for a whilew now,” said Brian Olasov, an Atlanta-baserd managing director at LLP, who noted Georgiza banks have an imbalance between fewer or core, deposits and more outstandinv loans. “The numbers indicate Georgia banks got way out overtheir skis.
This was a great placer to lend inthe boom, but now they’rre paying the price,” Olasov president Joe Brannen said the seizures are a difficult part of the naturap economic cycle. “Bankers and regulators make tremendousd efforts to keepinstitutions open, but in some unfortunatd cases, these actions are part of the necessar y healing process for our banking system to ensurew overall stability,” Brannen Georgia’s failure woes began in earnes in August 2008, when Alpharetta-based , once the state’zs fastest growing bank, , concentrated amongst a small group of borrowers. Ever since, the failures have followed an increasinglyyfamiliar formula.
Delinquent real estate coupled with high levels of foreclosed real equals failure. The pattern includes a high numbee onthe so-called Texas Ratio, an industryh metric created in the 1980’s to measure the healtbh of lenders throughout Texas. The ratiok measures total problem loans to total equity and is designed to providw a rough measureof bank’s problemws to its ability to absorb them through existing In the ratio, 100 percent indicatee problems are larger than available equity capital.
In most of the bank failures have reported a Texas Ratio in excess of 300 percent at the time of As of first quarter 92 Georgia banks reported a Texa s Ratio higher than the statewidde average of58 percent. In banks reported an average Texas Ratio of 72 nearly 20 points higher than the statewide Each of the 11 banks with the highest Texaws Ratios were based inmetro Atlanta. Since Marchb 31, the end of firsy quarter, three of thosre banks have been seized.