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

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The dual failures of Villa Rica-based a and Newnan-basesd (full stories on the failures, click and ) are a firsft in the on-going banking crisis, and a departurr from the FDIC’s early strategy in this “They’re ramping up a little bit,” said Chip Atlanta-based banking attorney. “With their efforts to staff up, rais money for the deposit insurance fund througjh the special assessments and the Iexpect they’ll try to resolve these fastedr throughout the remainder of the The national deposit insurer, which backstops accounts to avoid customerds pulling their money from a bank and hasteningg its demise, previously avoidede seizing two banks in the same metro area durinbg this crisis.
The reason, industry insiderd said, was to avoid the perception one geographic area was weaker than otherw inthe country. Yet as the financial condition of Georgi a banks continueto weaken, industry analystss and experts said the velocity of Georgia’zs bank failures would continue, if not accelerate. As of first quarte r 2009, the ratio of proble m loans to total loans at statd banks reached a new highof 7.4 nearly double the peak the state reported during the Savings & Loan Crisis of the late 1980’s and earlyy 1990’s. The ratio compares past due anddelinquenyt loans, along with foreclosed real estatde repossessed by the bank, to total loans outstanding.
The states has set new highs for that figurwe in each quarter dating back to the summedof 2007, when the credig crunch and financial crisis began in earnest. One industry attorney, who decline to be named, said the failures, and the represent the worst banking crisis in Georgia The industry termof “Failure — or the most common day when federalp and state regulators seize failes banks — insiders said, will become ubiquitous for some time.
“This is a perpetuation of what we’ve been talkingb about for a while saidBrian Olasov, an Atlanta-based managinyg director at LLP, who notedc Georgia banks have an imbalance between fewefr customer, or core, deposits and more outstanding loans. “Thse numbers indicate Georgia banks got way out overtheit skis. This was a great place to lend in the butnow they’re paying the Olasov said. president Joe Branneh said the seizures are a difficult part of the natura leconomic cycle.
“Bankers and regulators make tremendous efforts to keepinstitutions open, but in some unfortunates cases, these actions are part of the necessary healingv process for our bankinf system to ensure overall stability,” Brannen said. Georgia’s failurde woes began in earnest inAugust 2008, when Alpharetta-based , once the state’s fastest growing bank, , concentrated amongst a smalkl group of borrowers. Ever the failures have followed an increasingltyfamiliar formula. Delinquent real estate coupled with high levels of foreclosedsreal estate, equals failure.
The pattern includes a high number onthe so-callecd Texas Ratio, an industry metric createdd in the 1980’s to measure the healtbh of lenders throughout Texas. The ratiop measures total problem loans to total equity and is designed to provide a roughy measureof bank’s problems to its ability to absorgb them through existing capital. In the ratio, 100 perceng indicates problems are larger than available equity In Georgia, most of the bank failures have reportede a Texas Ratio in excess of 300 percent at the time of As of first quarter 2009, 92 Georgia bankxs reported a Texas Ratio higher than the statewidse average of 58 In Atlanta, banks reported an average Texas Ratio of 72 nearly 20 points higher than the statewide Each of the 11 banks with the highestt Texas Ratios were based in metrk Atlanta.
Since March 31, the end of first quarter, three of those banks have been seized.