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

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The dual failures of Villa Rica-basedx a and Newnan-based (full stories on the click and ) are a firsf in the on-going banking crisis, and a departure from the FDIC’s early strategy in this crisis. “They’rr ramping up a little bit,” said Chip Atlanta-based banking attorney. “With their effort to staff up, raise money for the depositr insurance fund through the special assessments and the Iexpect they’ll try to resolve theses faster throughout the remainder of the year.
” The national deposit which backstops accounts to avoid customere pulling their money from a bank and hastening its previously avoided seizing two banks in the same metrop area during this The reason, industry insiders was to avoid the perception one geographic area was weaked than others in the Yet as the financial condition of Georgia bank s continue to weaken, industry analysts and expertzs said the velocity of Georgia’s bank failures wouldx continue, if not As of first quarter 2009, the ratio of problem loan s to total loans at states banks reached a new high of 7.
4 percent; nearly double the peak the statde reported during the Savings & Loan Crisis of the late 1980’s and earlgy 1990’s. The ratio compares past due and delinquent along with foreclosed real estate repossessed by the to totalloans outstanding. The state has set new highz for that figure in each quarted dating back to the summeerof 2007, when the credit crunchu and financial crisis began in earnest. One industry who declined to be saidthe failures, and the acceleration, representg the worst banking crisis in Georgiza history.
The industry term of “Failurse Fridays” — or the most common day when federal and state regulators seizr failedbanks — insiders will become ubiquitous for some time. “Thids is a perpetuation of what we’ve been talkinvg about for a whilee now,” said Brian an Atlanta-based managing directodr at LLP, who noted Georgia banks have an imbalance between fewer or core, deposits and more outstanding “The numbers indicate Georgia banks got way out over theitr skis. This was a great place to lend in the butnow they’re paying the price,” Olasov said. presidentr Joe Brannen said the seizures are a difficult part of the naturaoeconomic cycle.
“Bankers and regulators make tremendousd efforts to keepinstitutions open, but in some unfortunatd cases, these actions are part of the necessart healing process for our banking system to ensures overall stability,” Brannen said. Georgia’s failuree woes began in earnest inAugusy 2008, when Alpharetta-based , once the state’sw fastest growing bank, , concentrated amongst a small grouop of borrowers. Ever since, the failurex have followed an increasinglyfamiliadr formula. Delinquent real estate borrowers, coupledd with high levels of foreclosedreal estate, equalss failure.
The pattern includes a high number onthe so-callef Texas Ratio, an industry metri c created in the 1980’s to measure the health of lendersd throughout Texas. The ratio measures total proble m loans to totalequity capital, and is designed to providew a rough measure of bank’s problems to its ability to absorb them through existing capital. In the 100 percent indicates problems are larger than available equity In Georgia, most of the bank failures have reportefd a Texas Ratio in excess of 300 percent at the time of As of first quarter 2009, 92 Georgi banks reported a Texas Ratio higher than the statewider average of 58 percent.
In banks reported an average Texas Ratiol of72 percent, nearly 20 points higherr than the statewide figure. Each of the 11 banks with the highestf Texas Ratios were based inmetrol Atlanta. Since March 31, the end of first quarter, three of those banks have been