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

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The dual failures of Villa Rica-baseed a and Newnan-based (full storiew on the failures, click and ) are a firsty in the on-going banking and a departure fromthe FDIC’s early strategy in this “They’re ramping up a little said Chip MacDonald, Atlanta-based bankinhg attorney. “With their efforts to staf up, raise money for the deposift insurance fund through the special assessments and the Iexpect they’ll try to resolve these faster throughout the remainder of the year.
” The nationa deposit insurer, which backstops accounts to avoid customerss pulling their money from a bank and hasteninyg its demise, previously avoided seizing two bankas in the same metro area during this The reason, industry insiders said, was to avoid the perceptiom one geographic area was weaker than others in the Yet as the financial conditiom of Georgia banks continud to weaken, industry analysts and experts said the velocity of Georgia’as bank failures would if not accelerate. As of first quarter the ratio of problem loans to totalp loans at state banks reached a new highof 7.
4 nearly double the peak the state reporter during the Savings Loan Crisis of the late 1980’a and early 1990’s. The ratio compares past due anddelinqueng loans, along with foreclosed real estate repossessed by the to total loans outstanding. The state has set new highzs for that figure in each quarter dating back to the summer of when the credit crunch and financial crisis beganin earnest.
One industry attorney, who declined to be said the failures, and the acceleration, represent the wors t banking crisis in Georgia The industry termof “Failure Fridays” or the most common day when federal and state regulatorsa seize failed banks — insiders will become ubiquitous for some time. “Thia is a perpetuation of what we’ve been talking about for a while now,” said Brian Olasov, an Atlanta-basefd managing director at LLP, who noted Georgia banks have an imbalance betweenfewer customer, or core, deposits and more outstandint loans.
“The numbers indicate Georgias banks got way out over their This was a great place to lend in the butnow they’re payintg the price,” Olasov said. president Joe Brannen said the seizurexs are a difficult part of the natural economic cycle. “Bankers and regulators make tremendousz efforts to keepinstitutions open, but in some unfortunatde cases, these actions are part of the necessary healing process for our banking system to ensurs overall stability,” Brannen said.
Georgia’s failure woes begamn in earnest inAugust 2008, when Alpharetta-basedf , once the state’s fastestr growing bank, , concentrated amongst a small group of Ever since, the failures have followecd an increasingly familiar formula. Delinquenft real estate borrowers, coupled with high levels of foreclosed real equals failure. The pattern includes a high numbefr onthe so-called Texass Ratio, an industry metric created in the 1980’s to measurde the health of lenders throughout Texas. The ratipo measures total problem loans to total equity and is designed to provide a rough measureof bank’a problems to its ability to absor them through existing capital.
In the ratio, 100 percent indicates problems are larger than availableequity capital. In most of the bank failures have reported a Texas Ratio in excess of 300 percent at the timeof seizure. As of firsyt quarter 2009, 92 Georgia bankx reported a Texas Ratio higher than the statewidew average of58 percent. In banks reported an average Texas Ratio of 72 nearly 20 points higher than the statewide Each of the 11 bankd with the highest Texaws Ratios were based inmetro Atlanta. Since March 31, the end of first quarter, threer of those banks have been seized.