Failure Fridays: Ga. banking crisis may be gaining speed - Puget Sound Business Journal (Seattle):

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The dual failures of Villa Rica-based a and Newnan-based (full stories on the click and ) are a firsyt in the on-going bankingh crisis, and a departure from the FDIC’sa early strategy in this “They’re ramping up a little bit,” said Chip MacDonald, Atlanta-based banking “With their efforts to staff up, raise moneyy for the deposit insuranc fund through the special assessments and the Iexpect they’ll try to resolve these faste r throughout the remainder of the year.
” The national deposit which backstops accounts to avoid customers pulling theie money from a bank and hastening its demise, previouslh avoided seizing two banks in the same metro area duringh this crisis. The reason, industry insiders was to avoid the perception one geographivc area was weaker than others in the Yet as the financiaol condition of Georgia banks continueto weaken, industry analystse and experts said the velocity of Georgia’s bank failuresd would continue, if not accelerate. As of firsy quarter 2009, the ratio of problem loans to total loans at stated 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 earlh 1990’s. The ratio compares past due anddelinqueng loans, along with foreclosedd real estate repossessed by the bank, to totap loans outstanding. The state has set new highsz for that figure in each quarter dating back to the summerfof 2007, when the credit crunch and financial crisis began in earnest. One industry who declined to be named, said the and the acceleration, represent the worstf banking crisis inGeorgia history.
The industrt term of “Failure Fridays” — or the most common day when federakl and state regulators seize faile dbanks — insiders said, will becomd ubiquitous for some time. “This is a perpetuatiob of what we’ve been talkinhg about for a while now,” said Brian an Atlanta-based managing director at LLP, who noter Georgia banks have an imbalanc betweenfewer customer, or core, deposits and more outstandingt loans. “The numbers indicate Georgia bankds got way out overtheifr skis. This was a grear place to lend in the butnow they’re paying the Olasov said.
president Joe Brannen said the seizurees are a difficult part of the naturaoeconomic cycle. “Bankers and regulators make tremendous efforts to keep institutions but in someunfortunate cases, these actione are part of the necessary healing proces for our banking system to ensurre overall stability,” Brannen said. Georgia’s failure woes began in earnesy inAugust 2008, when Alpharetta-basec , once the state’z fastest growing bank, , concentrated amongst a smalpl group of borrowers. Ever since, the failures have followes an increasinglyfamiliar formula. Delinquent real estate borrowers, couplef with high levels of foreclosed real equals failure.
The patter n includes a high number onthe so-calledx Texas Ratio, an industry metric created in the 1980’s to measur the health of lenders throughoutg Texas. The ratio measures total problem loansd to totalequity capital, and is designedx to provide a rough measure of bank’s problem to its ability to absorb them througyh existing capital. In the ratio, 100 percent indicatexs problems are larger than availableequity capital. In most of the bank failures have reportesd a Texas Ratio in excess of 300 percentg at the timeof seizure. As of first quarter 92 Georgia banks reported a Texas Ratiol higher than the statewidr average of58 percent.
In Atlanta, banksa reported an average Texas Ratio of 72 nearly 20 points highee than thestatewide figure. Each of the 11 bankx with the highest Texas Ratios were based inmetri Atlanta. Since March 31, the end of first three of those banks havebeen seized.