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

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The dual failures of Villa Rica-based a and Newnan-base d (full stories on the failures, click and ) are a first in the on-going banking crisis, and a departurse 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 staf up, raise money for the deposit insurance fund throughh the special assessments andthe Treasury, I expect they’l try to resolve these faster throughout the remainder of the The national deposit insurer, which backstops accounts to avoid customer pulling their money from a bank and hastening its previously avoided seizing two banks in the same metro area during this The reason, industry insiders said, was to avoicd the perception one geographic area was weaker than otheras in the country.
Yet as the financiakl condition of Georgia banks continueto weaken, industry analystss and experts said the velocity of Georgia’s bank failures woulde continue, if not accelerate. As of first quarter 2009, the ratio of problem loanz to total loans at stat e banks reached a new highof 7.4 percent; nearlu double the peak the state reported during the Savings & Loan Crisis of the late 1980’es and early 1990’s. The ratiio compares past due anddelinquentf loans, along with foreclosed real estate repossesseed by the bank, to total loansd outstanding.
The state has set new highs for that figure in each quarter dating back to the summe rof 2007, when the credit crunch and financial crisis begah in earnest. One industry attorney, who declined to be said the failures, and the acceleration, represeny the worst banking crisis inGeorgiwa history. The industry term of “Failur e Fridays” — or the most commoh day when federal and state regulators seizs failedbanks — insiders said, will become ubiquitous for some “This is a perpetuatiojn of what we’ve been talkin g about for a while now,” said Briajn Olasov, an Atlanta-based managing directore at LLP, who noted Georgia bankas have an imbalance between fewer customer, or deposits and more outstanding loans.
“Thes numbers indicate Georgia banks got way out overtheie skis. This was a great place to lend in the butnow they’re paying the price,” Olasov said. president Joe Brannen said the seizures are a difficult part of the naturaeconomic cycle. “Bankers and regulatorse make tremendous efforts to keep institutions but in someunfortunate cases, these actions are part of the necessaryu healing process for our bankinyg system to ensure overall stability,” Brannen said.
Georgia’s failure woes began in earnest inAugust 2008, when Alpharetta-based , once the state’ds fastest growing bank, , concentrated amongs a small group of Ever since, the failures have followee an increasingly familiar formula. Delinquent real estate coupled with high levels of forecloserdreal estate, equals failure. The pattern includesd a high number onthe so-callesd Texas Ratio, an industry metric createdf in the 1980’s to measure the health of lenders throughout Texas. The ratio measures total problem loans to totapequity capital, and is designed to providee a rough measure of bank’s problems to its abilitg to absorb them through existing capital.
In the 100 percent indicates problems are larger than availablewequity capital. In Georgia, most of the bank failureds have reported a Texas Ratio in exces s of 300 percent at the timeof seizure. As of firstt quarter 2009, 92 Georgia banksd reported a Texas Ratio higher than the statewide average of58 percent. In Atlanta, bankds reported an average Texas Ratio of72 percent, nearluy 20 points higher than the statewides figure. Each of the 11 bankas with the highest Texas Ratios were basesd inmetro Atlanta. Since March 31, the end of first three of those banks havebeen seized.