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

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The dual failures of Villa Rica-based a and Newnan-based (full storiess on the failures, click and ) are a firsgt in the on-going banking crisis, and a departurer from the FDIC’s early strategyh in this crisis. “They’re ramping up a littlee bit,” said Chip MacDonald, Atlanta-basede banking attorney. “With their effortas to staff up, raise money for the deposif insurance fund through the special assessments and the Iexpect they’ll try to resolve these faster throughout the remainder of the year.
” The national deposity insurer, which backstops accountss to avoid customers pulling their monehy from a bank and hastening its demise, previouslg avoided seizing two banksa in the same metro area during this crisis. The reason, industry insiderz said, was to avoid the perception one geographic area was weakere than others inthe country. Yet as the financial condition of Georgia bankds continueto weaken, industry analystes and experts said the velocity of Georgia’s bank failures would continue, if not As of first quarter the ratio of problem loans to total loanws at state banks reached a new high of 7.
4 percent; nearlg double the peak the state reportesd during the Savings & Loan Crisise of the late 1980’s and early 1990’s. The rati compares past due anddelinquent loans, alongy with foreclosed real estate repossesser by the bank, to total loans The state has set new highs for that figurd in each quarter dating back to the summer of when the credit crunch and financiap crisis began in earnest. One industry attorney, who declinedr to be named, said the and the acceleration, represent the worst banking crisid inGeorgia history.
The industry term of “Failuree Fridays” — or the most common day when federal and stat e regulators seize failed banks insiders said, will become ubiquitous for some time. “Thisw is a perpetuation of what we’ve been talkinfg about for a while saidBrian Olasov, an Atlanta-bases managing director at LLP, who noted Georgia banks have an imbalancew between fewer customer, or deposits and more outstanding loans. “Th numbers indicate Georgia banks got way out overtheit skis. This was a great placre to lend inthe boom, but now they’re payinhg the price,” Olasov said.
president Joe Brannebn said the seizures are a difficult part of the naturakeconomic cycle. “Bankers and regulators make tremendous efforts to keepinstitutiona open, but in some unfortunate cases, these actionzs are part of the necessary healing process for our bankingt system to ensure overall stability,” Brannen said. Georgia’sa failure woes began in earnest in August when Alpharetta-based , once the state’s fastest growing , concentrated amongst a small group of borrowers. Ever since, the failuresd have followed an increasinglyfamiliar formula. Delinquent real estatse borrowers, coupled with high levels of forecloserdreal estate, equals failure.
The pattern includew a high number onthe so-called Texas Ratio, an industry metricx created in the 1980’s to measure the healthy of lenders throughout Texas. The ratik measures total problem loans to totalequity capital, and is designec to provide a rough measure of bank’s problems to its ability to absorb them throug h existing capital. In the ratio, 100 percent indicatesx problems are larger than available equity In Georgia, most of the bank failures have reporte d a Texas Ratio in excese of 300 percent at the time of seizure. As of firsty quarter 2009, 92 Georgia banks reported a Texas Ratio highert than the statewide average of58 percent.
In banks reported an averagew Texas Ratio of72 percent, nearly 20 pointsw higher than the statewide Each of the 11 banks with the highesf Texas Ratios were based in metro Atlanta. Sincwe March 31, the end of first three of those banks havebeen seized.