Problems among Georgia banks rise

By J. Scott Trubey

The Atlanta Journal-Constitution

The number of troubled banks in Georgia grew slightly in the third quarter along with the percentage of problem loans statewide, according to data on the state’s banks.

That reversed improvements in both categories in second quarter.

The latest results suggest banks will continue to suffer through a prolonged slump caused by bad bets in real estate, said Chris Marinac, bank analyst at FIG Partners.

“If you call the recession a war, we’re still losing the war,” he said.

Georgia leads the nation in bank failures with 46 since 2008. Sixteen Georgia community banks have failed so far this year.

The number of banks with troubling Texas ratios— a measure of troubled loans to cash reserves -- grew by one to 77 during the third quarter. That was despite the failure of seven banks since June 30, which were removed from the troubled list.

A score above 100 shows a bank has more loans delinquent, in default or in foreclosure than it has cash reserves. The ratio is a non-regulatory measure used by analysts.

Fourteen of the Top 20 Texas ratio banks nationally were based in Georgia at the end of the third quarter, according to banking data. That’s one more than in the second quarter.

Georgia Bankers Association President and CEO Joe Brannen said the ratios "don’t necessarily reflect the full picture of a bank’s health."

The ratio doesn't show the value of collateral backing loans, or how much the bank could receive if it forecloses and sells the property or goods, Brannen said. It also doesn't take into account a bank's ability to raise additional cash from investors.

"Texas Ratio calculations are tools for analysis and consideration, but should not be viewed as a single definitive indicator about a bank’s long-term outlook,” Brannen said.

The percentage of problem loans by dollar value at banks across the state increased slightly, to 8.6 percent, following a slight decline in second quarter, according to a report by Atlanta-based FIG Partners.

Sixty percent of Georgia’s banks reported increases in non-performing assets, which include loans late three months or more, loans banks don’t expect to be repaid and loans foreclosed.

Loans at least 30 days late also climbed slightly to 1.8 percent of total loans, meaning new problems keep emerging, Marinac said.

Marinac also noted that only 27 percent of Georgia’s banks had profitable operations excluding gains on securities, money reserved for credit losses and taxes paid.

Many of the Georgia lenders with Texas ratios topping 100 will not fail, he said, but some will likely become takeover targets by stronger lenders looking to expand.

Brand Banking Co., of Lawrenceville, for instance, announced this week a deal for $200 million in private equity investment, and that the cash would be used to shore up its balance sheet and possibly to buy up rivals. The deal is pending regulatory approval.