DEL.ICIO.USViewpoint: Joe Brannen, Georgia Bankers Association
Georgia banks on brink of collapse? Not quite
The Atlanta Journal-Constitution
Sunday, July 05, 2009
Joe Brannen,
president and CEO of the Georgia Bankers Association, shares his thoughts about the current state o f banks in Georgia, with the Atlanta Journal-Constitution.
Joe Brannen is president and CEO of the Georgia Bankers Association, which has about 350 bank and thrift members.
Latest Headlines:
• More Business news
• Search pending foreclosures
• Find metro gas prices
• Money-saving tips!
Markets »
It is easy to see why so many are concerned about the state of our banking industry here in Georgia.
The economy is still tough, there have been an unusually high number of local bank closures and there is a rush by a variety of sources to come up with a bumper-sticker phrase of the week to inaccurately imply wholesale apocalypse for Georgia’s banking industry.
One national newspaper quoted someone calling Georgia the “Chernobyl of banking.” That may be a catchy phrase, but radioactive we’re not.
We’re concerned this unfairly paints a damaging picture for many of our banks that are actually holding up well, and that big-picture perspective often gets overshadowed by headlines and hyperbole.
It would be disingenuous to suggest things are just peachy for all banks based here in the Peach State. For the record, however, many Georgia banks are doing fine, and there are some important facts people should know.
We have 323 banks based in Georgia, and 92 percent of those meet the regulatory threshold for being well capitalized. More than 55 percent of our banks were profitable in the first quarter, and most that were not profitable have adequate capital protecting them from other losses. Those numbers are traditionally much better, but they are far better than the impression left by the headlines and catchy quotes.
Also, more people in the past 12 months have entrusted Georgia banks with their deposits, which are up by $12 billion, or 5.6 percent, during that time.
Total loan balances are
relatively stable despite the recession. Banks are making loans for businesses, homes and autos to borrowers with good credit, low levels of debt and verifiable income. Overall, loan demand is down as more people pay off debt and companies have put off expansions or additions to inventories. And because the economic picture has changed, what 12 to 18 months ago may have looked like a loan that could easily be paid back carries a much higher risk for the both the borrower and a bank today.
Because bank performance mirrors the local economy, it is absolutely true that the business environment is extremely difficult for banks that supported residential real estate builders and developers supplying homes to the booming parts of our state.
Most of the problem loans at Georgia’s banks are direct loans to developers and builders, not individual home mortgage loans and certainly not subprime loans. Main Street Georgia banks did not heavily participate in products and services supported by the unregulated Wall Street model that collapsed last fall.
So while all is not well, it is also not as bleak as some clever one-liners would lead you to believe. Long term, our banking industry will continue to be a strong part of our state’s growth.
Georgia remains well positioned to recover relatively quickly compared to other regions. Georgia remains a high-growth population state. One projection shows Atlanta’s metro area gaining more than a million people from 2005-2015, jumping from the ninth-largest to sixth-largest MSA. In another interesting but admittedly unscientific indicator, U-Haul recently said Atlanta was the top one-way destination for its rental trucks in each of the past two years.
Our state remains attractive to new businesses, too, as shown by the announcement that NCR is relocating its headquarters and thousands of jobs to Georgia. Another promising indicator is that Georgia is the most entrepreneurial state in the U.S., according to the Kauffman Index of Entrepreneurial Activity. Georgia had 590 entrepreneurs per 100,000 adults in 2008, the study said.
Georgia’s continued population and business growth need everyday banking services and funding. That’s why I’m confident Georgia will continue to have a robust, competitive and healthy banking industry made up of small, medium and large banks.
We don’t know exactly when things will get better for Georgia’s economy and for some of our struggling banks. That’s why we emphasize the importance of understanding FDIC insurance protection for your accounts. No one has ever lost a penny of FDIC-insured deposits, and the insurance limits are higher than ever. If your deposits are within the limits, your money is safe at any of Georgia’s commercial banks and thrifts.
And, we do know things will improve as the overall economy improves. They always have, and they will again.
Joe Brannen is president and CEO
of the Georgia Bankers Association, which says it promotes the usefulness and the preservation
of a sound banking system.
Services »
