Georgia banks’ slow healing helps recovery

Jim Miller is optimistic for the first time in years. And because Miller is a banker, that’s a good thing for metro Atlanta and Georgia.

In a state that’s led all others in bank failures since mid-2008, optimism among bankers has been a rare find.

“There’s clearly a recovery underway” in banking that spills into the state’s economy, said Miller, chairman of Fidelity Southern Corp., which owns Fidelity Bank in Buckhead.

Georgia banks have recorded six straight profitable quarters, according to federal data released Tuesday. Other key barometers of health, such as an uptick in lending, signal better days for a beleaguered but critical industry.

Fewer than half as many Georgia banks have failed this year as in 2011, and the sector’s improving health has it poised to begin fueling the recovery rather than leading a meltdown.

As banks return to profitability they restock their ability to lend, said economist Roger Tutterow of Mercer University. That enables viable businesses to grow and consumers to buy big ticket items such as cars.

Demand for loans, Tutterow cautioned, still remains low and banks still are concerned about the credit worthiness of many would-be borrowers. Georgia’s economic outlook remains mixed, with unemployment still higher than the nation’s.

But many metrics show slowly rising momentum, and that’s the case in banking as well.

Lenders are socking away less money to cover losses on bad loans, and the total amount of bad loans and foreclosed real estate on banks’ books also is declining.

With that, the industry is lending more compared to a year ago.

Total loans and leases were up 3.2 percent in third quarter to $191.1 billion compared to a year ago, according to analysis of Federal Deposit Insurance Corp. data by The Atlanta Journal-Constitution.

Real estate development – the bread and butter of community banking for years – has been almost off-limits since the recession. But banks are even venturing there again, though not with the zeal of some lenders that succumbed to economic crisis, said Chris Marinac, a bank analyst with FIG Partners in Atlanta.

“Incrementally, banks should be more and more willing to lend,” Marinac said.

The industry is still troubled by any historical measure. Dozens of banks in Georgia remain under stringent regulatory oversight and others are still dealing with damaged loan portfolios.

Eighty-four Georgia banks have failed since mid-2008. Experts say the state was badly “overbanked” during the real estate bubble, when many new banks were created in a sort of gold rush to take advantage of loan demand.

Though only 10 have been forced to close so far in 2012 – and only one since July – experts predict failures and natural consolidation in the industry to continue playing out over the next several years.

Georgia banks reported profits of $1.17 billion in the first nine months of 2012, compared to $365 million in the same period last year. The bulk of those profits went to two giant institutions – Atlanta-based SunTrust Banks and Columbus-based Synovus Financial.

But nearly three out of four Georgia banks were profitable in third quarter, up from three out of five a year ago. About nine of 10 banks nationwide swung to a profit in the period.

Noncurrent loans and leases were 3.62 percent of Georgia banks’ total loan portfolios, compared to 4.78 percent in September 2011.

Miller, the Fidelity Southern chairman, said auto lending, mortgage loans, the acquisition of failed rivals and even a little lending to home builders has helped boost his bank’s returns. Fidelity Southern earned $8.2 million in the third quarter, up from $2.1 million a year ago.

“We’ve been in the doldrums for five years, six almost,” he said, “and people are working their way through their (financial) problems.”

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