Federal regulators are preparing for a large number of bank failures across the country, and Georgia could be among the states feeling the biggest impact, according to financial analysts.
“Georgia is more exposed to bank failures than most other states,” said Jaret Seiberg, a policy analyst with financial services firm The Stanford Group in Washington, D.C. “It has a combination of high mortgage delinquency rates, high delinquency rates on commercial lending and a lot of brand new banks, and brand new banks often are especially at risk of failure.”
Some bankers in the Chattanooga area said those banks’ losses could present opportunities for their institutions, particularly those with roots in Georgia.
“We are not looking at bank failures to benefit us, but what we are looking at is ... a (potential) merger in the local market,” said Scott Smith, president and chief operating officer of the more than 100-year-old Northwest Georgia Bank based in Ringgold, Ga. “We would definitely benefit from mergers and acquisitions due to the fallout of the current economic conditions.”
Mr. Smith said he already has had to address customers’ concerns about predictions of widespread bank failures around the country.
That worry started when officials with the Federal Deposit Insurance Corp. announced last month plans to hire 140 additional workers in the division that handles its bank failures — an increase of 60 percent in current staff.
“I think it is just a sign of the times and a sign of the economic conditions,” Mr. Smith said, recounting what he told his customers. “But the stronger institutions will survive.”
The predicted failures are likely to take place across the country in the next 12 to 24 months, Mr. Seiberg said.
One of the largest bank failures in history occurred in September involving NetBank Inc., an Alpharetta, Ga.-based online bank with $2.5 billion in assets. So far this year, two banks have failed, both in Missouri.
The Associated Press reported that 76 banks currently are on the FDIC’s “problem institutions” list and could equate to about 10 expected bank failures this year, though FDIC officials declined to make projections.
Mike Haskew, executive vice president and city president of Cohutta Banking Co. in Chattanooga, said Georgia’s place among the banks hardest hit by failures could be traced back to subprime lending and growth in the metro Atlanta area.
Speculative development along Georgia’s Atlantic coastline also could be having an impact on the way the state is viewed, he said.
But some in the banking industry don’t see Georgia as being in great danger.
Joe Brannen, president of the Georgia Bankers Association, said he has not heard the state’s banks are at an elevated risk.
“Clearly with the downturn in the economy some of our members do have some significant challenges. They are in markets where the principal line of business is the residential real estate construction, and if that’s what your market was, then you are most likely going to see a downturn, ” Mr. Brannen said. “Now whether or not it leads to a failure is anyone’s guess, but I’ve not heard that there is any bank that is in danger of failing.”
Ultimately, however, Mr. Smith said the current situation of the banking industry all over the country is just part of a cycle.
“We went so long without hearing about any bank failures, and now we are into that natural cycle where we are seeing some adjustments,” he said. “We’re going through some corrections. It’s a natural part (of banking).”
The Associated Press contributed to this report.