Georgia’s banks have issues. The state has led the nation in the number of bank failures since January 1, 2008, a fact that earlier this year (even before the most recent round of closures) led the Wall Street Journal (here) to describe the Atlanta area as "the bank failure capital of the world." Signs indicate there may be more Georgia bank failures yet to come.

After the FDIC moved in this past Friday night (refer here), Atlanta’s Omni National Bank became the ninth Georgia bank closure since the beginning of last year. (A tenth Georgia bank closed in September 2007.) Though banks in 19 different states have failed since the beginning of 2008, no state has had more bank failures than Georgia. Not even California, which has had eight banks fail during that period, or Florida, which has had four.

The Georgia bank failures represent a significant part of the total number of bank failures in recent months. Since the beginning of 2008, there have been a total of 46 bank failures. So the nine failures in Georgia during that period represent about one-fifth of the total. The pace of Georgia bank failures has continued in 2009, with four out of the 21 closures so far this year.

The nine Georgia bank failures since the beginning of 2008 had a total of $4.7 billion in assets. The failures’ estimated cost to the FDIC insurance fund is about $1.4 billion.

A January 2, 2009 Wall Street Journal article entitled "Bank Failure Central? Try Alphretta, Georgia" (here) noted that the Atlanta region has been "haunted by overabundant home building, years of risky lending, and one of the most relaxed regulatory environments in the U.S. for starting new banks."

Nor have these problems entirely played themselves out yet. The Journal article quotes industry sources as saying that "as many as 20 of the 122 banks still headquartered in or near Atlanta could go under before the credit crisis and recession are over."

A March 31, 2009 Street.com article entitled "Georgia Banks Face More Pain" (here) similarly projects that "there’s a lot more trouble ahead" for Georgia’s banks. The article’s accompanying analysis shows that over 30 of Georgia’s 331 banks and thrifts are "in a weakened condition."

The Street.com article identifies four banks (beyond those that have already failed this year) as "undercapitalized" as of December 31, 2008. The article also identifies thirty-three more that had "nonperforming asset ratios above 10%." On the other hand, the article also identifies 83 of Georgia’s 331 banks and thrifts as "good" or above.

These institutional failures have their costs, and even the closure of a smaller bank can leave problems behind. A March 28, 2009 New York Times article entitled "A Small Town Loses Its Pillar: Its Only Bank" (here) describes the difficulties experienced in Gibson, Georgia – a town far from Atlanta too small even for a hospital, a jail or a Wal-Mart – when it lost its only bank, FirstCity. (Refer here for background regarding FirstCity’s closure.)

The Times article recounts how the bank’s decline began with the 2001 sale of the former Bank of Gibson. After the sale, the bank rushed to "cash in on the expanding real estate market." By the time it failed, the bank was so weak that the FDIC couldn’t find another institution to buy its deposits. The article quotes the bank’s founder’s grandson as saying about the owners who acquired the bank in 2001 that "maybe they weren’t as smart as they thought they were."

The FDIC’s complete list of all bank failures since 2001 can be found here. Hat tip to Adam Savett of the Securities Litigation Watch for link to the Times article.

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