SMN on continuing struggle of Savannah’s community banks

I have written a lot about the banking crisis in Georgia.

By the way, I don’t use the word “crisis” lightly. I’ve been using it for a few years to describe the real estate sector, but the recent debt debate was a manufactured crisis, not a real one.

Still, while “crisis” conveys the gravity of some problems, it also has connotations of suddenness, which in turn might connote quick healing. So maybe there’s a better word out there.

Anyway, whatever you want to call the banking woes in Georgia, they’re very real and one day there are going to be some great Ph.D. theses written about the state level failures that led Georgia to have more failed banks since 2008 than any other state and about the ongoing damage done to an economy when so many banks are struggling to deal with a souring and/or stagnating real estate market.

In today’s Savannah Morning News, Adam Van Brimmer has a couple of more pieces in his excellent quarterly series about community banks that serve Savannah: Continued struggles in real estate, economy delay advances for community banks and Interest margins bright spot for local community banks

A snippet from the former piece:

Delinquent loans rose year-over-year and quarter-over-quarter for seven of the nine Southeast Georgia-based community banks that do business in Chatham, Bryan and Effingham counties. Seven also added significantly to their loan-loss reserves in the quarter to cover for potential losses on the delinquencies.

Additionally, all nine hold more repossessed properties among their assets than they did a year ago.

“The non-performing loan situation just isn’t getting any better,” The Savannah Bank President Holden Hayes said. “It’s not significantly worse, but it’s not better. The $64,000 question is what will it take to turn it around? People have to feel good about the economy and their path. There’s just too much fear and uncertainty right now.”

I would disagree with Hayes’ characterization to some degree. Yes, fear and uncertainty affect financial choices, but those aren’t the reason people aren’t repaying their debts. They lack jobs, they are burdened with household debt, they are underwater on their mortgages, etc. These are fundamental problems in the economy, not psychological ones.

From the piece:

“You can’t give away undeveloped land right now,” First Chatham Bank CEO Brian Foster said. “Meanwhile, the regulators make you take another write-down because of it. And there’s more to come on that.”

First Chatham lost over $3 million in the first two quarters of 2011 and owns more than $20 million in repossessed property, according to the piece. It’s one of three local banks operating under special FDIC scrutiny.

Both pieces are well worth a read.