“The Contagion In Georgia Spreads!”

Two more Georgia banks were seized by the FDIC on Friday!

American Trust Bank in Roswell and North Georgia Bank in Watkinsville were the third and fourth taken-over by the Georgia Department of Banking and turned over to the FDIC this year.

North Georgia Bank was the 55th Georgian bank closed since the crisis began. Illinois also lost its 40th this week. Community First Bank, Chicago was the 14th bank closed in 2011.

With the three foreclosures in Georgia and Illinois the big four, which includes Florida and California, account for 52% of the 333 banks closed since the crisis began. The four states have lost 174 banks in the three years and one month.

The banking crisis shows little sign of slowing as banks continue to have problems with their balance sheets and capital requirements after years of ignoring the fundamentals of finance or suffering from the downturn caused by the Big Banks that were bailed out by the Treasury Department.

As a result the Deposit Insurance Fund of the FDIC continues to be stretched, with expenses outpacing the inputs from member banks.

Additionally, four banks were assumed the last Friday in January, the 8th through the 11th, in Oklahoma, Wisconsin, Colorado, and New Mexico. FirsTier Bank in Louisville, Colorado was the 2nd bank in as many weeks in which the FDIC had to set up a Deposit Insurance Insurance National Bank—the other, Enterprise Banking Company in Georgia, the week before.

Financially is was a good week for the Deposit Insurance Fund (DIF). The cost to the Fund on Friday was only $118.4 million, considerably less than the $545.5 million cost for the four banks seized the previous week.

In the next couple weeks the banking quarterly report  for the 4th quarter will be out which will allow us a view of the banks in the U.S. The last quarterly report, the 3rd of 2010, the ‘problem bank’ list increased by 31 from 829 the previous quarter to 860. This is the largest number of problem banks since March of 1993 when there were 928. Total assets of the banks on this list declined for the 2nd quarter in a row from $403.2 billion to $379.2 billion. Assets declined by $27 billion in the precious quarter from $431 billion. The problem bank list, along with the number of chartered insured banks, are measures to watch closely.

But there is still a hidden dynamic in the banking crisis and a potential increase in future foreclosures lies in the ‘real’ health of the commercial market. We have not seen the impact that was anticipated from predicted problems in commercial loans.

Will that be the other shoe to drop?

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