Real Estate Pain on Tap for Smaller Banks

In another similarity with W Holding Company, R&G Financial has been unable to file a timely quarterly or annual financial statement in over four years. The company restated its financial statements for 2002, 2003 and 2004 in November 2007, and is working now to restate subsequent results. The restatements resulted from a reassessment of accounting related to transfers of loans and participations, mortgage securitizations and loan sales.

Back in April, R&G Financial suspended preferred stock dividends and deferred dividends on trust preferred securities.

While WHI effected a reverse stock split on Tuesday, which enabled the company to avoid being delisted from having its shares trade below a dollar for an extended period, R&G's shares were trading on the Pink Sheets, closing at ten cents.

R&G Financial did not comment for this article.

Bank of North Georgia

The past year hasn't been good for banks headquartered in Alpharetta, Ga. Integrity Bank, with $1.1 billion in total assets, was closed by state regulators on Aug. 29 and all deposits were taken over by Regions Bank (held by Regions Financial (RF Quote)). Alpha Bank, with $354 million in assets, was shuttered on Oct. 24, with deposits taken over by Stearns Bank NA. These followed NetBank, which was the first major failure resulting from the mortgage crisis, in late September 2007.

While it is the fourth institution on the list, Bank of North Georgia (a subsidiary of Synovus Financial Corp. (SNV Quote)) seems unlikely to follow suit, considering its holding company's relatively deep pockets.

Synovus, with $34 billion in total assets and (at last count) 36 banking subsidiaries in the Southeast, received preliminary approval for $973 million in TARP money on Nov. 14.

Bank of North Georgia's ratio of nonperforming CRE and CCL to total assets was 2.65% as of Sept. 30, and its total nonperforming assets ratio was 6.03%. Loan loss reserves covered 1.53% of total loans, keeping ahead of the year-to-date net charge-off ratio, however, the annualized pace of charge-offs for the third quarter was 2.37%.

With a high concentration of CRE and CCL and considering its location, it's reasonable to expect continued increases in nonperforming loans and elevated charge-offs. With the bank losing $25 million in the third quarter mainly from a $24 million provision for loan loss reserves, the risk-based capital ratio fell to 10.11%. Synovus will be expected to do whatever's necessary to keep Bank of North Georgia well-capitalized.