Banks, Thrifts Weaken on Bad Loans

The condition of community banks in states with the heaviest concentrations of bank and thrift failures has worsened, according to preliminary March 31 regulatory data provided by SNL Financial on May 28.

Noncurrent loans, those on which payments have fallen behind at least 90 days, increased 26% to $59.2 billion. Some 22% of banks and thrifts reported first-quarter net losses, compared with 23% in the previous quarter.

While most coverage of the financial crisis over the past two years has been focused on the largest financial-services companies, 98% of U.S. banks and thrifts had less than $5 billion in total assets as of March 31. Community banks, the lifeblood of commercial real estate and construction lending across the country, have suffered as overheated property markets cooled. Of 61 bank and S&L failures during 2008 and 2009, 56 were institutions with less than $5 billion in total assets.

To be sure, the Federal Deposit Insurance Corp. said May 27 the bank and thrift industry returned to profit. Many banks reported an improvement in net interest margins and reduced loan loss provisions from the previous quarter.

The following is a roundup of community banking in three states at the forefront of the boom-and-bust real-estate cycle.

Georgia

Georgia leads all other states with 11 bank or thrift failures during 2008 and 2009, followed by California with nine failures, Illinois with six, Florida with five and Nevada with four.

Large regional holding companies snapping up failed Georgia institutions include Regions Financial(RF Quote), with two acquisitions, along with SunTrust Banks(STI Quote) and BB&T(BBT Quote), each with one. (See TheStreet.com's Bank Failure Map for an interactive summary of all bank and thrift failures since the start of 2008.)