Georgia foreclosure listings continue to grow as delinquent residential construction loans continue to worsen, based on statements issued by financial analysts concerning the third-quarter performance of Georgia banks.
The analysts said that the bank financial statements, which will be released in the coming weeks, are expected by many to show continued banking difficulties because of delinquent housing construction loans and commercial loans. They added that more Georgia banks will fail in the months ahead.
Many Georgia banks have been taking aggressive actions to resolve their toxic residential property loans, but they have not been totally successful in rising from their losses, according to the analysts.
Jefferson Harralson, head of Keefe, Bruyette and Woods Inc., said that Georgia banks will face more difficulties as federal and state regulators force them to resolve issues in their commercial property loan portfolios. He added that residential construction losses are substantial, but projected losses from toxic commercial loans are even more staggering.
Harralson also said that banks in Georgia will continue to trail national average profitability levels in the third quarter and that 40 percent of banks throughout the country will show significant losses in the third quarter, an increase from the previous 34 percent, based on data from the Federal Deposit Insurance Corporation.
As 3 out of 5 banks in Georgia suffered big losses in the second quarter, more residential and commercial properties are entering Georgia foreclosure listings. The foreclosure rate will rise further as banks show bigger loan losses in the third quarter.
Since August last year, Georgia has already lost 24 banks, including 19 bank failures this year. The main causes are substantial losses from housing construction loans and lack of funds to cover them.
Synovus Financial Corp. and SunTrust Banks Inc., the two biggest banks in Georgia, will release their reports this week.
In September, James Wells III, chairman and CEO of SunTrust, said his bank expects more losses in its residential property loan portfolio because of falling property values. He added however that his bank’s commercial property loans are performing well compared to those of other commercial banks.
Synovus is expected to lose 57 cents per share while SunTrust is expected to lose 42 cents per share, based on a report from Morgan Keegan.
The ratio of problem loans increased to 7.4 percent in the second quarter, and this ratio is expected to increase further in the third quarter.
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