Happy Thanksgiving from the entire GBA Staff!

Economy, Construction and Consumer Loans, Contribute to Lower Bank Earnings

The FDIC released its quarterly banking profile Tuesday, and it was no surprise that overall bank earnings were significantly lower for the third quarter of 2008 compared to 2007. Net income for all FDIC-insured institutions was $1.7 billion for the quarter, a decline of 94 percent from the same period last year. This was the second-lowest quarterly earnings amount since 1990. Asset quality issues were the primary drivers of lower earnings. Residential mortgages and construction and development loans were the two most prominent categories of stressed loans. The number of banks on the FDIC’s problem list increased to 171 institutions from 117, with a combined asset value of $116 billion. FDIC Chairman Sheila Bair did point out that 98 percent of the nation’s banks remain well capitalized, and a majority of banks

remain profitable and sound. A majority of Georgia banks remain profitable through the end of September.

Concerns about increasing credit costs and limiting credit availability to consumers led joint testimony Nov. 25 by GBA, Community Bankers Association of Georgia and Georgia Credit Union Affiliates to a Georgia Senate committee studying whether to propose legislation to raise personal bankruptcy exemption amounts. Georgia’s current exemptions total $20,500 per person, and include exemptions for homesteads, jewelry, motor vehicles, tools of the trade, furnishings and apparel. GBA President and CEO Joe Brannen delivered the joint statement to the committee on behalf of the three associations. “One of our primary concerns… is that significant increases to bankruptcy exemptions would increase the risk that lenders would not be paid back the full amounts of their loans,” he said. “Assumptions based on basic banking principles dictate that this increased risk could have a negative effect on the cost and availability of all types of consumer loans including mortgages, credit cards, home equity lines of credit, cars and other vehicles as well as other small-dollar-amount personal loans that are typically not secured by specific collateral. These changes could hamper the ability of financial-services companies – large, small and in-between – to meet the credit needs of the communities they serve." Click the More Details button above for a copy of the statement.

Increased exemption amounts for personal bankruptcy could increase the cost and decrease the availability of credit to borrowers, said GBA's Joe Brannen (center) in testimony to a Georgia Senate study committee this week. Joining Brannen for the joint testimony were Steve Bridges, Community Bankers Association of Georgia (left) and Mike Culbertson, Georgia Credit Union Affiliates (right).

GBA continues its efforts to educate the public about the state of the banking industry and some of the technical details of the TARP plan to invest in banks. Joe Brannen, GBA President and CEO, spoke to the Oconee Rotary Club in Watkinsville as the guest of Chuck Williams, CEO, North Georgia Bank, and the Marietta Kiwanis Club as the guest of Ron Francis, CEO,

The FDIC incorporated several important and helpful modifications to its final Temporary Liquidity Guarantee Program rules announced Friday. GBA supported many of the changes in its official comment letter about the proposed rule. For the Transaction Account Guarantee part of the program, coverage now also includes IOLTA accounts as well as NOW accounts earning interest rates of 50 basis points or less. For the Debt Guarantee program, the FDIC moved from a flat 75-basis-point fee for guaranteeing unsecured debt to a tiered pricing model based on the maturities of the debt, with guarantees for maturities of 180 days or less costing 50 basis points. Another important change GBA supported is that banks that had no outstanding unsecured debt as of Sept. 30 will be allowed to participate in the guarantee program with new debt up to 2 percent of liabilities. See the FDIC FAQ for full details, including information about eligibility, disclosure notices and the full pricing structure. You can participate in both programs, either program, or you can opt out completely. All eligible institutions must complete the TLG Program Election Form by Dec. 5. Forms should be available on the FDICconnect web site . Bankers who plan to participate

in the program have told us that among their reasons are that the program:

• Provides additional deposit protection and peace of mind for their customers, which strengthens customer retention efforts

• Provides for an additional source of liquidity

• Once you opt out, you can’t opt back in except in the event of a merger.

• And, those opting out will be listed on the FDIC website and will be required to post signage to that effect, and these bankers felt that could be difficult to explain to customers.

While we have heard from fewer bankers who are thinking of opting out, they tell us their reasons are to avoid increased costs to their financial institution for which they see little benefit or need.

The pool of potential buyers of struggling banks has been expanded through the creation of its new national bank “shelf-charter,” according to the Office of the Comptroller of the Currency. The OCC announced the first preliminary approval of the shelf charter Nov. 21. The shelf charter allows the OCC to grant preliminary approval to investors for a national bank charter.

The U.S. Treasury, Federal Reserve and the FDIC Monday announced aggressive steps to shore up Citigroup. The agreement provides “protection against the possibility of unusually large losses on an asset pool of approximately $306 billion of loans and securities backed by residential and commercial real estate and other such assets, which will remain on Citigroup's balance sheet,” said the joint agency statement about the deal. In addition, Treasury is investing $20 billion from funds authorized from the Troubled Asset Relief Program to buy preferred Citigroup stock. The terms of the agreement call for Citigroup to pay an 8 percent annual dividend on the preferred shares, enhanced executive compensation restrictions and implementation of the FDIC's mortgage modification program.

Also included in the joint statement were a set of principles the agencies said are guiding their continued efforts to provide stabilization to the financial system:

• We will work to support a healthy resumption of credit flows to households and businesses.

• We will exercise prudent stewardship of taxpayer resources.

• We will carefully circumscribe the involvement of government in the financial sector.

• We will bolster the efforts of financial institutions to attract private capital.

President-elect Barack Obama Monday announced his nomination for Treasury Secretary and other key economic advisers. New York Federal Reserve President Tim Geithner will be nominated to head the Treasury Department. Other key advisors named were former Treasury Secretary Larry Summers to head the National Economic Council, economist Christina Romer to lead the Council of Economic Advisors and Melody Barnes to be director of the Domestic Policy Council. Peter Orszag, director of the Congressional Budget Office, has been tabbed to be director of the Office of Management and Budget.

• Overview of the challenge

• Lender liability for storm water

• Best practice information on storm water compliance

• Permitting, engineering, and legal strategies and case studies

• Panel discussions / Q&A

• Also, “Going Green in Georgia”

With questions, please contact GBA’s Susie McGehee at 404.420.2010.

Based on the current economic and political environment, we expect another busy banking agenda during Georgia’s General Assembly session. Now more than ever, it is critical to share your thoughts with your legislator and help prove that the grassroots network of bankers is active throughout the state. Help show that strength by attending GBA’s annual Legislative Reception Wednesday, Jan. 14, 2009, at the Georgia Aquarium from 6:30-8 p.m. Also, take advantage of touring the Aquarium exhibits, including the Titanic Aquatic, from 5-7 p.m. for a special reduced rate. We have reserved a block of rooms at the Embassy Suites Hotel, Centennial Olympic Park for the night of Jan. 14.

Hot Topic: Financial Risk Management Conference - Jan. 28-29

Learn the latest about how to carefully lead your bank’s risk policies by attending GBA’s Financial Risk Management Conference scheduled for Jan. 28-29, 2009, at the Cobb Galleria Centre in Atlanta. Thanks to Brad Jones, Committee Chair and Senior Vice President at Silverton Bank in Atlanta, and the other members of the Asset/Liability Management Committee for coordinating an informative agenda.

A block of rooms at the Renaissance Waverly Hotel has been reserved until Jan. 6. For hotel reservations, call the hotel directly at 770. 953.4500. For more information or to register, please contact GBA’s Marybeth Jones at 404.420.2032.

Those who are on our standing-order list should have received their order last week. The holiday window decals provide a professional appearance and include the 10 holiday closings recognized by the Federal Reserve Bank in accordance with FDIC rules.

There are only a few copies left of the most up to date GBA Financial Directory. The directory provides you with quick access to information about all commercial banks and thrifts in

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Please remember to include the Georgia Bankers Association on the list of recipients for announcements about promotions, new employees and special recognition your bank has received. 

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