The Federal bailout of FNMA and FRMAC may help free up some home loan money but will not quickly help with land and development loans. This seems to be the deepest housing slump I have experienced in my 38 + years of law practice. It comes after one of the longest BOOM periods in memory.

AVOC

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September 9, 2008

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Housing Slump, Banks facing tough times, Oconee needs to slow spending

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By Wendell Dawson, Editor, AVOC, Inc

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The overbuilt housing slump has caused ripples in the whole economy.   Banks are hurting too.   Now is not the time to have any uninsured deposits.   Bank information is available online if one wants to check on their individual institutions.   I do think all the Athens area banks will survive but profits may be down for a while reducing dividends and possible stock values.

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The Federal bailout of FNMA and FRMAC may help free up some home loan money but will not help quickly with land and development loans.   This seems to be the deepest housing slump I have experienced in my 38 + years of law practice.   It comes after one of the longest BOOM periods in memory.   The oversupply of houses and developed lots will impact lots and land prices in this area.   Eventually, Tax Assessors and elected officials will have to face reality that banks are already encountering.   “The Party is Over”-at least for a while.Taxpayers need to impress this on local officials at every opportunity.

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It has been surprising to see some experienced bankers and developers caught in the squeeze.   Cycles and downturns are essential parts of the economic cycles.In the long-term the area housing and financial economy will prevail but the slowdown will probably last longer than many have hoped.

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Government officials have also indulged in extravagant spending.   Revenues have increased tremendously but it has not slowed down property tax increases, water bill increases and increased user fees.   During the recent primary process, there should have been more campaign debate about spending and the cost of our local government.  Most of us, not in the Conservation Use Program, have received tax bills that are higher than last years despite political claims to the contrary.

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These same officials are discussing a new $ 40 Million SPLOST.   This causes some anxiety because a majority of these folks have participated in “fast growth” policies that have strained our water, sewer, transportation and other essential infrastructure.   Fast Growth has not brought lower property taxes or a better quality of life.It has brought more spending and more debt.

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Hopefully, we can get a handle on our growth and exercise some spending restraint.Otherwise, the “bloom can come off the rose”.

ARTICLE ON PLANNING REVIEW FEE ON PRINCE AVENUE BAPTIST CHURCH in Athens Banner-Herald on 8-30-08

9-8-08 See Lee Becker on Oconee's Water Rate Increase-www.oconeecountyobservations.blogspot.com/

8-14-08 Local Taxpayers should not have to ‘pay’ for declining state and county revenues

8-6-07 Property tax problems ahead for Oconee - Housing Slump is part of an economic cycle- supply and demand

8-24-08 Oconee Taxpayers need to be alert to Hard Labor Creek Project with slowdown in Financial Markets and Revenues

Bank Reports online 7.08

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To find information about bank assets, underperforming loans, etc, go to the following link:

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Georgia Department of Banking and Finance https://dbfweb.dbf.state.ga.us/WebBkData.html

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FDIC:  http://www4.fdic.gov/UBPR/UbprReport/SearchEngine/Default.asp

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Banks.Rating.The.Street.Instructions.9.1.08

www.thestreet.com

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Pull down tab for Banks.   On the left under bank name, you have to put in the first word of the name, like Oconee or North on the right side under sort by, put rating. 

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http://www.thestreet.com/screener/index.html?src=ratingsindex&tab=3

8-30-08 Banking industry is not out of the woods yet

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Money and Markets

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=2143

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Latest FDIC Report Reads Like a Horror Novel 
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08-29-08

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By Mike Larson 

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QBP: "Insured commercial banks and savings institutions reported net income of $ 5.0 billion for the second quarter of 2008. This is the second-lowest quarterly total since 1991 and is $ 31.8 billion (86.5 percent) less than the industry earned in the second quarter of 2007."

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Translation:Earnings are collapsing throughout the financial sector as bad debts mount and write-downs on complex securities surge. Banks are being forced to set aside greater and greater amounts of money to cover loans they expect to sour down the road.

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QBP: "The number of institutions on the FDIC's "Problem List" increased from 90 to 117 during the quarter. Assets of "problem" institutions increased from $ 26.3 billion to $ 78.3 billion."

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Translation: The FDIC maintains a list of troubled institutions that rank either a "4" or "5" on its internal, non-public risk scale. The number of banks on that list surged 30% quarter over quarter and is now at the highest level in five years. The total assets held at those problem institutions has ballooned to more than $ 78 billion.

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8-30-08 Integrity Bank of Alpharetta, Georgia, was closed by U.S. regulators

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BLOOMBERG.Com

http://www.bloomberg.com/apps/news?pid=20601087&sid=a7dn3iRmUDCQ&refer=home

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August 30, 2008

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Integrity Bank Becomes 10th U.S. Failure This Year (Update2)

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By Alison Vekshin and Ari Levy

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Aug. 29 (Bloomberg) -- Integrity Bank of Alpharetta, Georgia, was closed by U.S. regulators today, the 10th bank to collapse this year amid a surge in soured real-estate loans stemming from the worst housing slump since the Great Depression.

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Integrity Bank, with $ 1.1 billion in assets and $ 974 million in deposits, was shuttered by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. Regions Financial Corp., Alabama's biggest bank, will assume all deposits from Integrity, which was run by Integrity Bancshares Inc. The failed bank's five offices will open on Sept. 2 as branches of Regions, the FDIC said.

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``Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance,'' the FDIC said.

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Banks are being closed at the fastest pace in 14 years as financial companies report more than $ 505 billion in writedowns and credit losses since 2007. California lender IndyMac Bancorp Inc., which had $ 32 billion in assets, was closed July 11 in the third-largest bank seizure, contributing to a 14 percent drop in the U.S. deposit insurance fund that had $ 45.2 billion at the end of the in the second quarter. …………

EXCERPTS FROM LOCAL BANK STOCKHOLDER REPORTS IN 2008

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Oconee State Bank Letter to Stockholders dated August 26, 2008

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This year's earnings have been impacted by all that is happening in the economy. As of July 31, 2008, earnings were $ 848,019 compared to $ 2,046,775 for the same period last year. For 2007, we had earnings of $ 3,268,470. Our current projection estimates earnings at the end of this year to be approximately $ 1,000,000. This decrease in earnings will have a limiting impact on dividends. Last year, we paid $ 1.15 per share. Your Board of Directors will make a decision in December, but it is our estimate that dividends will be in the $ 0.30 per share range.

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I am also pleased to report some good news as well. The Bank is very fortunate to have a very strong capital position. At the end of July, our equity capital stood at $ 29,835,909. This number represents tier 1 capital to total assets of 9.97%. Additionally, the Bank has a very strong liquidity position of 28.63%. The financial strength represented in these numbers is an essential part of enabling the Bank to weather this economic storm.

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NORTH GEORGIA BANCORPS, INC Letter to Stockholders dated July 14, 2008

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Back in January we told you that we had increased the level of our Loan Loss Reserve as a hedge against the inability of some customers to meet the terms of their loan obligations. Now, six months later, we find it necessary to continue to bolster our Loan Loss Reserve levels. We have been working diligently to identify any loans in our portfolio that meet the definition of "impaired loans" - those loans with weaknesses which in all probability will impact the collectability of the loan. While this identification process will be ongoing, the current economic environment, combined with our identification efforts, indicates that it is prudent for us to continue to enhance the bank's reserves for potential bad debts. By doing so, we will be better positioned to absorb any potential loan losses from our reserve accounts. Thus, for the first six months of 2008, what was potentially a very positive net income scenario ended up with a modest net income of $ 46,000 as we allocated an additional $ 455,000 to the Loan Loss Reserve, which now stands at $ 3,261,500 or 2.37% of total loans outstanding. Please keep in mind that this amount does not necessarily represent the level of any expected loan losses, but rather is a number arrived at in accordance with certain accounting and regulatory guidelines that apply to the banking sector.

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Fortunately, North Georgia Bank is well capitalized and we began early to prepare for this troubling period in our economy. We appreciate the support of our customers, our shareholders and our employees as we work through this cyclical downturn in the economy. Our community and our region enjoy many great attributes that should enhance our long-term growth prospects. We are committed to meeting the banking needs of our community, while striving to protect and enhance your investment as a shareholder. ………………..