Georgian Bank is the Latest to Fall

Fridays are when we bid adieu to terminally ill banks. Today it's Atlanta's Georgian Bank, which is being closed by state banking regulators. South Carolina's First Citizens Bank and Trust will acquire most of the $2 billion-asset company's assets, which include five branches and roughly $2 billion in deposits.

Under the loss-sharing agreement with First Citizens, the FDIC is forking out $892 million from its deposit insurance fund to cover Georgian. That's a lot. And in general, taking smaller banks into receivership costs the FDIC proportionally more than disposing larger institutions. For instance, the demise of $25 billion Colonial Bancgroup, whose assets were acquired in August by BB&T, cost the FDIC deposit fund $2.8 billion, or about 11 percent of Colonial's assets.

By comparison, the failure earlier this month of Brickwell Community Bank, a $72 million institution in Minnesota, drained $22 million from the fund, or 30 percent of the bank's assets. Also in September, the FDIC paid $47 million in receiving $105 million First State Bank, or 44 percent of the Arizona company's assets.

Banks in Georgia are really taking their lumps, amid a battered real estate sector in the Southeast. The state leads the nation with 19 bank failures. Georgian's loans deteriorated rapidly this year, and it failed to raise additional capital.

Regulators have shuttered a total of 95 banks in 2009. That has greatly depleted the FDIC's deposit insurance fund, which at the end of June was down to $10.4 billion, its lowest level since 1992. The agency projects that bank closures will cost the fund $70 billion through 2013. FDIC officials on Tuesday will take up the issue how best to replenish the fund. It remains to be seen if they will settle for a short-term solution that temporarily shores it up or, less likely, consider a bolder approach that takes into account the growing risk that a money-center bank could topple.

Image courtesy of Netta Bank.