Bank Failures, Graphically

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[I]t’s a combination of an antiquated state law that favored a plethora of smaller community banks over multi-branch giants; a population explosion in metro Atlanta that fueled massive suburban real estate development and a crush of new banks formed to cash in on the Atlanta boom shortly before the market tanked.

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First, Georgia is home to a huge number of state and federally chartered banks. At the end of 2008, Georgia had 334 banks. That’s more than California, which has nearly four times Georgia’s population, or Florida, which has twice as many people. …

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Even after interstate giants such as Bank of America, SunTrust and Wachovia could expand freely across Georgia, growth in Atlanta’s suburbs spurred the opening of banks looking to profit from loans to real-estate developers. Metro Atlanta had three of the nation’s 10 fastest growing counties of the 1990s. Because of that growth, about half the state’s banks ended up clustered around Atlanta, said Joe Brannen, president and CEO of the Georgia Bankers Association….

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Georgia’s diversity of small banks was an asset when the economy was strong, with consumers benefiting from competitive rates and broader sources of credit, said James Verbrugge, a professor emeritus of finance at the University of Georgia’s Terry College of Business. It became a liability when the bottom fell out of the housing market and smaller banks had less capital to weather the crisis.