It has been a discouraging year for many Georgians. We’re still trying to crawl out from under an economic slowdown that has lasted for more than four years. Unemployment continues to be too high, and too many people who run businesses are struggling to get by. As we get closer to the end of the year, however, there are signs of encouragement and reasons to believe that an upturn may finally be underway.

One encouraging sign is this: the pace of bank failures in a state where more than 80 banks have collapsed since 2008 has finally slowed down. That is little short of a miracle. In each of the years 2009, 2010, and 2011, more than 20 banks were shut down by state and federal regulators. Georgia consistently led the nation in the number of bank failures. In 2012, only 10 state banks had collapsed as of Nov. 16, and there has been just one bank failure since July. When you consider we have struggled through the worst economic downturn since the great depression, that looks like real progress.

There has been a lot of wreckage to clean up. State banking Commissioner Rob Braswell said there were 297 state chartered institutions at the end of 2007 and 50 national banks: a total of 347 financial institutions. Today, he said there are only 195 state institutions and 30 national banks, for a total of 225 financial institutions.

Most of the departed banks were pulled down by the implosion of the real estate industry in 2008. The failure of these community banks also dried up a source of loans for the startup or expansion of local businesses, which made the state’s economic slump that much deeper.

The original business and banking expansion was fueled by the relentless movement of new residents into Georgia during the 1990s and early into the next decade.

“Lots of new people were moving in, and the economy was so dependent on building new houses to handle those people,” Braswell said.

New banks were started that immediately began handing out loans to residential developers who were building subdivisions all over Metro Atlanta’s suburbs. It would turn out that many of these newly chartered institutions were under-capitalized and lightly regulated.

The trade publication Bank Director commented: “Georgia’s experience represents a cautionary tale, of sorts, for what can happen when regulators are too hands-off. In retrospect, state and federal agencies handed out too many charters during the boom times, and examiners didn’t crack down on riskier lenders when it might have done some good.”

As the real estate market began to teeter, people stopped buying houses, developers couldn’t pay off their loans and banks started failing left and right.

These banking collapses involved some major political figures, including Gov. Nathan Deal, Congressmen Phil Gingrey and Tom Graves, state Sen. Chip Rogers and the state’s former adjutant general, David Poythress.

The evidence of this banking and real estate collapse can be seen in the numerous empty areas where land was cleared for subdivisions but houses were never built in counties extending along the northern and southern reaches of the metro area.

The total loss to the FDIC’s deposit insurance fund, which makes sure that individuals don’t lose their deposits when a bank fails, has been estimated at more than $8.5 billion.

“The banks just were not making money writing down the real estate loans on their books,” Braswell said.

The economy has slowly been turning around for the past few months, as illustrated by small but steady improvements in the unemployment rate, and the wave of bank failures has taken out many of the weaker financial institutions over the past four years.

“They have stabilized, and many of them have started working their way back to healthy status,” Braswell said. “We still have some of those (bad) loans on the books, but most of them have been written down to the market value.”

There are still a number of troubled banks, but perhaps they will be able to make their way back to firmer financial ground in 2013.

“The banks are recovering as the economy is recovering,” said Joe Brannen, president of the Georgia Bankers Association. “We see that as a nice way to enter the new year.”

Tom Crawford is editor of The Georgia Report, an Internet news service at gareport.com that reports on government and politics in Georgia. He can be reached at [email protected].