Watch Out for Georgia's Worst Banks

It will be interesting to see how SunTrust fares over the next few quarters. Its leverage ratio was 7.45% and its risk-based capital ratio was 10.66% as of March 31, both slightly higher than a year earlier. A 5.5% decrease in total assets over the past year helped in maintaining those capital ratios.

If the rapid increase in nonperforming loans continues, that second capital ratio could well drop closer to 10%. SunTrust will then need to keep shrinking its balance sheet or take the plunge and cut its dividend and/or raise capital to maintain its well-capitalized status. That being said, SunTrust has fared better through the crisis than several other large regional players.

Here are the five Georgia banks (Integrity Bank is listed again) with over $1 billion assets with the worst loan quality as of March 31:

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Security Bank of Bibb County (held by Security Bank Corp.(SBKC Quote)) had the highest net loan charge-offs on the list, with an annualized 7.28% for the first quarter. Even after charging off $18.6 million during the quarter (mostly residential construction loans), nonperforming assets comprised 6.48% of total assets as of March 31. Loan-loss reserves covered 32% of nonperforming loans.

The holding company is still paying a quarterly dividend of 4.375 cents per share, which translates to an annual yield of 3.10%. Since the stock tanked in early June, it has been slowly climbing, with some insider buying. If the bank follows last quarter's $16 million loss with another, Security Bank's risk-based capital ratio could drop sufficiently to threaten the dividend.

Bank of North Georgia is a unit of Synovus Financial(SNV Quote), which held 37 separately-chartered institutions at last count. While Bank of North Georgia's risk-based capital ratio was on the low side, at 10.19% as of March 31, the $33 billion holding company was strongly-capitalized as of March 31, with a leverage ratio of 8.96% and a risk-based capital ratio of 12.46%.

Synovus Financial has been holding up pretty well. For the first quarter, the holding company's net income was $81 million, or a return on average assets of 0.97% and a return on equity of 9.29%. Those are respectable earnings in this market.

The news is not all bad.

To end on a cheerful note, here are the five Georgia banks with over $1 billion in assets, with the best loan quality as of March 31:

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Columbus Bank and Trust Company is also held by Synovus Financial. The institution has strong asset quality, with nonperforming assets of just 0.37% of total assets as of March 31. Capital levels are also quite strong.

Georgia B&TC of Augusta is a unit of Southeastern Bank Financial(SBFC Quote), which also holds the $86 million Southern Bank & Trust, of Aiken, S.C.

Georgia B&TC has seen its earnings decline over the past year like most institutions, but reported first-quarter net income of $2.9 million, with respectable returns on average assets and equity of 1.02% and 12.95%. Nonperforming assets comprised 0.68% of total assets as of March 31. Loan loss reserves covered a very strong 152% of nonperforming loans. The bank is maintaining strong reserves which could anticipate a bit of trouble ahead, since loans past due 30-89 days comprised 1.16% of total assets as of March 31.