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Georgia's Strongest and Weakest Banks

ATLANTA (TheStreet) -- The pace of bank failures in Georgia is bound to pick up at some point, considering that the Peach Street has by far the highest number of institutions in dire need of additional capital.

According to data provided by SNL Financial, 41 of Georgia's 271 banks and thrifts were undercapitalized per ordinary regulatory guidelines as of Sept. 30, far ahead of second-place Florida, which had 17 institutions included on TheStreet's second-quarter Bank Watchlist.

Meanwhile, the pace of bank failures in Georgia has slowed to 18 this year from 25 in 2009. So far during 2010, Florida leads all states with 28 bank failures.

Since the Watchlist is based solely on capital ratios, we have taken a different approach below, by looking overall credit quality to identify troubled institutions.

Georgia Banks with Weakest Asset Quality

The following list includes all banks in the state with nonperforming assets comprising more than 15% of total assets as of asset quality. Please click the image to expand the table.

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Nonperforming assets (NPA) include nonaccrual loans, loans past due 90 days or more and repossessed assets. Government-guaranteed loan balances are excluded.

The list also includes financial strength ratings provided by Weiss Ratings. Weiss Ratings uses a very conservative ratings model, placing the greatest weight on capital strength, credit quality and earnings stability to assign ratings ranging from A-plus (Excellent) to E-minus (Very Weak).

The Georgia bank with the highest nonperforming assets ratio as of September 30 was Security Exchange Bank of Marietta, which was undercapitalized since its total-risk-based capital ratio was 7.25% as of September 30, below the 8% required for most banks and thrifts to be considered adequately capitalized by regulators. The bank had $178 million in total assets, which were 44% concentrated in commercial mortgages and construction and development loans.

The bank continues to operated under a March 2009 cease and desist order from state regulators and the Federal Deposit Insurance Corp., which required Security Exchange Bank to "retain qualified management," beef-up board of directors involvement and bring the total risk-based capital ratio up to 10% within 90 days. Not surprisingly, in an environment where investors in failed banks get generous loss-sharing agreements from the FDIC, it is very difficult for a bank with this level of problem assets to attract outside capital.

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