Georgia Banks: Strongest and Weakest

The worst is over for the Peach State's largest banks, but consolidation will continue.
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ATLANTA (

TheStreet

) -- An analysis of Georgia's banks and savings and loan associations shows that the largest players in the state are strongly capitalized despite continued losses, but consolidation among smaller players may accelerate.

Out of 279 banks and thrifts in the Peach State, 39 were

undercapitalized

per ordinary regulatory guidelines as of June 30, according to data provided by

SNL Financial

. All were included in

TheStreet's

second-quarter

Bank Watchlist

published last week, except for

Appalachian Community Bank, FSB

of McCaysville, whose second-quarter data wasn't yet available.

Appalachian Community Bank's June 30 data is now available, and the thrift reported a total risk-based capital ratio of 6.61% as of June 30, below the 8% required for most banks and thrifts to be considered

adequately capitalized

. More of the thrift's June data is included on the table below.

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 June 30, with data provided by

SNL Financial

:

Nonperforming assets (NPA) include repossessed real estate -- along with nonaccrual loans and accruing loans past-due 90 days or more -- less government-guaranteed balances.

Out of 33 listed Georgia banks with NPA exceeding 15% as of June 30, 22 had total risk-based capital ratios below 8%, providing a clear indication that these institutions will need to raise significant additional capital to work through their nonperforming loans.

The Georgia bank with the highest nonperforming assets ratio as of June 30 was

First Commerce Community Bank

of Douglasville, which had $248 million in total assets as of June 30. Repossessed real estate comprised nearly two-thirds of the nonperformers, meaning that these assets are likely to have already been sufficiently written-down, however, that left another $35.2 million in problem loans to work through. With loan loss reserves and core capital totaling just $11.2 million, it appears the bank is running out of time. A call to the bank's senior management was not returned in time for this article.

The largest bank in Georgia with a nonperforming assets ratio exceeding 15% as of June 30 was

Park Avenue Bank

of Valdosta, the main subsidiary of

PAB Bancshares

(PABK)

. The bank was undercapitalized per ordinary regulatory guidelines, with a total risk-based capital ratio of 6.18%, and is operating under a July 2009 agreement with the Federal Reserve to strengthen its credit risk management and capital, although the agreement didn't stipulate any capital ratio benchmarks.

In its second-quarter 10-Q filed Monday with the

Securities and Exchange Commission

, the holding company said it was "making all efforts to increase its capital ratios," including a "variety of capital-raising and other strategic alternatives."

Georgia's Largest Banks

Here are the ten largest banks and thrifts in Georgia, along with key metrics using the most recent available quarterly data:

Since second-quarter thrift financial reports were not available for

BB&T Financial, FSB

of Columbus, we have included first-quarter data for this thrift subsidiary of

BB&T Corp.

(BBT) - Get Report

of Winston-Salem, N.C. BB&T Financial FSB is primarily a credit card lender, and despite having just $2.3 billion in total assets, it made a nice contribution to the holding company, earning $25.3 million during the first quarter.

Of course, BB&T Corp. is a major player in Georgia, with 178 branches operating in the state according to its 2009 10-K filing, and a 5th-place market share for deposits.

BB&T appears to be primed for the eventual economic recovery, remaining profitable through the credit crisis and appearing to have sufficient capital to finish clearing out its nonperforming loans, which appeared to be nearing a crest during the second quarter. Please see

July's 5 Worst-Performing Big Bank Stocks

for a detailed analysis of BB&T.

The largest bank headquartered in Georgia is

SunTrust Bank

of Atlanta, the main subsidiary of

SunTrust Banks, Inc.

(STI) - Get Report

. While the holding company posted a second-quarter net loss to common shareholders of $56 million or 11 cents a share, it would have earned $12 million if preferred dividends - paid mainly to the U.S. Treasury for bailout money received through the Troubled Assets Relief Program, or TARP - were excluded. The bank subsidiary reported a profit of $12.4 million, its first quarter in the black since the third quarter of 2008.

SunTrust Bank's nonperforming assets ratio declined to 3.34% as of June 30 from 3.68% the previous quarter and 3.71% a year earlier. The bank's annualized ratio of net charge-offs to average loans declined to 2.48% from 2.87% in the first quarter, although it was up slightly from a year earlier.

The clear signs of a turnaround on credit quality encouraged a positive reaction from some analysts, although sentiment on the holding company's shares remained mixed, with 9 out of 35 analysts rating the company a buy, 18 hold and 8 sell, according to

Bloomberg

. Christopher Marinac of FIG Partners rates SunTrust a "market perform," saying that while shares appear attractive relative to earnings power, the company "must first wrestle its capital needs to position itself to repay TARP in the next 3 quarters and outline an intermediate-term game plan for paying down" its trust-preferred equity. Trust preferreds will eventually be excluded from regulatory capital calculations as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in July.

The second-largest bank headquartered in Georgia is

Synovus Bank

of Columbus, which is held by

Synovus Financial

(STI) - Get Report

. During the second quarter, the holding company consolidated 28 of its 30 separate bank charters into Synovus Bank, simplifying the holding company's credit and capital management while reducing regulatory examination costs. As of June 30, Synovus Bank had $32 billion in assets, representing nearly all the holding company's banking business.

Capital ratios improved, after a $769 million common offering the holding company completed in May, and an additional $266 in regulatory capital raised as part of a $334 million offering of $25 tangible equity units, comprised of a prepaid stock purchase contract and an amortizing note. Synovus Bank's total risk-based capital ratio was 13.63% as of June 30, which Guggenheim Securities analyst Jeff Davis termed "relatively strong."

Factoring in $14.4 million in dividends paid on preferred shares, mainly to the government for $968 million in TARP money, the holding company posted a second-quarter net loss to common shareholders of $242.6 million or 36 cents a share, as problem loan charges and provisions for loan loss reserves remained high.

Synovus's shares closed at $2.42 Wednesday, up 19% year-to-date. Davis has a neutral rating on the shares, including "potential for another common raise to redeem TARP by 4Q13, and impaired earnings power given significant contraction in the balance sheet," among reasons for the shares to drag peers. Davis also said his firm sees a "reasonable possibility" of a sale of the company in a few years, "once asset quality stabilizes and TARP is addressed."

Strongest Georgia Banks and Thrifts

Based on first-quarter financial reports, 11 Georgia institutions were rated B-plus (good) or above by Weiss Ratings:

Weiss Ratings uses a conservative ratings model, placing the greatest weight on capital strength, credit quality and earnings stability to assign ratings ranging from A+ (Excellent) to E-minus (Very Weak).

All 11 Georgia institutions with "recommended" ratings by Weiss are strongly capitalized, with all but one having total risk-based capital ratios of at least double the 10% required for most to be considered well capitalized by regulators. All 11 were profitable during the second quarter and only one had a nonperforming assets ratio over 2%.

Among banks on the recommended list held by actively traded holding companies,

Invesco National Trust Company

of Atlanta has the most name recognition, as a subsidiary of investment manager

Ivesco PLC

(IVZ) - Get Report

. Invesco National Trust Company earned $1.7 million during the second quarter, from its fee-based services, for a return on average assets of 5.15%, which is very strong earnings performance for any bank.

Georgia Bank Failures

There have been 11 bank failures in Georgia so far during 2010, putting the state in third place following

Florida

, which has had 20 and Illinois with 14 bank closures. Since the current wave of failures began in 2008, Georgia leads with 41 failures, followed by Florida and Illinois with 36 apiece.

All previous bank and thrift failures since the beginning of 2008 are detailed in

TheStreet's

interactive bank failure map:

The bank failure map is color-coded, with states having the greatest number of failures highlighted in red, and states with no failures in gray. By moving your mouse over a state you can see its combined 2008-2010 totals. Clicking on a state will open a detailed map pinpointing the locations of the failures and providing additional information about each one.

--

Written by Philip van Doorn in Jupiter Fla.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.