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.

The largest bank on the list that is held by a publicly traded holding company is Park Avenue Bank of Valdosta, which is the main subsidiary of PAB Bankshares ( PABK). In August, the holding company gave up on attempt to raise about $80 million in new capital through a public offering of common shares. The bank had $1 billion in assets as of September 30 and a nonperforming assets ratio of 20.84%, with a very weak total risk-based capital ratio of 5.92%.

Georgia's Largest Banks

Here are the 10 largest banks in the state, along with key metrics as of Sept. 30:
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The largest bank in the state is, of course, SunTrust Bank of Atlanta, which is the main subsidiary of SunTrust Banks ( STI). The bank swung to a profit during the third quarter, earning $114.4 million, with nonperforming assets and loan charge-offs declining for the second-straight quarter.

The holding company still owes the government $4.85 billion in bailout funds received in November 2008 through the Troubled Assets Relief Program, or TARP, and will need to provide the Federal Reserve a capital plan, including another round of stress tests, by January 7. Please see TheStreet's 10 Banks with Real Earnings Improvement for a detailed discussion of SunTrust's third-quarter results.

The second-largest Georgia bank is Synovus Bank of Columbus, which is held by Synovus Financial ( SNV). The bank's problem loans continued to increase during the third quarter and its nonperforming assets ratio was 4.92%. The holding company owes $967.9 million in TARP money and was also included among the 10 Banks with Real Earnings Improvement for the third quarter, as its repossessed real estate expenses declined significantly from a year earlier.

United Community Bank of Blairsville had $7 billion in assets as of September 30 and posted a third-quarter net loss of $235.5 million, however, most of the loss was from a non-cash goodwill impairment charge of $210.6 million. The bank's nonperforming assets ratio was 5.01% as of September 30, and operating losses continued, since the quarterly provision for loan loss reserves totaled $50.5 million. The bank is held by United Community Banks ( UCBI), which owes $180 million in TARP money.

The best-performing subsidiary of a publicly-traded holding company among the largest 10 Georgia banks during the third quarter of 2010 was BB&T Financial FSB, which is a relatively small subsidiary of BB&T Corp. ( UCBI), with $2.5 billion in total assets as of September 30, but earned $31.2 million during the third quarter, for an annualized return on average assets of 5.11%, with a nonperforming assets ratio of only 0.70%. The thrift subsidiary focuses on credit card lending and also has a subsidiary specializing in issuing retail gift certificates and a wholesale mortgage unit.

Ameris Bank of Moultrie (held by Ameris Bancorp ( ABCB) has acquired five failed Georgia banks over the past two years, with the most recent being Darby Bank & Trust and Tifton Banking Company, which were both shuttered by regulators on November 11.

Strongest Georgia Banks and Thrifts

Based on second-quarter financial reports, 15 Georgia institutions were rated B (good) or above by Weiss Ratings:
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The only bank on the list that is a subsidiary of an actively-traded public company is Invesco National Trust Co., which is a subsidiary of Invesco PLC ( IVZ).

Georgia Bank Failures

There have been 18 bank failures in Georgia so far this year, second only to Florida, with 28 failures, and ahead of Illinois, which has had 16 bank failures. Since the current wave of bank closures began in 2008, Georgia has had the most, with 48 institutions shuttered by regulators. Next is Florida, which has had 44 failures, then Illinois with 38 and California, with 34.

Please click here for a summary of last week's bank failures.

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 the states having the greatest number of failures highlighted in dark gray, and states with no failures in light green. By moving your mouse over a state you can see its combined 2008-2010 totals. Then click the state to open a detailed map pinpointing the locations and providing additional information for each bank failure.

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--Written by Philip van Doorn in Jupiter, Fla.

>To contact the writer of this article, click here: Philip van Doorn.

>To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

>To submit a news tip, send an email to: tips@thestreet.com.

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.

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