SunTrust Profits Among Wilting Georgia Banks

ATLANTA ( TheStreet) -- Georgia's banking industry continues its shakeout, as the state continues to lead with the highest number of bank failures and undercapitalized institutions. Meanwhile, most of the largest players in the state are turning a profit.

According to data provided by SNL Financial, 38 of Georgia's 255 banks and thrifts were undercapitalized per ordinary regulatory guidelines as of March 31, far ahead of second-place Florida, which had 20 institutions included on TheStreet's first-quarter Bank Watch List.

Regulators have shuttered 12 Georgia banks so far in 2011.

Since the TheStreet's first-quarter Watch List is based solely on capital ratios, we take a different approach on our quarterly coverage of banks in key states, by looking at 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. Please click the image to expand the table.

Nonperforming assets (NPA) include nonaccrual loans, loans past due 90 days or more and repossessed assets. Government-guaranteed loan balances are excluded. The ratio of net charge-offs to average loans is annualized. The total risk-based capital ratios needs to be at least 8% for most institutions to be considered adequately capitalized by regulators and 10% for most to be considered well-capitalized. Most of the undercapitalized banks on the above list are operating under regulatory orders to achieve and maintain total risk-based capital ratios higher than 10%.

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 March 31 was Douglas County Bank of Douglasville. The bank was included in TheStreet's first-quarter Bank Watch List, because its total risk-based capital ratio was 6.86%, which was below the 8% required for most banks to be considered adequately-capitalized under regulatory guidelines.

The largest Georgia bank with nonperforming assets exceeding 15% of total assets as of March 31 was First State Bank of Stockbridge, with $575 million in total assets. The bank has been unable to comply with a May 2010 consent order with state regulators and the Federal Deposit Insurance Corp. to achieve and maintain a total risk-based capital ratio of at least 10%.

Georgia's Largest Banks

Here are the 10 largest banks in the state, along with key metrics as of March 31:

SunTrust Bank of Atlanta is, by far, the largest institution in the state, and is the main subsidiary of SunTrust Banks ( STI). Based on the most recent deposit market share data provided by the Federal Deposit Insurance Corp., SunTrust Bank had a 16.6% deposit market share in Georgia as of June 30, 2010, followed by Wells Fargo Bank NA (the main banking unit of Wells Fargo ( WFC)), with a 15.2% market share; Bank of America NA (the largest subsidiary of Bank of America ( BAC)), with an 11.2% deposit market share; and Synovus Bank of Columbus, Ga., in fourth place with a 7.6% deposit market share in its home state.

SunTrust Bank reported its third-straight quarterly profit, earning $94.7 million in the first quarter, although its return on average assets (ROA) was a low 0.24%. The bank's provision for credit losses increased to $509.4 in the first quarter, from $451.3 million a year earlier.

During the first quarter, the holding company completed a $1 billion common equity offering and fully redeemed $4.85 billion in preferred shares held by the government for bailout funds received in November 2008 through the Troubled Assets Relief Program, or TARP.

The second-largest Georgia bank is Synovus Bank (held by Synovus Financial ( SNV)), which reported a first-quarter net loss of $57.4 million, although this was much lower than the bank's fourth-quarter loss of $153.9 million. The parent company was included Tuesday in TheStreet's 10 Bank Stocks Under $5 With Up to 91% Upside, based on analysts' consensus price targets.

Standard and Poor's on Wednesday upgraded its outlook on Synovus Financial to "stable", while affirming its "BB-" long-term counterparty credit rating for the holding company and saying Synovus's capital position was weak in comparison to peers.

United Community Bank of Blairsville is the third-largest Georgia institution, with $8 billion in total assets as of March 31. The bank is the main subsidiary of United Community Banks ( UCBI), which owes $180 million in TARP money. The holding company raised $380 million in common equity through a private offering during the first quarter. United Community Bank posted a first-quarter net loss of $140.9 million, mainly because of the holding company's aggressive actions to reduce nonperforming assets through bulk sales and transfers to held-for-sale, which resulted in $211.1 million of the holding company's $231.6 million in charge-offs during the first quarter.

The best-performing subsidiary of a publicly-traded holding company among the largest 10 Georgia institutions during the first quarter of 2011 was once again BB&T Financial FSB, which is a smaller subsidiary of BB&T Corp. ( BBT), with $2.5 billion in total assets as of March 31. BB&T Financial FSB earned $28.5 million during the first quarter, for an ROA of 4.49%. The thrift subsidiary focuses on credit card lending and also has a subsidiary specializing in issuing retail gift certificates and a wholesale mortgage lending unit.

Strongest Georgia Banks and Thrifts

Based on fourth-quarter financial reports16 Georgia institutions were rated B (good) or above by Weiss Ratings:

The only bank on the list that is a subsidiary of an actively-traded public company is Invesco National Trust Co., which is held by Invesco PLC ( IVZ).

Thorough Bank Failure Coverage

Since the current wave of bank closures began in 2008, Georgia has had the highest number of failures, with 63 institutions closed by regulators. Next is Florida, which has had 50 failures, then Illinois with 42 and California, with 37.

All 366 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 2008-2011 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.

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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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