NEW YORK ( TheStreet) -- Georgia banks saw significant improvements during the first quarter, with 81% institutions in the Peach Tree State showing profits, up from less than 60% in the fourth quarter. The improvement was even stronger than the trend seen for Florida banks, although Georgia still leads all states with 28 undercapitalized institutions on TheStreet's first-quarter Bank Watch List, with Florida in second place, with 20 undercapitalized banks. The largest Georgia bank to fail so far this year was The First State Bank of Stockbridge, which was shuttered by state regulators in January, and sold by the Federal Deposit Insurance Corp. to Hamilton State Bank of Hoschton, Ga. Since the 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 as of March 31, according to data supplied by Thomson Reuters Bank Insight:
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 institution with the highest level of nonperforming assets as of Dec. 30 was Security Exchange Bank of Marietta, which had $157 million in total assets and a rather astounding nonperforming assets ratio of 45.74%. The bank was undercapitalized, with a total risk-based capital ratio of 3.97%, and is still operating under a March 10, 2009 cease and desist order from the FDIC and Georgia regulators, requiring the bank to raise sufficient capital to achieve a total risk-based capital ratio of 10%, within 60 days of the order.