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Highest Texas Ratios At Banks

By Aarti Kanjani, SNL Financial

SNL defines the Texas ratio as the ratio of nonperforming assets plus loans 90 days or more past due, excluding delinquent government-guaranteed loans and OREO covered by loss-sharing agreements with the FDIC, to tangible equity and reserves.

Historically, banks operating with Texas ratios above 100% have tended to fail. Of the 195 banks and thrifts that had Texas ratios in excess of 100% as of Dec. 31, 2008, 135 had failed as of Dec. 13, 2012.

314 of the 7,192 active commercial and savings banks as of Dec. 14 operate with Texas ratios in excess of 100% at Sept. 30, compared to 332 at June 30, according to SNL Financial data. Most of these banks are small, and only 15 of the banks with Texas ratios greater than 100% as of Sept. 30 have more than $1 billion in assets.

The median Texas ratio for all commercial and savings banks was 14.73% at Sept. 30, down 80 basis points from June 30 and down 180 basis points from the year-ago quarter.

The largest bank with a Texas ratio above 100% was San Juan, Puerto Rico-based Doral Bank, with $7.70 billion in assets. Its Texas ratio stood at 132.16% at Sept. 30, down from 143.81% as of June 30.

University Place, Wash.-based Westside Community Bank had the highest Texas ratio amongst the operating commercial and savings banks: 966.67%, up from 617.58% in the second quarter. 26.19% of the company's total loans were past due or nonaccruing. The company's loans were mostly commercial and real estate loans. A group of investors have agreed to invest $5.7 million to acquire Westside Community in a deal announced Aug. 8, 2012. Westside Banking Co. is the bank's parent company.

Douglasville, Ga.-based Douglas County Bank had the second-highest Texas ratio on the list: 857.71%, up from 837.87% in the prior quarter. Douglasville, Ga.-based Thornton Holding Co. Inc. is the company's parent. Almost half of the bank's total loans are commercial real estate loans.

The largest quarter-over-quarter decline in the Texas ratio belonged to Chicago-based American Metro Bank, a subsidiary of American Metro Bancorp Inc. The bank's Texas ratio fell to 375.70% at Sept. 30, from 864.22% at June 30.

Four of the largest 30 banks with Texas ratios above 100% on the list are subsidiaries of Lansing, Mich.-based Capitol Bancorp Ltd.: Bank of Las Vegas, Sunrise Bank of Arizona, Pisgah Community Bank and Sunrise Bank. Capitol Bancorp has filed for bankruptcy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.