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Christopher Menkin
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Christopher "Kit" Menkin is of editor (, an internet trade publication for the finance/leasing industry. He has 46 years experience in the finance/leasing industry as well as being a founder of a commercial regional bank and serving on several company... More
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  • Good News For Lending---Banks With Highest Texas Ratios Decline 0 comments
    Sep 10, 2013 1:48 PM

    By Tahir Ali, SNL Financial

    A SNL Feature Article

    (click to enlarge)

    The number of banking institutions with Texas ratios over 100% continued to decline in the second quarter, according to data compiled by SNL. A total of 243 commercial banks and savings banks were above the 100% threshold as of June 30, 2013, down from the peak of 510 at the end of 2010. At March 31, the total was 260, and a year ago, there were 358 institutions with Texas ratios above 100%.

    Banks continue to fail at a slower rate than in recent years. With four banks closed in August, the count for 2013 closures so far remains relatively low at 20, compared to 51 closures during the whole of last year. Based on the pace of failures in prior years, the industry will most likely see more banks closed this year.

    Although a high Texas ratio does not guarantee a failure, the ratio is a good measure of a bank's ability to absorb future losses. SNL defines the Texas ratio as nonperforming assets plus loans 90 days or more past due, excluding delinquent government-guaranteed loans and other real estate owned covered by loss-sharing agreements with the FDIC, divided by tangible equity plus reserves.

    (click to enlarge)

    Community's Bank perched atop U.S. banks and thrifts with the highest adjusted Texas ratios, with a Texas ratio of 1,339.07%. The Bridgeport, Conn.-based bank first surpassed the 100% threshold at the end of 2012. Community's Bank was hit with a cease and desist order Feb. 17, 2010, which was later modified on April 27, 2011.

    Second on the list of banks with the highest Texas ratio is Millennium Bank NA, a unit of Millennium Bankshares Corp., with a ratio of 1,152.84% at June 30, down 10.86 percentage points, as the bank reported a decrease of $10 million in nonperforming assets from March 31. The Sterling, Va.-based bank was rated red, according to the Veribanc rating system as of March 31.

    Eastside Commercial Bank ranks third with a Texas ratio of 926.06% as of June 30. The Conyers, Ga.-based bank reported an aggregate equity and reserve balance of only $6.65 million; its nonperforming assets totaled nine times that. Eastside is one of 40 currently active institutions in Georgia with a Texas ratio above 100%. That's the highest number banks and thrifts with Texas ratio above 100% in any state in the nation. Next in line are Florida and Illinois with 26 institutions each.

    Decatur, Ark.-based Decatur State Bank reported a Texas ratio of 239.98%, the highest decrease of 363.56 percentage points since March 31.

    (click to enlarge)

    Parsons, Tenn.-based Community South Bank and Fort Myers, Fla.-based First Community Bank of Southwest Florida, third and eighth in prior-quarter rankings, were closed by regulators on Aug. 23 and Aug. 2, respectively. These institutions had Texas ratios of 887.89% and 777.58% as of June 30, respectively.

    (click to enlarge)

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

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