6 Data Points on the State of Banking

by: Eric Fox

The Office of Thrift Supervision [OTS] released its first quarter report on the 1,276 thrifts that it supervises. The report showed the effects of the deteriorating credit cycle on bank balance sheets. We have written previously on this quarterly report here, and it is important in monitoring the state of the industry.

All data is as of 3/31/2008.

1) Average capital ratios are still strong, some even increased from the end of 2007. There are still outliers on the ratio scale but it is encouraging to see overall strength:

Total Risk Based Capital Ratio - 14.6%
Tier One Risk Based Capital Ratio - 12.5%
Equity Capital Ratio - 9.1%
Tier One Core Capital Ratio - 8.5%

2) The industry has reserved 2.01% of its assets, or $7.6 billion for the coming storm of losses.

3) Troubled assets are now 2.06% of assets. This category includes noncurrent (90 days or more past due), nonaccrual status loans and other real estate owned [OREO]. This has not yet peaked and will continue to increase during 2008.

4) The total percent of non current loans continues to rise, reaching 1.78% of assets. The most problems are coming in the category of Construction and Land loans where 6% of all loans are non current. However, this is only 3.5% of all loans held by thrifts. Unfortunately, 1-4 Family loans represent 49.4% of all loans held by thrifts, and delinquencies here are at 2.85% and rising.

5) There are another 1.33 percent of total loans past due by 30 to 89 days. Many of these loans will eventually filter into the non current and OREO categories.

6) Another "bright" spot, if you can use that term, is that the number of banks on the OTS watch list is only at 12. For a bank to qualify for this list it must have a CAMELS rating of 4 or 5. The CAMELS rating is a ratings system that examines capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk. In 1992, the number of banks on this watch list was 203, or 11% of all thrifts.

Read the Full Report by clicking below:
Press Release
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