Based on the pace of failures so far in 2013, this year will see the closure of roughly 26 institutions. In the last few years, banks with adjusted Texas ratios over 100% have remained operating for longer periods prior to closure. Of the 51 institutions that failed in 2012, 33 posted adjusted Texas ratios of over 100% for more than five quarters prior to failure. This year, 16 of the 23 failed banks, as of Nov. 11, posted adjusted Texas ratios above 100% for more than five quarters prior to failure.
The Texas ratio is a good measure of a bank's ability to absorb future losses, and a Texas ratio over 100% is a widely regarded threshold at which banks tend to fail. SNL defines the adjusted 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.
Failed Banks: Class of 2013
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