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Saturday, May 01, 2010 12:50 PM


Texas Ratios, Capitalization Ratios, 30 Day Late Loans of Recently Failing Banks


Inquiring Minds just may be interested in the Texas Ratios, capitalization ratios, and percentages of 30 day late loans or higher at recently failed banks.

Texas Ratio Definition

The Texas ratio is a measure of a bank's credit troubles. Developed by Gerard Cassidy and others at RBC Capital Markets, it is calculated by dividing the value of the lender's non-performing assets (Non performing loans + Real Estate Owned) by the sum of its tangible common equity capital and loan loss reserves.

In analyzing Texas banks during the early 1980s recession, Cassidy noted that banks tended to fail when this ratio reached 1:1, or 100%. He noted a similar pattern among New England banks during the recession of the early 1990s.
Bank Failures 2010-04-30

Westernbank Puerto Rico: 136%
Total Capital: 8%
Total Capital% minus (30+ days late or more / Total Assets): -7%

Eurobank Puerto Rico: 213%
Total Capital: 4%
Total Capital% minus (30+ days late or more / Total Assets): -10%

R-G Premier Bank of Puerto Rico: 270%
Total Capital: 6%
Total Capital% minus (30+ days late or more / Total Assets): -19%

CF Bancorp (MI): 421%
Total Capital: -1%
Total Capital% minus (30+ days late or more / Total Assets): -10%

Champion Bank (MO): 344%
Total Capital: 2%
Total Capital% minus (30+ days late or more / Total Assets): -19%

Champion Bank (MO): 194%
Total Capital: 2%
Total Capital% minus (30+ days late or more / Total Assets): -6%

7 Bank Failures Cost FDIC About $7.4 Billion

The above 7 bank failures will take a $7.4 billion bite out of FDIC deposit fund.

Emergency Powers Stabilize Puerto Rico Banks

Inquiring minds are reading Puerto Rico Banks Seized as Regulators Waive Deposit Limits.
Regulators used emergency powers to stabilize Puerto Rico’s banks, putting almost a third of the U.S. territory’s deposits in Popular Inc. and giving control of another lender to a Canadian firm.

Deposit limits were waived to allow Banco Popular of Puerto Rico to hold $19.5 billion, or 31.4 percent of the island’s total, after its purchase of Westernbank Puerto Rico, the Federal Reserve said yesterday in a statement. Three banks on the island were shut at a cost to the Federal Deposit Insurance Corp. of $5.3 billion, the agency said in statements posted on its website. Combined with four other banks, the closures cost the deposit-insurance fund a total of $7.3 billion.

“The Puerto Rican banking system is somewhat unique” in being concentrated among a small number of lenders, FDIC Chairman Sheila Bair said on a conference call with reporters. “We think this will help the banking system in Puerto Rico and improve its capacity to provide credit support for the economy.”
Bank Failures 2010-04-23

New Century Bank (IL): 320%
Total Capital: 3%
Total Capital% minus (30+ days late or more / Total Assets): -21%

Citizens Bank & Trust Company Chicago (IL): 500%
Total Capital: 3%
Total Capital% minus (30+ days late or more / Total Assets): -29%

Broadway Bank (IL): 476%
Total Capital: 3%
Total Capital% minus (30+ days late or more / Total Assets): -15%

Amcore Bank NA (IL): 155%
Total Capital: 3%
Total Capital% minus (30+ days late or more / Total Assets): -8%

Lincoln Park Savings Bank (IL): 404%
Total Capital: 2%
Total Capital% minus (30+ days late or more / Total Assets): -18%

Peotone Bank & Trust Company (IL): 314%
Total Capital: 3%
Total Capital% minus (30+ days late or more / Total Assets): -12%

Wheatland Bank (IL): 601%
Total Capital: -1%
Total Capital% minus (30+ days late or more / Total Assets): -44%

Winners and Losers

The losers (failed bank) all had high Texas ratios. 12 of the 14 failures in the last two weeks had Texas Ratios over 200%. Wheatland bank had a Texas Ratio of 601%, negative reported capital, and an astonishing 43% of loans 30 days late or more.

Wow! Congratulations to Wheatland for such a remarkable record. It's not easy to be that inept!

How pray tell did the FDIC let this go on so long?

Banks with low Texas Ratios are generally picking up the assets of failed banks. For example, Northbrook Bank & Trust (IL) with a Texas Ratio of 13% took over Lincoln Park Savings Bank.

Wheaton Bank & Trust Company (IL) with a Texas Ratio of 20% took over Wheatland.

Texas Ratio List - How Safe Is Your Bank?

To find the Texas Ratio for over 7,500 banks in the country, please see How Safe Is Your Bank? Texas Ratios of 7,500+ Banks

Inquiring minds might also be interested in an Interactive Map of Worst Banks in the U.S. by Texas Ratio, Non-Performing Assets, and Total Capital.

Recent bank failures may not be noted as such in the above interactive map.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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