Some area banks’ fi­nan­cial health scores low

Ge­or­gia banks with New­ton branches af­fected by bad hous­ing loans

The Covington News - - Local News - By Rachel Oswald

Bur­dened by a long string of bad hous­ing loans that they can’t shake off, more than a hand­ful of Ge­or­gia banks have been left with a tee­ter­ing bal­ance sheet of debt to cap­i­tal and sev­eral of th­ese banks have branches in New­ton County.

The Com­mu­nity Bank, First Ge­or­gia Com­mu­nity Bank and McIn­tosh Com­mer­cial Bank all have ex­cep­tion­ally high Texas ra­tios. The Texas ra­tio is a barom­e­ter by which the fi­nan­cial health of a bank or thrift is judged by looking at the ra­tio of bad loans and as­sets to the cap­i­tal and re­serves set aside to cover po­ten­tial losses.

Christo­pher Marinac, di­rec­tor of re­search and co-founder of At­lanta-based FIG Part­ners, a bro­ker firm spe­cial­iz­ing in bank and thrift stocks, said the Texas ra­tio first came to pop­u­lar­ity in the early 1990s in Texas when it was used by bank reg­u­la­tors to screen banks dur­ing the sav­ings and loan cri­sis

“It’s a mea­sure of how healthy a bank is and it’s driven by how many prob­lem loans you have,” Marinac said.

In metro At­lanta, the me­dian Texas ra­tio level of banks is 33 per­cent said Marinac while the av­er­age level is 54 per­cent. Any level be­low 40 per­cent is gen­er­ally con­sid­ered to be a healthy ra­tio to have. Banks get into trou­ble when their ra­tios climb past 60 per­cent he said. To have a ra­tio above 100 per­cent is a cause for se­ri­ous con­cern.

The Com­mu­nity Bank has one of the high­est Texas ra­tios in Ge­or­gia at 237 per­cent. Other banks with Texas ra­tios greater than 100 per­cent that have branches in New­ton County in­clude First Ge­or­gia Com­mu­nity Bank with a ra­tio of 199 per­cent and McIn­tosh Com­mer­cial Bank with a ra­tio of 113 per­cent,

“Th­ese com­pa­nies that we’re talk­ing about are way above the norm,” Marinac said.

How­ever, Jan Teal, chief ex­ec­u­tive of­fi­cer of McIn­tosh Com­mer­cial Bank, said she didn’t think the Texas ra­tio was a “to­tally fair re­flec­tion of the bank­ing in­sti­tu­tion.”

“Those num­bers may not be as we may like them to be but McIn­tosh re­mains well cap­i­tal­ized. We also have strong loan loss re­serves set aside,” Teal said. “All of that keeps us po­si­tioned ex­tremely well to work through this chal­leng­ing eco­nomic time we’re in.”

Marinac said the Texas ra­tio is a good re­flec­tion of an in­di­vid­ual bank’s over­all health. If a bank is a sub­sidiary and has ac­cess to a greater pool of cap­i­tal than just its own to draw down its debt, that in­for­ma­tion is in­cluded in the cal­cu­la­tion of the ra­tio he said.

Banks that have high Texas ra­tios have tended to fo­cus heav­ily on the hous­ing mar­ket he said.

“I would say that most banks sim­ply had too much con­cen­tra­tion,” Marinac said. “What we’ve seen is a lot of con­cen­tra­tion in construction and res­i­den­tial real es­tate.”

While some Cov­ing­ton branch banks have high Texas ra­tios, oth­ers re­main in strong fi­nan­cial shape. New­ton Fed­eral Bank has a Texas ra­tio of only 35 per­cent and BB&T has a ra­tio of only 26 per­cent.

Cov­ing­ton na­tive Rob Fowler, a for­mer chair­man and CEO of Main Street Banks be­fore it merged with BB&T, said even though BB&T re­mains as “strong as an ox to­day,” the cur­rent fi­nan­cial cri­sis is the worst one he has ever seen. Still he pre­dicted the cur­rent eco­nomic re­ces­sion would not be as se­vere as the Great De­pres­sion of the 1930s.

“This one won’t be as bad be­cause we’ve got so many gov­ern­ment [pro­grams] that it keeps it afloat,” said Fowler who now serves on a BB&T board of direc­tors.

Fowler blamed the re­ces- sion on “Wash­ing­ton urg­ing us to make more [sub­prime] loans to peo­ple who frankly couldn’t af­ford them, the peo­ple who bought the homes that they prob­a­bly knew they couldn’t af­ford” and the Wall Street ty­coons who per­pet­u­ated the cy­cle by buy­ing, slic­ing up and sell­ing off the sub­prime mortgages at overly in­flated prices.

“We’ve hit a brick wall on that,” Fowler said. “In my old opin­ion, it’s go­ing to take three years to see our way out of it.”

Marinac said the credit crunch un­der­way will likely con­tinue for some time as long as banks are re­luc­tant to lend to bor­row­ers whose fi­nan­cial his­tory they’re un­cer­tain of.

“There is cer­tainly a fear that things [will] get worse and then com­pa­nies can’t trust each other’s in­for­ma­tion,” Marinac said. “I think that loan rates are go­ing up. Some banks are not lend­ing be­cause they don’t have any room to lend.”

Teal said McIn­tosh Com­mer­cial, which re­cently opened a new two-story Ge­or­gian style branch on U.S. High­way 278, plans to be in New­ton County for the long haul.

“Yes, it’s a chal­leng­ing time but we’re po­si­tioned to work [through] this and we’re com­mit­ted to be­ing part of that Cov­ing­ton busi­ness com­mu­nity,” she said.

Teal said she be­lieves that New­ton County’s lo­ca­tion in metro At­lanta, an area of the United States that con­tin­ues to grow de­spite all gloomy eco­nomic fore­casts, bodes well for the county’s abil­ity to bounce back quicker than other parts of the coun­try.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.