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Bank Health by State
The Texas Ratio has become the de facto way of gauging a bank's health. By aggregating banks by geography and calculating a weighted average Texas Ratio for each geographic region we can gain a understanding of what things look like on a more global scale.
There are several definitions of the Texas Ratio, but the quick and dirty is taking a bank's Adjusted Nonperforming Assets and dividing them by Tangible Equity and Loan Loss Reserves. I modified mine somewhat to include Restructured Loans in the Adjusted NPAs due to my experience working in a collection shop at Wells Fargo. A full definition of all the components can be found here.
The following analysis uses FDIC Call Report data from the 1st Quarter 2010 and is at the Bank Certificate level. I only looked at insitutions below $2 billion in assets to avoid the large multi-state banks. Please note that there is no way to get a "true" peformance by state, the best we can do is try to get an approximation by looking at "community banks".
The ten worst states:
A Texas Ratio above 75 is a close approximation of what gets a bank on the FDIC Watch List. Anything above 50 is considered "troubling".
The ten best states:
Yeah, a sample size of 11 or 18 isn't much to get excited about, but Massachusetts at 15.83, New Jersey at 19.40 and Texas at 19.92 are pretty impressive numbers.
A crappy map for the Lower 48:
A full listing of the states can be found in the Research Lab at BankRegData.com. The Lab is on the middle right of the home page and contains a handful of PDFs that you are free to download, use and distribute. These are quick analysis that I'm putting together to determine if I'm going to build web pages for.
A final teaser: the top 30 bank markets sorted descending on Texas Ratio:
Must say I'm a little shocked that you'd put Detroit & Seattle in the same sentence when discussing the worst markets in the U.S.
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any suggestions,,as to which public banks to short,,,??
Is this data available for credit unions?
I'm in WA, but have banked with credit unions since 1994.
WSECU and BECU come to mind as big ones in WA.
Any pointers to credit union data would be welcome.
The Credit Union data is at:
http://www.ncua.gov/
I'm not sure what the field names for the Texas Ratio are in the NCUA dataset.
Thank you.
If financial institutions with assests above $2 billion were excluded, which in turn leaves out 70% +/- of total assets, performing or not... I'm thinking 3 states in particular are especially not worthy of the Texas ratio they're sitting at and instead are masking their "turd in the punch bowl" status...
Think: North Carolina (BofA), California (Wells), and everyones favorite casino state, no not Nevada ladies and gentleman... New York (Citi & JPM).
Ironically enough the Northeast has some of the lowest Texas ratios in the country, this doesn't coincide with the close proximity to the FRBNY does it?
bmoreland,
Thanks for the excellent post!
For best accuracy with just three of the greater Detroit area communities, you should include Dearborn instead of Warren.
If your time is unlimited (small joke), you need to include towns like Royal Oak, Pontiac, Farmington, Sterling Heights(fundamentally attached to Warren) and the Bloomfield Hills, Birmingham and Rochester areas as well. From the financial standpoint, Metro Detroit no longer really represents the Greater Detroit area.
I use the Core Based Statistical Area (CBSA) which is the Government's next generation MSA. The label is just the larger of the communities in the area. A full list of the cities for Detroit:
Query1
Query1 cityC Bingham Farms Birmingham Bloomfield Hills Capac Clarkston Dearborn Detroit Eastpointe Farmington Hills Hamtramck Howell Lapeer Milford Mount Clemens Novi Oxford Plymouth Port Huron Saint Clair Southfield Sterling Heights TroyI've seen many banks with texas ratio's way less than 50 shuddered over the last 2 yrs.
"shuddered" is an interesting description...
shuttered is probably what you meant.
Sure...shuttered, closed, seized, toast, kaput. Spelling is not my high point
How does HSBC fit into the bad bank picture? I understand the US bank problems but HSBC is international. Are there different rules that apply?
I've had a front row seat for three failures so far (I'm a Washington resident):
First, WAMU (my personal bank) went belly up so, being pissed at having to deal with a faceless NYC corporate banking behemoth to deal with (Chase - at least WAMU was a local banking behemoth), I moved everything into American Marine Bank, a local bank with only 11 offices. Oops. They went belly-up several months ago, but at least they were purchased by Columbia Bank - HQ'd in Tacoma, and "allegedly" in good financial shape. Fortunately, there was no direct inconvenience or cost to me for WAMU or AMB.
The primary bank that my employer uses (Frontier Bank) also went belly up. Fortunately my employer is spread around amongst several banks and hasn't really suffered any significant costs or cashflow hold-ups due to this.
Heh heh. Same here. Headed for cover with a local bank; FDIC notice logging in one morning a month or so ago. "Whidbey Island Bank welcomes you; your money is safe here now."