How healthy is your bank? The Texas ratio.

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rn79870
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How healthy is your bank? The Texas ratio.

Postby rn79870 » Sun Jul 20, 2008 4:39 am

From CBS evening news last night - 07/19/2008

(CBS) The surprise failure of IndyMac Bank last Friday has many Americans wondering about the health of their own banks, reports CBS News correspondent Priya David.

"The economy has slowed down and it has caused problems for some banks," said Paul Mersky, chief economist for the Independent Community Bankers of America.

The Federal Deposit Insurance Corporation, which oversees the nation's 8,500 banking institutions is reportedly watching 90 additional banks.

But some Wall Street analysts using a little known formula called the "Texas ratio" say as many as 150 financially strapped institutions could fall over the next 18 months.

The Texas ratio is calculated by dividing the institution's bad and delinquent loans by its cash on hand plus money set aside to cover loans that go bad. A ratio of 100 or higher means a bank is in deep financial distress. IndyMac's recent Texas ratio was 116.

Other banks and savings institutions' Texas ratios, once closely held by banking industry insiders, are now leaking to the public.

CBS News has obtained a list compiled just last month of 50 institutions, many with ratios higher than IndyMac's. (See lists below)

Those with the highest Texas ratios are smaller, community banks such as Colorado Federal Savings Bank, with a Texas ratio of 709; Integrity Bancshares in Georgia, with a ratio of 371; Stockgrowers State Bank in Kansas has a 369; and Mesilla Valley Bank in New Mexico, with a 362.

"If you are a shareholder, if you are a borrower who wants future loans, then you should be concerned," said Lawrence White of the NYU Stern School of Business.

But for most customers, "there is no alarm out there for consumers with money in community banks," said Mersky.

Mersky points out individual deposits up to $100,000 are federally insured, so if a bank fails, most consumers' accounts are protected.

"Certainly the consumer has a lot to worry about," said Mersky. "But one thing they don't have to worry about is secured deposits in community banks."

But only to a point. That $100,000 guarantee is per person, so for people with more than that amount in any account, it's best to move some of it to a different bank to protect all the assets.





http://www.cbsnews.com/stories...story


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Re: How healthy is your bank? The Texas ratio. (rn79870)

Postby smockers83 » Sun Jul 20, 2008 12:42 pm

All very interesting, but why does it have to be called the Texas ratio? Why not something financial like the Wall Street ratio, or the NYC ratio, the Omaha ratio, the CME ratio, the AMEX ratio, the S&P ratio. Alright I'm done.

As the article points out, people with share deposits and other government-backed deposits really have nothing to worry about. And for telling people now that they should move their money around if they have more than $100,000 in an account, shouldn't they have known that from the beginning? And how many people really have $100,000 in cash? Hardly any small business can keep $100,000 in cash.

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Re: How healthy is your bank? The Texas ratio. (rn79870)

Postby srellim234 » Sun Jul 20, 2008 7:40 pm

PFF, a local bank here that is on the list, agreed in June to merge with FBOP Corp.

http://www.vvdailypress.com/ne....html

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Postby AZhitman » Mon Jul 21, 2008 8:04 pm

Credit Unions FTW.

Notice there's a LOT of GA / KS / FL banks?

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Re: How healthy is your bank? The Texas ratio. (rn79870)

Postby Zjay626 » Wed Jul 23, 2008 4:07 pm

good info

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Re: (AZhitman)

Postby WDRacing » Wed Jul 23, 2008 4:26 pm

AZhitman wrote:Credit Unions FTW.

Notice there's a LOT of GA / KS / FL banks?
BOA, USAA FTW...

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Re: How healthy is your bank? The Texas ratio. (Zjay626)

Postby AZhitman » Wed Jul 23, 2008 5:12 pm

Zjay626 wrote:good info
Are you looking to increase your post count?

If so, I'll be glad to reset it to zero.

Posts with something to contribute are welcome... I'm not seeing those yet.

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Re: How healthy is your bank? The Texas ratio. (AZhitman)

Postby Eikon » Wed Jul 23, 2008 5:18 pm

I already reset him to 1 after he bumped a 3 year old fantasy football thread to tell me "good luck".

He apparently doesn't get it.


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