Thursday, November 5, 2009

Don't Bank on It


We all remember the failure of Arkansas National Bank in Bentonville, and its closure in 2008 by the Comptroller of the Currency for unsafe and unsound banking practices, mostly in the real estate portfolio. Now, Metropolitan National Bank announced its fourth straight quarterly loss ($54.8 million in 2009), much of which is blamed on problem real estate lending in Northwest Arkansas, evidenced by the foreclosures on bad loans filed against Gary Combs, Bob Gaddy Trust, and Dirk Van Veen and his Risky Heights partners.

Bloggers who know far more about the banking situation that I do have expressed concerns about the future of Metropolitan National Bank, because it is "short $20 million in equity capital and also seriously short of the needed reserves to cover its growing delinquent loan portfolio. ...The bank’s problem loan-to-asset ratio is 116 percent. The benchmark for failed banks is roughly 100 percent." This is an issue of public concern, because the bank took $25 million in TARP funds in the final days of the Bush Administration, and the taxpayers have an interest in getting it back.

The Banktracker Investigative Reporting Workshop provides important information about the "troubled asset ratio" of local financial institutions that you won't read in the newly merged Stephens-Hussman Media Conglomerate and Print Monopoly "serving" Northwest Arkansas. "While [the TAR] is not an official FDIC statistic, nor is it intended as a definitive predictor of the likelihood of bank failure, the troubled asset ratio apparently is a strong indicator of severe stress inside a bank because it shows the bank's ability to withstand loan losses. Of the 92 banks that have failed so far this year, 84 had troubled asset ratios of 100 percent or greater in the final quarter they reported data before they closed."

Let's take a look at the "troubled asset ratio" of other Northwest Arkansas banks as of June 30, 2009. Keep in mind that the national average is 13.0.

Parkway Bank (Rogers) 132.5
Pinnacle Bank (Rogers) 83.7
Legacy National Bank (Springdale) 78.9
Bank of Gravette 57.7
Bank of Fayetteville 43.5
Simmons First Bank of NWA
34.2
Arvest Bank 28.9
Decatur State Bank 28.3
Signature Bank of Arkansas (Fayetteville) 25.9 *
United Bank (Springdale) 24.0
National Average for all banks 13.0
Bank of Arkansas (Fayetteville) 12.7

Signature Bank is owned in part by White River Bankshares, which received $16.8 million in TARP funds.

Bank of Rogers had a troubled asset ratio of 56.3 in June 2008, before it merger with FNB of Fort Smith, which has a 30.6 ratio in June 2009.

Current data for Chambers Bank of North Arkansas was not available. Holding company Chambers Bankshares received $19.8 million in TARP funds.

Last Friday, nine U.S. banks were officially declared insolvent by the FDIC, bringing the total this year to 115 banks. Here's hoping that the local economy improves. If not, be glad that the federal government has socialized the losses and will cover your loss due to bank failure up to $250,000 per account per bank.

5 comments:

  1. Good job Jonah! Thanks for the info.

    Bad job Stephens-Hussman Media Conglomerate and Print Monopoly! Thanks for nothing.

    ReplyDelete
  2. What is your source on the ratios?

    The link is not helpful.

    ReplyDelete
  3. Bernie madeoff with the moneyNovember 5, 2009 at 11:15 PM

    CH, How is the link not helpful? Looks black and white to anyone who reads the charts.
    They also back up the ratios in their research info.
    The development community seems to think this is the way to make money, pay themselves big consulting fees and not pay back the banks.
    Can you spell fraud?

    ReplyDelete
  4. Parkway Bank was ordered by the FDIC last year to come up with additional capital and this year closed two of its three NWA offices.

    ReplyDelete
  5. Great blog! Thank you for the public information we can't get elsewhere around here.

    ReplyDelete