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Texas Ratios Mostly Improve For Lenders

2 min read

Seven Arkansas lenders recorded Texas Ratios higher than 50 during the third quarter in 2014.

Four of those improved their balance sheet by year’s end to fall below that line.

The ratio compares the number of loans at risk and the amount of Other Real Estate Owned (OREO) with the amount a lender has on hand to cover any losses, in the form of equity capital and loan loss reserves.

Only one of the seven produced a worsening Texas Ratio: Allied Bank of Mulberry.

The $111 million-asset lender’s parent company, Acme Holding, is 10 months into a Chapter 11 bankruptcy reorganization that could be converted to Chap-ter 7 liquidation if creditors have their way.

As of Dec. 31, Allied Bank carried more than $14.8 million in noncurrent loans and OREO with combined equity and loan loss allowances of more than $11 million.

The bank lost $1 million during 2014, an improvement over its $4.8 million loss in 2013.

The two biggest Texas Ratio reductions of the group were registered by Pinnacle Bank of Rogers (more than 26 percentage points) and One Bank & Trust of Little Rock (nearly 23 percentage points).

Pinnacle Bank tallied a year-end Texas Ratio of 161.74 percent, the highest in Arkansas. The $89 million-asset lender ended 2014 with a $472,000 profit, compared with $158,000 in 2013.

“We still have work ahead us,” said David Bordovsky, president of Pinnacle Bank. “But the market conditions have improved, so we were able to capitalize on it. There are more buyers in the real estate market, and people are in a positive mood.”

During that 12-month period, the bank’s portfolio of property that had been recovered from bad real estate loans was reduced from more than $21.8 million to less than $17.7 million.

Pinnacle got shed of more than $2.3 million worth of OREO between the third and fourth quarters alone.

Cash resolutions on nonaccrual loans and sale of OREO powered One Bank’s improved Texas Ratio.

“Nonperforming assets went from $13.7 million to $7.8 million,” said Jerry Pavlas, CEO of One Bank. “That’s a 43 percent drop.”

Between the third and fourth quarters, the bank increased its total equity capital by 5.7 percent to more than $15.5 million while reducing its OREO from $4 million to less than $2.7 million.

The $343 million-asset lender finished 2014 with a Texas Ratio of 36.41 and a $412,000 profit after enduring a $6.6 million loss during 2013.

Tracking Texas Ratios

  Sept. 30, 2014 Dec. 31, 2014 Total Assets*
Pinnacle Bank, Rogers 188.17 161.74 $89,994
Allied Bank, Mulberry 123.93 134.25 $111,538
First State Bank, Lonoke 66.46 63.71 $254,790
One Bank & Trust, Little Rock 59.37 36.41 $343,464
Chambers Bank, Danville 52.50 45.52 $682,247
Signature Bank of Arkansas, Fayetteville 52.27 47.05 $504,456
Decatur State Bank 50.34 ** $128,813

*In thousands.
**Became part of Grand Savings Bank of Grove, Oklahoma, after $6 million sale.

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