Georgia banks with a high ‘misery index’

The list of Georgia banks with a high misery index known as the “Texas ratio” got much longer in the fourth quarter due to mounting problem loans and other challenges.

By the end of the year, Georgia had 42 banks with Texas ratios over 100, a measure that some industry analysts say indicates which financial institutions face a higher risk of insolvency. The list totaled 30 institutions at the end of September.

But subsequent bank failures later shortened both lists. Four Georgia banks failed after the third quarter ended, bringing the state’s total failures last year to five.

One financial institution, FirstBank Financial Services in McDonough, has failed this year, since the state’s banks reported their fourth-quarter financial results.

Atlanta bank consulting firm FIG Partners produced the updated list based on the fourth-quarter numbers.

A banking industry analyst developed the Texas ratio during the savings and loan crisis in the 1980s as a way to pick out financial institutions with the biggest potential problems. It compares a bank’s total problem loans, foreclosed properties and other troubled assets to its total cash reserves and other funds that are available to absorb potential losses.

The theory is that if a financial institution’s problem loans are 100 percent of more of its cash and other reserves, there’s a higher chance the bank will become insolvent.

However, bankers and other people in the industry argue that the Texas ratio gives an incomplete measure of a bank’s health, partly because it doesn’t reflect bank managers’ options to cut costs, raise new capital and sell foreclosed properties and other assets to increase reserves.

David Stovall, chief executive of Clarkesville-based Habersham Bank, said he has been able to raise capital and sell foreclosed assets, unlike many institutions that failed during the savings and loan crisis.

When the Texas ratio was developed, “the underlying collateral was oil equipment rusting in fields,” said Stovall, whose bank’s Texas ratio has exceeded 100 percent in recent quarters.

For Habersham Bank, “the underlying collateral is homes. … We are in fact selling at no further loss,” said Stovall.

He said Habersham Bank also raised $3 million in additional capital from one of its previous shareholders in the fourth quarter, but it also reclassified more delinquent loans as problem assets, causing its Texas ratio to go up.

“If you take an isolated number like the Texas ratio by itself, it’s not the whole picture,” said Bryan F. Bell, a veteran bank executive from C&S Bank and Regions who retired in 2005. However, Bell, who occasionally works as a turnaround consultant, added that he uses the list to look for prospective clients.

Last week, he was named interim chief executive of Neighborhood Community Bank in Newnan, which had a Texas ratio of 218 percent, shortly after the previous CEO resigned.

Bank Location 4Q 3Q

FirstBank Financial Services McDonough 393% 276%

Omni National Bank Atlanta 379% 219%

First Piedmont Bank Winder 373% 189%

First Security National Bank Norcross 340% 273%

Security Bank of Gwinnett County Suwanee 335% 228%

FirstCity Bank Stockbridge 315% 281%

Southern Community Bank Fayetteville 311% 209%

Freedom Bank of Georgia Commerce 241% 175%

Security Bank of North Metro Woodstock 236% 181%

Chestatee State Bank Dawsonville 231% 118%

McIntosh Commercial Bank Carrollton 229% 139%

Neighborhood Community Bank Newnan 218% 186%

American Southern Bank Roswell 176% 137%

Gordon Bank Gordon 175% 149%

United Security Bank Sparta 172% 118%

Habersham Bank Clarkesville 167% 115%

First National Bank of Georgia Carrollton 166% 125%

Buckhead Community Bank Atlanta 165% 91%

Peoples Bank Lithonia 162% 124%

First State Bank Stockbridge 156% 91%

Georgia Heritage Bank Dallas 156% 47%

First Cherokee State Bank Woodstock 153% 122%

First Coweta Bank Newnan 150% 80%

First Commerce Community Bank Douglasville 143% 94%

Century Security Bank Duluth 131% 61%

Community Capital Bank Jonesboro 131% 112%

First National Bank of Griffin Griffin 126% 122%

Tattnall Bank Reidsville 125% 102%

Security Bank of Bibb County Macon 123% 77%

Farmers & Merchants Bank Lakeland 121% 103%

Douglas County Bank Douglasville 121% 95%

Bank of Soperton Soperton 120% 93%

Community Bank & Trust - West Georgia Villa Rica 118% 116%

McIntosh State Bank Jackson 117% 101%

Legacy State Bank Loganville 115% 59%

Bank of Hiawassee Hiawassee 114% 74%

First Covenant Bank Norcrss 108% 111%

Unity National Bank Cartersville 108% 93%

Oconee State Bank Watkinsville 105% 59%

North Georgia Bank Watkinsville 104% 43%

Bank of Lenox Lenox 102% 99%

Northwest Bank & Trust Acworth 102% 61%