A new number in the bank rating game
Add comment March 26th, 2009
I’ve covered banks off and on for the Register Star since 2001 and until last year it was pretty easy lifting — four AMCORE earnings stories a year and keep track of the mergers and new bank branches popping up on Rockford’s east side.
Now, in the age of the Great Recession, banks and the cornucopia of bank statistics that judge the health and lending habits is hot.
I attended the national Computer Assisted Reporting Conference in Indianapolis two weeks ago and sat through seminars on campaign funding, government finance and tracking test scores. The best attended talks were about mining the Internet social networking revolution and … bank finances.
Over the past several months I’ve talked to bankers about what to look for in the mountains of available data. I’ve learned about capital ratios, nonperforming loans, loan loss allowances and brokered deposits.
In Indianapolis, I talked with Wendell Cochran, the founding senior editor of the Investigative Reporting Workshop at American University School of Communication in Washington D.C. Cochran spent most of his journalism as a business reporter and learned about bank financing in the 1980s when more than 1,600 institutions went under during the Savings & Loan crisis.
There are several bank strength ratings systems available on the web — including Bankrate.Inc, BauerFinancial Inc. and Weiss Ratings Inc. Cochran’s group has waded into the mix launching a Bank Tracker focusing on one stat — a troubled asset ratio.
The site compares a bank’s total of loans that are 90 days or more past due and nonaccrual loans to its tier 1 capital, loan loss reserves. After the seminar Cochran said a bank that is losing money and has a troubled asset ratio of 100 percent — meaning its ammount of bad loans are equal or greater than its cash reserves — is likely in danger of being taken over by the federal government.
Of course, anyone paying attention locally knows AMCORE Bank, the area’s largest locally based public company, just completed its most trying year, and it had the highest local troubled asset ratio on the index at 73.3 percent. A look at the 36 banks with at least one branch in Boone, Ogle, Stephenson and Winnebago counties though showed the pain of rising loan defaults is widespread.
Cochran’s group calculated that the median troubled asset ratio at the end of 2008 for the more than 8,000 operating banks was 9.9 percent. Locally, 27 of the 36 banks were above the national median and one hit 9.9 percent on the nose. Ogle County-based Holcomb State Bank had the lowest troubled asset ratio at 5.8 percent and Midwest Community Bank of Freeport was next at 6.4 percent.
The site’s search function is pretty simple, but we’ve made it easier. Go to rrstar.com, look under the Special Reports tab on the right and click on “Find out whether your bank might be in trouble.” There you will find a link to the home page of the Bank Tracker as well direct links to the pages on all 36 banks in the Rock River Valley.
