97 community banks exit CBLR in Q3

The number of U.S. community banks adopting the reporting framework for the community bank leverage ratio, or CBLR, continued to decline in the third quarter.

Ninety-seven banks exited the simpler CBLR reporting methodology in the third quarter, according to an S&P Global Market Intelligence analysis. The largest exits were Honolulu-based American Savings Bank FSB, with $9.01 billion in total assets at Sept. 30, and Provo, Utah-based Green Dot Bank, with $3.58 billion in total assets.

At the end of the third quarter, nearly 3,000 commercial banks, savings banks, and savings and loan associations with less than $10 billion in total assets did not qualify for and opt into the CBLR framework. About 74% of those institutions reported a leverage ratio higher than 8.5%, which was one of the CBLR criteria.

In contrast, over 1,800 banks opted for CBLR reporting in the third quarter, including 60 entries. Most community banks that said "yes" to the regulatory relief reported leverage ratios above the minimum requirement, but 40 were in a grace period because they fell short of the threshold.

Fifteen banks with leverage ratios below 8.50% were in a grace period for the second consecutive quarter, including Seneca, Mo.-based People's Bank of Seneca and Evant, Texas-based First National Bank of Evant. At 7.91% and 7.93%, respectively, their third-quarter leverage ratios decreased further from second-quarter ratios.

Under the CBLR rules, certain banks with less than $10 billion in total assets may report only one leverage ratio, instead of more complex, risk-weighted capital ratios. Banks already in the framework will enter a two-quarter grace period if their leverage ratio dips below the minimum requirement by no more than 1 percentage point.

Meanwhile, seven CBLR banks reported total off-balance sheet exposure of over 25% of total assets in the third quarter, including Pharr, Texas-based Bank of South Texas and Omaha, Neb.-based Security National Bank of Omaha. To remain in the framework following a grace period, banks must report a total off-balance sheet exposure of 25% or less.