Twenty-six banks and thrifts reported an adjusted Texas ratio above 100% as of March 31, down from 30 at the end of 2017.
The number of institutions above the 100% mark has been steadily declining each quarter after peaking at 513 in the fourth quarter of 2010. In percentage terms, less than 0.5% of all U.S. banks and thrifts were above the 100% mark as of March 31, compared to 6.6% in the last quarter of 2010.

A high Texas ratio does not necessarily imply potential failure, but the ratio is a good measure of a bank's ability to absorb future losses. S&P Global Market Intelligence defines the adjusted Texas ratio as nonperforming assets plus loans 90 days or more past due — excluding delinquent government-guaranteed loans and other real estate owned covered by loss-sharing agreements with the FDIC — divided by tangible equity plus reserves. Institutions that reported negative tangible equity are excluded from the analysis.

Two Fort Walton Beach, Fla.-based banks, Beach Community Bank and First City Bank of Florida, posted the highest adjusted Texas ratios in the country at 1,048% and 609%, respectively. Both institutions reported quarterly losses and a 10%-plus drop in tangible common equity during the first quarter. However, Beach Community Bank's position could improve dramatically in the near future. In early April, a private investor agreed to acquire the bank and raise $95 million to $100 million. However, the deal must be approved by a bankruptcy court and requires certain nonperforming assets to be sold off before it can be completed.
Meanwhile, Duluth, Ga.-based Gwinnett Community Bank posted the third-highest adjusted Texas ratio at 344%, a 38.5-percentage-point increase quarter over quarter.
Mayo, Fla.-based Lafayette State Bank's adjusted Texas ratio plummeted 117 percentage points to 164% as of March 31, after the company reported a 39% quarter-over-quarter decrease in adjusted nonperforming assets.
At the end of the first quarter, Georgia had seven institutions with an adjusted Texas ratio over 100%, well above any other state. Florida and Tennessee had the next highest at three each. The median adjusted Texas ratio for Georgia-based institutions was 10.58% as of March 31, down from a high of 51.61% in the last quarter of 2009.

Did you enjoy this analysis? Click here to set up real-time alerts for data-driven articles on the U.S. financial sector. Click here to access an Excel template that allows you to analyze asset quality and other financial metrics. Click here for a template showing adjusted Texas ratios for all operating banks and thrifts that filed call reports. |

