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Six Florida Banks and Texas Ratio Woes

By Phil Butler | March 3, 2011

As if Florida had not been hit hard enough during this economic downturn, especially in the real estate realm, new today from the banking industry simply adds to the state's woes. The Texas Ration, a term used to basically determine bank solvency, for even banks that weathered the Great Recession - shows how fragile the economy really is in the deep South.

The South Florida banks that survived these past three years all appear to be well capitalized. Yet at least six of these have now been red flagged with this Texas syndrome. The Texas Ration compared a bank's bad assests (loans etc.) with its good assets (loan reserves, good loans, etc.). And the bad news is: Capital is probably dangerously short for at least six major South Florida banks.

Failed banks, not our best moments

Not our best moment, the failed banks of America

As of the end of December, 2010, at least 8 banks in this region fell below the “well capitalized” Texas Ration status. These banks desperately need to raise capital to solve the problem. Below is a list via the South Florida Business Journal, of six of the banks in question and suggested problems. These are all banks with a Texas Ration of above 100%.

Tamarac-based First East Side Savings Bank, at 218 percent: This $85 million-asset bank is under a cease and desist order from Federal regulators since last May. The bank basically has to get more capital to meet requirements. No need to overly portray the slippery slope this institution is on.

Sunrise-based TransCapital Bank, at 201 percent: The  Feds want this bank to offer higher than normal capital rations, and slapped a consent order on them in January. Again, not good news if we are looking for an institution climbing out of the recession.

Coral Gables-based EuroBank: This $102 million operation has $7.4 million in repossessed property – mostly commercial real estate. The bank is not under a public enforcement order. Uh hum. They have a pretty website.

Home Federal Bank of Hollywood, sits at a Texas Ration of 148 percent: The $84 million bank also got a cease and desist order in August. Gotta beat the bushes for more capital. No website that I could find easily?

Doral-based U.S. Century Bank, comes in at 115 percent: This bank’s $50.2 million in Troubled Asset Relief Funds was the largest in South Florida, yet still the bank seems to be leaking money like a strainer. Okay, a really ugly website too.

West Palm Beach-based Flagler Bank, is just about the threshold at 112 percent: $125 million in assets, and it looks like based on the banks efforts to reduce losses, this one may be about to get off the Texas Ration list.

Closed banks

Now closed

Of course the Texas Ratio is not the most significant indicator of a bank's potential for profit. It is however, something that Federal regulators look at closely for a reason, and a logical one at that. If anyone remembers the Great Depression, not to be confused with the Great Recession of late, one reason so many banks failed was the lack of such ratios applied to their operations. Enough said about Texas, but for South Florida's investment market and banks, 6 more banks on the doorstep of failure cannot be good news.

More later from other regions.

Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
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