There’s trouble a foot ..

Interesting … the nation’s banks have just been given a stress test by the Investigative Reporting Workshop, a project of the School of Communication at American University. Using June 2009 figures, they calculated a troubled asset ratio for every bank and credit union in the country.

According to MSNBC:

“While it is not an official FDIC statistic, nor is it intended as a definitive predictor of the likelihood of bank failure, the troubled asset ratio apparently is a strong indicator of severe stress inside a bank because it shows the bank’s ability to withstand loan losses. Of the 92 banks that have failed so far this year, 84 had troubled asset ratios of 100 percent or greater in the final quarter they reported data before they closed.”

Here’s a look at here’s some of the local figures:

Troubled asset ratio, June 2009

56.7 Stirling Savings Bank (of Spokane)
54.5 Treasure State Bank of Missoula
38.5 Farmers State Bank (of Victor)
29.9 First Security Bank of Missoula

25.9 First Interstate Bank (of Billings)
24.1 US Bank (National)
19.7 Wells Fargo (National)
17.4 Community Bank – Missoula

16.8 Montana First Credit Union
15.6 Mountain West Bank (of Kalispell)
14.3 First Citizens (of Rhode Island)
10.1 Missoula Federal Credit Union

For banks, they calculated a “troubled asset ratio,” which compares the sum of troubled assets with the sum of Tier 1 Capital plus Loan Loss Reserves. Generally speaking, higher values in this ratio indicate that a bank is under more stress caused by loans that are not paying as scheduled.

For credit unions, they combined Capital and Loan Loss Reserves to calculate the amount of cushion the credit union has to protect against loan losses. We combined the delinquent loans and other real estate owned to calculate the “Total Troubled Assets.”

They then divided the amount of Total Troubled Assets by the amount of Capital and Loan Loss Reserves to derive the “Troubled Asset Ratio.” Generally speaking, higher values in this ratio indicate that a credit union is under more stress caused by loans that are not paying as scheduled.

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One Response

  1. […] in July, you’ll remember Treasure State Bank had the second worst Troubled Asset Ratio of the banks in Missoula (after Stirling Savings Bank). Now admittedly that Troubled Asset Ratio was a little bit better by September (down to 49%, from […]

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