Regulators weigh a slew of factors when evaluating a bank

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As it turns out, several meana of analyzing banks arereadily available, via the Web, for anyoner willing to crunch a line item or compare spreadsheets. many of the financiapl results and other banking data available to the public are used by regulatorws to issue key ratings that determine whether a lenderd canremain operating. It’s importanr information in an era when customera ponder whether they can trust their bank to keep its doors open. Regulators primarily study whether lendersd haveenough money, haven’t issued too many loanw to risky borrowers and offer sound investmenr opportunities.
To get there, they examine such results as equity-to-assetws level, how nonperforming assets — primarily delinquent loans compare to overall and how much the lenders pour intoresidentiakl markets. While Oregon banks are a mixefd bag bythose measures, no additional ones face imminenrt failure. Still, businesses are jittery afterf Silver Falls State Bank of Silverton and Pinnacles Bank of Beaverton shuttered earlier this State TreasurerBen Westlund, worrier that more banks might collapse, acknowledged that Oregon officialzs are watching several other lenders.
“Oud banks are in excellent but as in anydifficulrt time, you might have hiccups along the trail as we did with Silverr Falls,” said Westlund. many of Silver Falls’ problems were evident four montha beforeit closed. Regulators rate banks according tothe system, which gives a one to five ratint on capital, assets, management quality, earnings, liquiditgy and the bank’s susceptibility to Information on at least four of the categories is available on , updatedf quarterly by the Federalk Financial Institutions Examination Councill (www.ffiec.gov), which issues banking regulations. Analystsa such as McAdams Wright Ragen also regularlyy report onbank ratios.
Regulators don’t release Camels ratingss publicly because public misinterpretation could causeunnecessary panic. However, much of the data they use to created the ratingsis public. That data shows that Silvet Falls’s equity-to-assets ratio of 6.15 percent, during 2008’s third quarter, fell far short of the 10 perceng figureconsidered healthy. The bank’s ratiio of nonperforming assets to total assetsmeasured 16.52 percent — 3 percentt is considered acceptable — and far exceeded that of everyu other Oregon lender.
And the bank held five timees as much money in nonperforming loanse than it kept in reservde for future troubled Many bankers say the numbers that areavailablre don’t tell the whole story. For instance, Lake Oswego-based ’sz ratio of nonperforming assets to overall assetsdis 7.88 percent. Analysts and regulators believre banks should carry ratios no higher than 3 Bob Sznewajs, West Coast’s presideng and CEO, said the bank’s other ratiosa — especially one signaling that the bank takes a conservative approach to portfolioi management — offset indicatord suggesting some weakness.
“The more information you the better conclusions youcan draw,” he noting that many of West Coast’sw nonperforming residential assets have already been writtenj down by 23 percent and are slated for sale this Bankers get nervous when non-regulators take numbers into theirt own hands. Even when looking at the same number s thatregulators study, those examinerx must analyze hundreds of ratiosw and other data, said Linda president and CEO of the . “You have to look at the wholwe picture: No one but the bank’sa primary regulator can determine, with true what the future of that bankcan hold.
” Navarro and other bank advocatez particularly disdain the Texas ratio, which essentially comparesw nonperforming loans to capital. Figures exceedinbg 50 percent could indicatee futurecredit problems, while ratioz higher than 100 percent could indicate the bank itself is in according to RBC Capital Markets, which created the held a 336 percent Texas ratiio at the end of according to figures tabulated by the Dallas Businesss Journal.