Compared to 2008 when banks were failing left and right, the number of bank failures have decreased gradually over the years. In 2012, financial regulators shuttered 51 banks, the lowest number of bank failures since the financial crisis. Many of these failed banks had disconcerting Texas Ratios, a financial metric that compares a bank’s non-performing assets and its equity capital and loan loss reserves — the higher the Texas Ratio, the greater risk for failure. Take a look at the banks that are currently walking on thin ice.

troubled banks image

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It is important to note that banks that have high Texas Ratios are not destined for failure. Ideally, banks maintain a Texas Ratio below 100 percent. Many troubled banks have taken the necessary measures to improve their balance sheets and stick around — good news for customers who wish to stay with the banks.

Hanging by a thread

This year’s five banks most likely to fail are based on Texas Ratios determined by bank data as of the third quarter of 2012. (In last year’s list, all five of the previously listed banks have failed — the lowest Texas Ratio was 544 percent.)

1. Westside Community Bank (University Place, Wash.)

Topping the list is Westside Community Bank, which operates only two branches in eastern Washington. The bank touts an alarming Texas Ratio of 963 percent. The last time its Texas Ratio was below 100 percent was during the first quarter of 2010. In June 2012, Westside Community Bank was ordered by the FDIC to either sell enough voting share or obligation to rebuild capital, or accept an offer to be acquired. UPDATE: Westside Community Bank was closed by federal regulators on Jan. 11, 2013. Sunwest Bank, based in Irvine, Calif., has taken over the failed bank’s deposits and operations.

2. Douglas County Bank (Douglasville, Ga.)

Douglas County Bank, with four branches in northwest Georgia, has a Texas Ratio of 684 percent. Nine of the 51 banks that failed in 2012 were based in the state of Georgia. Having avoided the top-5 list last year, Douglas County Bank could be the next Georgia-based bank to close its doors. UPDATE: Douglass County Bank was closed on April 26, 2013. Hamilton State Bank, based in Hoschton, Ga., agreed to assume the failed bank’s deposits.

3. Eastern Savings Bank, FSB (Hunt Valley, Md.)

Eastern Savings Bank operates five branches in Maryland and its Texas Ratio is 642 percent. The bank’s Texas Ratio has been increasing, up from 572 percent in the first quarter of last year. Maryland hasn’t experienced a significant number of bank failures — just eight since 2000 — but Eastern Savings Bank could be the ninth.

4. Frontier Bank (Lagrange, Ga.)

Another Georgia bank on the list, but that’s not surprising. Frontier Bank has 10 branches through Georgia and holds a Texas Ratio of 617 percent — a bad sign for the state’s already-poor reputation for bank failures. UPDATE: Frontier Bank was closed on March 8, 2013. HeritageBank of the South agreed to assume all deposits of the failed bank.

5. Community South Bank (Parsons, Tenn.)

With 14 offices through Tennessee, Community South Bank carries a Texas Ratio of 479 percent, up from just 137 percent in mid-2011. Like Maryland, Tennessee is not known for many bank failures — four since 2000.

Don’t see your bank here?

Doesn’t mean it’s necessarily in good health, financially or otherwise. Go check out your bank’s MyBankTracker Report Card here, where you can learn about its fiscal health, customer reviews, fees and locations all in one spot.

If you want to see if these banks can pull out of their slump, follow our updated  bank failure list. We’ll update this story if and when the listed banks fail.

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