On December 7th I wrote a post about the Texas Ratio and other distressed bank barometers. While BankProspector doesn’t currently report the Texas Ratio of banks it does display and make searchable the Tier 1 and the Total Risk Based ratios (also known as Capital Adequacy Ratios – CAR). In this post I called out Chestatee State Bank in Georgia and said:
I have no special knowledge, other than that from the BankProspector analysis, about Chestatee Bank in Georgia but I do know a few things. First I’ll mention that I saw this bank on a recent list as having the highest Texas Ratio of any bank in the U.S. I didn’t verify that data but I did see it. I looked the bank up in BankProspector. They have a Tier 1 Capital Ratio of 1.03%, recent requirements for Tier 1 and Tier 1&2 were recently 4% and 8% respectively. That means this bank is low, they have almost no reserves compared to the non-accrual loans and REO on their books. I also know that they have $20MM in construction REO on their books, I love that I could sell that all day long. But wait, for some reason they’ve been doing nothing but growing their construction REO balance for more than a year!
I was not surprised then when I saw Chestatee show up not 10 days later on the FDIC failed banks list. A little bit of knowledge could save a lot of time penetrating an account like this where they couldn’t sell and in the end won’t even be around to close whatever deals you might have been working on.
Chestatee did have an REO List, I’d suspect they’re ready to sell now. One note about this list, you’ll notice that these properties are all local to the bank and that’s exactly what we might expect when prospecting local and regional banks.
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