Community banks are facing an increased risk of insolvency, according to a measure of banks’ health known as the Texas ratio. Based on data derived from
the ratio, analysts say Georgia leads the nation with the most at-risk banks. The Texas ratio determines a bank's insolvency risk by comparing the size of its problem loans to the amount of capital it has set aside to cover potential losses.
The new information has many experts trying to predict what banks may do next.
Area bankers say local institutions are not at risk of financial collapse, however.
David Oliver, senior vice president of communications and marketing for the Georgia Bankers Association, said only 4 percent of banks are in trouble.
"A vast majority of all of Georgia banks remain well capitalized, based on regulatory levels," he said.
While figures are important for people to be aware of, Oliver suggested consumers take them with a healthy dose of understanding that there are other factors that help maintain stability.
"While they are educated guesses, they don't just include everything that's going on," Oliver said.
He said banks only function as well as the economy and the
market.
Mike Odum, division president of The Coastal Bank in Hinesville, feels the Texas ratio has some fault, and says there are other indicators of an institution's success.
"You have to judge it (a bank) on its capital levels and also the strength of its management and stability of the market," Odum said.
Denying any risk of collapse, Odum did mention a decrease in the local bank's loans.
"As people have followed the media and read of the concerns ... we've seen a slowdown in lending," Odum said. "However, we have not seen a slowdown in deposit activity."
Heritage Bank President Jim Floyd said growth from Fort Stewart makes Liberty County's market different.
"The majority of community banks are very safe and very well-managed and predominately profitable," Floyd said. "I don't think any of the community banks in Liberty County have risk of insolvency."
Odum thinks the local market is stable and asserts it’s the metropolitan areas that are feeling the stress from the general economic slowdown.
"Most of the reports are referring to investment banks that do a lot more than take deposits and make loans," Odum said.
Although the president's proposed $700 billion bailout plan failed House approval, Odum predicts the government will eventually pass something in the next couple weeks.
"I think this is a situation that is going to be with us for a little while," Odom said.
Floyd agreed there is likely to be more federal intervention.
"I think, just like the (savings and loan crisis) of the ’80s, there will be tons of new regulation," Floyd added.
First Citizen's Bank President Julian Lane thinks the pattern of high-risk banks will take the next year or two to improve.
"I think the majority of banks in Georgia are sound and well managed and they will continue to prosper," Lane said.
He does not feel community banks are necessarily at greater risk than other larger banks and banks differ.
"I think it would be difficult to say that either sector are at more risk than the other," Lane said.
Odum explained FDIC insurance does not necessarily prevent the insolvency of a bank, but an investor will not lose his or her deposit.
"Generally speaking, Georgia community banks are well capitalized and well managed and not exposed to those kinds of losses being taken by large money centered banks," Odum said.
"I encourage anyone with concerns to visit (their) bank and sit down with management and address concerns on individual basis," Lane said.