Categories : Independent Opinion


I don't look too much at others' opinions of our bank, I like to do my own analysis to come to my own conclusions.  Sometimes though, it is useful to look for an independent opinion to help determine if I'm on the right track.  So recently I took a look at's opinion of our bank for an independent analysis (not my analysis, and not the bank's analysis).

At they strive to generates independent opinions of most if not all banks and credit unions.  I don't think they gain anything by trashing some banks and building up others.  Like anybody's analysis, people can disagree with it, but it is a good comparison to my own analysis.  Let's look at it anyway to see how close the two of us agree.

To get the analysis and opinion, click here Overall Ratings:

For those who do not want to click the link, I'll summarize what it says.  It is evaluating the year end 2010 financial statements.

  • Overall Rating:  2 Stars (out of 5, 19.45% percentile rating, meaning that over 80% of banks were above it)
  • Earnings Rating: 1 Star, 18.48% percentile (almost 82% of banks had a higher rating)
  • Asset Quality: 2 Stars, 26.01% (almost 74% of banks were higher)
  • Capital Rating: 4 Stars (67.25% percentile, about 33% or one third of banks were higher.)
  • Liquidity Rating: 3 Stars 40.07% percentile

In addition they have some ratios that justify their opinion above.  It also gives's opinion of the ratio.  By the way, the ratios shown reflect both good and bad performance, so I'm not cherry picking the info I want to show to help sell my story.  In highlights, I've put my interpretation of's ratings.

  • Return on Equity: -3.36%- Substantially below averageBad
  • Net Interest Margin: 4.49%: Higher than peer  Good
  • Non Interest Income Level: 1.97- Solid    Good
  • Overhead: 3.99% (percentage of average assets)- Significantly Higher than average.  Very Bad
  • Non Performing Asset Ratio: 28.99%- Higher than standard  Bad
  • Loss Reserve Coverage: 87.83%- Approximately Normal  Average
  • Loan Yield: 7.04%- Conservative  Conservative rather than Aggressive
  • Asset Growth Rate: 68.19%- High Alarms them because this is unusual and is because of the second round of Equity Financing.
  • Net Worth to Total Assets: 9.79%- Approximately peer Norm  Average
  • Regulatory Capital Ratio: 14.91%- Substantially exceeds requirements  Good but remember it is because it includes TARP money and a second round of Equity Financing
  • Balance Sheet Liquidity: 24.81% Better than Normal  Good
  • Purchased Liabilities: 12.77%- Average Dependence.  Average Early Warning Highlights: 

  • High Overhead
  • Commercial and Construction Real Estate Lending
  • Asset Growth Composite Summary:

Bankrate believes that, as of December 31, 2010, this bank exhibited a below average condition, characterized by substantially lower than normal overall, sustainable profitability, questionable asset quality, strong capitalization and near normal liquidity.

Institution Summary:

This bank has been rated below average.
Negative factors that impacted that rating follow:

  • Earnings
  • Asset Quality

As noted previously, early warning indicators, possibly requiring specific investigation include:

  • Overhead
  • Commercial Real Estate and Construction Lending
  • Asset Growth

Here are my comments and responses to's analysis:

  • agrees with my belief that Asset Quality is bad.  You know this because Loan loss expense has been high, and we shareholders (at least the old shareholders) can't get an answer as to when that will stop. 
  • disagrees with management in that it believes earnings are bad.  The difference is that Management always chooses to tell us that earnings are good (just don't include loan loss expense).  It's like the Government saying that when you take out food and energy prices, inflation is good.  Everybody knows that argument is misleading.
  • I did not know that Overhead expense was significantly higher than peers.  I don't know why overhead is higher than peers, but the new Chairman of the Board is signalling that employees wages are about to increase because they haven't been adjusted for several years.  This will make the overhead ratio even worse.
  • A close look at's narrative shows that it does not adjust for TARP money nor for recent capital infusions.  It would understandably be hard to make adjustments like that for thousands of banks.


In the next few posts, I'll try to take a look at how the bank compares to its peers.  This was just a first attempt, I'll see what else I can find.  Basically, the bank isn't telling us the whole story, just what it wants to tell us.  For instance, earnings are good, as long as you don't consider loan loss expense.  And loan loss expense puts the bank in the lowest 20% of all banks- they don't show us that comparison either, we have to find it ourselves.

It would be great to know that I'm not the only shareholder that is angry not only about the poor performance, but also the lack of candor coming from the bank and its management and Board of Directors.  If you feel the same way, you should contact the new chairman and ask him what his recovery plans are.

Bet you don't get a straight answer.

 Posted on : May 26, 2011
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