by Brian Orr
WALSENBURG- There have been headlines for months about the troubled state of the nation’s banking industry. Now the headlines are hitting a little closer to home.
Community Banks of Colorado, with 42 branches across the state of Colorado including the Walsenburg branch on the corner of Fifth and Main, has recently been significantly downgraded in its financial stability ratings. According to figures compiled by BauerFinancial Inc., as of the end of September, 2010, Community Banks’ Star Rating has dropped from 2 (Problematic) to 0 (Lowest rating). BauerFinancial states that, although its data is “consistently reliable, its accuracy and completeness cannot be guaranteed.” Criteria used in determining these rankings include the bank’s capital ratio, profitability/loss trend, delinquent loans, chargeoffs and repossessed assets. As a point of reference, the other bank doing business in Huerfano County, First National Bank of Trinidad, is rated by BauerFinancial Inc. as a five star bank (Superior).
Community Banks of Colorado is based in Greenwood Village, Colorado and has a total of 292 employees statewide. BauerFinancial’s report indicates that the Community Banks statewide is posting a loss of $36,993,000 for the year to date. Of that, $30,357,000 was posted as a loss in the third quarter alone. The banks posted a loss of $36,996,000 in 2009, and showed a profit of $3,444,000 in 2008.
According to Andy Obermueller, of Investing Answers, a website devoted to helping investors build and develop wealth, there are currently 442 banks in immediate danger of failure nationwide. Community Banks ranks number 220 on the list. Obermueller has correctly predicted the failure of 34 of the 37 banks seized by the FDIC between June 9, 2010 and September 2010. In December 2010, five banks listed as higher risks than Community Banks failed, and one listed as slightly more stable failed. Obermueller’s system utilizes “Texas ratios” in ranking the financial institutions. This is computed by dividing the banks’ non-performing assets by their tangible common equity plus loss reserves. Institutions with a Texas ratio greater than 0.90 are considered troubled. Community Banks’ Texas ratio is 1.34. The range of Texas ratios for failed banks is 10.85 for the Chestatee State Bank in Georgia to 1.31 for Community National Bank in Minnesota.
The FDIC  also maintains a list of troubled banks. There are 7,760 banks in the United States. Of them, the FDIC now lists 860 financial institutions as "Problem Banks", up from 829 last quarter and the highest number of troubled banks in 17 years. There is no way to tell if Community Banks is one of them because the FDIC does not divulge the list.
The last time the "Problem Banks" list reached this size, it took five years and more than 1,000 bank failures for things to return to normal. Incidentally, that presents a real problem for the FDIC, which now has only $8 billion in its deposit insurance fund, down 47.4% from the end of September 2010.
Don Woods, CEO of the Greenwood Village, CO based Community Banks, acknowleged the bank has problems, but was confident in its stability. “We’re a private company,” Woods said, “and the Bauer star ranking isn’t one we follow.” He stated that a significant number of loans have been in real estate, “Which,” he said, “Headlines show real estate is going down. Community Banks of Colorado suffers as a result. The bank is still viable; we’re just working through this as fast as we can.”
Woods said the bank is under stress, but he is not concerned about its long-term survivability: “This bank has been in business a long time in Walsenburg. We expect to be here for the next one hundred years.”
Data compiled from a report on Community Banks of Colorado by BauerFinancial Inc., Coral Gables, FL,
www.denverpost.com/bank
ratingsresults, and www.investinganswers.com
