If a big “Texas ratio” suggests big risk on the books of tiny Wilton Bank, its CEO counters that the company is well on the way to recovery.
As it reaches its 25th anniversary this month, Wilton Bank has the highest Texas ratio of any bank in Connecticut ”“ a measure first conjured in the early 1990s to capture excessive risk in the savings and loan industry, first in Texas and later New England.
The Texas ratio compares a bank”™s delinquent loans with the amount of reserves and capital it has to cover any losses. A ratio over 100 percent means a bank does not have enough capital to cover delinquent loans if they all go bad.
Wilton Bank”™s Texas ratio was 143 percent as of the end of last year, nearly twice the score of Connecticut Community Bank, the next highest in Fairfield County. The U.S. average was just under 20 percent, according to data compiled by Dallas-based DirectAccounts.com.
It was one of the five worst marks of any bank in the Northeast, with New Jersey-based Fort Lee Federal Savings Bank having the worst Texas ratio at nearly 300 percent. Some 170 banks nationally had worse Texas ratios than Wilton Bank.
Long led by Nicki Brown, a onetime director of the American Bankers Association, Wilton Bank recruited Charles Howell III as Brown”™s replacement upon her 2010 decision to retire. Between 2009 and 2011, Wilton Bank lost $8 million.
Howell previously was CEO of Stamford-based Patriot National Bank, which was teetering on the brink of collapse in 2009 before Michael Carrazza invested $50 million to take a controlling stake in the company, and since earning plaudits for a turnaround.
Turning around Wilton Bank now falls on the shoulders of Howell ”“ and in a sense marks his career coming full circle, having early in his career managed a Wilton branch of Norwalk Savings Society.
Howell noted that Wilton Bank cut its impaired loans from $20.9 million in December 2010 to $13.5 million a year later, of a total loan portfolio of $41.3 million. He declined to provide Wilton Bank”™s figure for the first quarter this year ahead of the Federal Deposit Insurance Corp. reporting figures in a few weeks”™ time, except to say it would be an improvement and that the bank is making progress.
Howell added the Texas ratio is an imperfect score in that it does not delineate between various types of risk on a bank”™s books. In the case of Wilton Bank, a few large real estate loans soured ”“ if they are not producing income at present, they still have value as collateral capable of paying off down the road.
“If you had commercial and industrial loans and a company blows up, you can lose a high percentage because receivables don”™t come in,” Howell said. “With real estate you get a much higher recovery rate than other kinds of loans.
“We first will try to work with a builder, and it may be a situation where there is a short sale,” Howell said. “The builder obviously loses his equity and we take somewhat of a nonperforming loan.”
