Banks Strain as Capital Drains

Oakland Deposit Bank of Oakland, Tenn., reported net loan charge-offs of residential, commercial and consumer loans totaling $7.2 million during the third quarter. To cover the charge-offs and expected future losses, the $126 million institution set aside $8.7 million for loan loss reserves in the quarter, which lowered its total capital to just $1.8 million. Oakland Deposit was considered critically undercapitalized as of Sept. 30, and its leverage and risk-based capital ratios were 1.43% and 3.11%.

Another bank hit hard by the Fannie and Freddie debacle was New York City's Berkshire Bank, held by Berkshire Bancorp (BERK. Quote). Securities losses during the quarter totaled $94.5 million, leaving the $917 million bank with a net loss of $88.5 million and just $3.8 million in total capital as of Sept. 30. This is another bank that has maintained good loan quality through the crisis, as nonperforming assets comprised 0.83% of total assets as of Sept. 30, and year-to-date charge-offs were close to zero.

Berkshire Bancorp announced on Sept. 16 that Moses Marx, the company's chairman and majority stockholder, would make $60 million in cash available for the company to draw upon to bring Berkshire Bank back to well-capitalized status, subject to regulatory approval. Apparently, this approval was not granted before the end of the third quarter.

One United Bank of Boston was well-capitalized at the end of the second quarter, but slipped to critically undercapitalized, with a leverage ratio of 1.70% and a risk-based capital ratio of 3.67%, as of Sept. 30. The institution reported securities losses of $54.9 million during the third quarter, leading to a net loss of $48.3 million and leaving One United with $11.8 million in tier 1 capital to support $625 million in total assets.