Funny Business

The fallout over naming potentially troubled banks continues. Ladenburg Thalmann's Dick Bove, who circulated the most widely-cited list last week (see my earlier posts) is now being sued by one of the banks he lists in his report, but it's NOT a bank in what he declares "The Danger Zone."

BankAtlantic,

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[BBX  Loading...      ()   ] according to Bove, has a ratio of bad loans to all loans of 4.4%, and anything over 5% is potentially in danger. Bove also compared non-performing loans to the bank's loan loss reserves plus common equity, and he said the BankAtlantic had a 38.4 percent ratio. Anything over 40 percent was "in the danger zone."

The bank is now suing Bove for defamation. In a press release, BankAtlantic's Chairman, Alan B. Levan refers, in part, to yours truly, in saying, "In the wake of the highly publicized failure of IndyMac, breathless television reporters filled the airwaves with the repeated question on the minds of an anxious public: 'who is next?' Of course, if there is anyone who knows 'who is next,' it would be the folks at the FDIC with mountains of detailed financial information about every institution enjoying deposit insurance. They, however, keep what they know to themselves - for good reason."

Levan says reporters then turned to "a supposed expert" in Bove, who "failed to examine the health of the banks and thrifts in his report. Instead, he only examined holding company data, which, in at least our case, is meaningless information. This is simply shocking." The bank says it is well capitalized and that Bove got his ratios wrong. The true ratio of non-performing loans to all loans is 1.25 percent, and bad loans compared to reserves and equity is 12.5 percent.

"Not even close," says the bank, to what Bove called dangerous. Chairman Levan claims Bove based his figures on those from the holding company, which do not represent the numbers for the subsidiary bank. "BankAtlantic can clear its name from this irresponsible defamation - and that is what it is - is in the courthouse."

Interestingly, a week ago the bank sent out a press release saying the numbers were wrong, and Bove sent out a follow-up report saying the Bank disagreed with him. "The holding company has purchased $100,000,000 in non-performing assets from the underlying bank," Bove wrote. "Therefore, the ratio of the underlying bank is 12.5% at the end of the 1st quarter. This is not expected to change in the 2nd quarter. Investors can therefore, either choose the numbers for the holding company as published, or use the number provided for the underlying bank." I guess that wasn't enough to stave off a lawsuit.

By the way, here is the original Bove report in its entirety.

But BankAtlantic suggests, however, that one checks public records of the bank itself. I did, on the FDIC website, which says the banks ratio of non-performing loans to all loans is 1.67 percent.

You can check this for any bank you want, though the FDIC doesn't make it easy. Go to the web site's "Institution Directory."  Click on "Find Institutions." Put in a bank's name and then hit "Find." Once the bank comes up, click on its "Cert" number. You'll get a page with the bank's name on it. Under "ID Report Selections," click on the drop-down menu, and then click on "All Summary Information." Then click on "Generate Report." Look at line item 93 on the report that is then generated. That will give you the "non-performing loans to all loans" ratio. Again, Bove said anything over 5 percent is in the danger zone.

Meantime, Yvette Kantrow from The Deal wrote about all this.

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