Deep In The Heart Of Texas

Recently, a list of the "safest banks in America" was making the rounds. Turns out a few Massachusetts-based institutions made the list, but Banker & Tradesman’s offices only received a press release from one of them.

Patriot Community Bank, which is up in Woburn, made the list. The bank was so tickled it just had to let the world know.

This is great for Patriot, a tiny, $115 million co-operative bank that’s only been around for about seven years. Talk about safety.

But there’s a problem: The Texas Ratio.

Yes, the 359 banks that made the ‘safest’ list published by InvestingAnswers.com were evaluated using the Texas Ratio. The Texas Ratio was devised (in Texas, in the 1980s) to indicate a bank’s risk of failure. That is, 0:0 is a perfect score.

But The Teller has spent many an hour in the offices of many a banker and banking industry analyst, and has heard only that the Texas Ratio is a sham.

"Nobody takes the Texas Ratio seriously," one told The Teller not so long ago. It is an oversimplification of a bank’s condition, an attempt to distill what cannot be distilled.

That reminds The Teller: Pick up gin. Then, make a martini for John O’Donnell, president and CEO of Patriot Community Bank.

Congratulations, John.

But on the other hand, you don’t need the Texas Ratio to tell you you’re a safe bank. And your customers don’t need InvestingAnswers.com to encourage them to refer you to friends and family.

The Teller has friends in Woburn, and it seems like a very nice community. Let’s keep Texas out of it.