Burdened by a long string of bad housing loans that they can’t shake off, more than a handful of Georgia banks have been left with a teetering balance sheet of debt to capital and several of these banks have branches in Newton County.

The Community Bank, First Georgia Community Bank and McIntosh Commercial Bank all have exceptionally high Texas ratios. The Texas ratio is a barometer by which the financial health of a bank or thrift is judged by looking at the ratio of bad loans and assets to the capital and reserves set aside to cover potential losses.

Christopher Marinac, director of research and co-founder of Atlanta-based FIG Partners, a broker firm specializing in bank and thrift stocks, said the Texas ratio first came to popularity in the early 1990s in Texas when it was used by bank regulators to screen banks during the savings and loan crisis

"It’s a measure of how healthy a bank is and it’s driven by how many problem loans you have," Marinac said.

In metro Atlanta, the median Texas ratio level of banks is 33 percent said Marinac while the average level is 54 percent. Any level below 40 percent is generally considered to be a healthy ratio to have. Banks get into trouble when their ratios climb past 60 percent he said. To have a ratio above 100 percent is a cause for serious concern.

The Community Bank has one of the highest Texas ratios in Georgia at 237 percent. Other banks with Texas ratios greater than 100 percent that have branches in Newton County include First Georgia Community Bank with a ratio of 199 percent and McIntosh Commercial Bank with a ratio of 113 percent,

"These companies that we’re talking about are way above the norm," Marinac said.

However, Jan Teal, chief executive officer of McIntosh Commercial Bank, said she didn’t think the Texas ratio was a "totally fair reflection of the banking institution."

"Those numbers may not be as we may like them to be but McIntosh remains well capitalized. We also have strong loan loss reserves set aside," Teal said. "All of that keeps us positioned extremely well to work through this challenging economic time we’re in."

Marinac said the Texas ratio is a good reflection of an individual bank’s overall health. If a bank is a subsidiary and has access to a greater pool of capital than just its own to draw down its debt, that information is included in the calculation of the ratio he said.

Banks that have high Texas ratios have tended to focus heavily on the housing market he said.

"I would say that most banks simply had too much concentration," Marinac said. "What we’ve seen is a lot of concentration in construction and residential real estate."

While some Covington branch banks have high Texas ratios, others remain in strong financial shape. Newton Federal Bank has a Texas ratio of only 35 percent and BB&T has a ratio of only 26 percent.

Covington native Rob Fowler, a former chairman and CEO of Main Street Banks before it merged with BB&T, said even though BB&T remains as "strong as an ox today," the current financial crisis is the worst one he has ever seen. Still he predicted the current economic recession would not be as severe as the Great Depression of the 1930s.

"This one won’t be as bad because we’ve got so many government [programs] that it keeps it afloat," said Fowler who now serves on a BB&T board of directors.

Fowler blamed the recession on "Washington urging us to make more [subprime] loans to people who frankly couldn’t afford them, the people who bought the homes that they probably knew they couldn’t afford" and the Wall Street tycoons who perpetuated the cycle by buying, slicing up and selling off the subprime mortgages at overly inflated prices.

"We’ve hit a brick wall on that," Fowler said. "In my old opinion, it’s going to take three years to see our way out of it."

Marinac said the credit crunch underway will likely continue for some time as long as banks are reluctant to lend to borrowers whose financial history they’re uncertain of.

"There is certainly a fear that things [will] get worse and then companies can’t trust each other’s information," Marinac said. "I think that loan rates are going up. Some banks are not lending because they don’t have any room to lend."

Teal said McIntosh Commercial, which recently opened a new two-story Georgian style branch on U.S. Highway 278, plans to be in Newton County for the long haul.

"Yes, it’s a challenging time but we’re positioned to work [through] this and we’re committed to being part of that Covington business community," she said.

Teal said she believes that Newton County’s location in metro Atlanta, an area of the United States that continues to grow despite all gloomy economic forecasts, bodes well for the county’s ability to bounce back quicker than other parts of the country.