The number of US banks with adjusted Texas ratios in excess of 100% declined for the second consecutive quarter.

Four US banks and thrifts posted adjusted ratios above 100% in the first quarter, down from six in the previous quarter, according to S&P Global Market Intelligence data. The median adjusted ratio for the US banking industry fell again in the first quarter, dropping to 2.61% from 2.88% in the linked quarter.

Nonperforming assets and 90-day loan delinquencies decreased for most banks on a quarter-over-quarter basis. The increase in tangible equity and reserves was greater as accumulated other comprehensive income (AOCI) continued to improve.

S&P Global Market Intelligence defines the adjusted Texas ratio as nonperforming assets plus loans 90 days or more past due — excluding delinquent government-guaranteed loans and other real estate owned covered by loss-sharing agreements with the Federal Deposit Insurance Corp. — divided by tangible equity plus loan loss reserves. Allowance for credit losses on off-balance sheet credit exposures are not included in loan loss reserves. A high Texas ratio does not necessarily imply potential failure, but the ratio is a good measure of a bank's ability to absorb future losses.

Unrealized losses on securities are still causing sizable hits to banks' tangible equity, as exemplified by the failure of Silicon Valley Bank, and banks had higher provisions for loan and lease losses in the first quarter.

Ten banks had negative combined tangible equity plus loan loss reserves in the first quarter, down from 11 in the previous quarter. More than half of those banks were headquartered in Texas for the second straight quarter.

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Among the four depository institutions with Texas ratios above 100%, Alva, Okla.-based BancCentral NA had the highest tangible equity balance of the first quarter at $19.13 million. Monterey, Calif.-based Monterey County Bank had the second highest at $5.79 million.

When excluding AOCI from tangible common equity, no US bank had a Texas ratio above 100% as of March 31. Excluding AOCI, Halstad, Minn.-based Red River State Bank had the highest such ratio at 72.8%.

Highest ratios

Monterey County Bank had the highest Texas ratio at 208.3% at the end of the first quarter. Sac City, Iowa-based Citizens Bank and Tampa, Kan.-based Tampa State Bank tied for second highest with 122%.