Five-star ratings are plentiful among Mississippi’s community banks in Bauer Financial’s third quarter ratings released last Tuesday, though a handful of weak links remain: zero-rated Heritage Banking Group of Carthage, one-star rated Cadence Bank in Starkville and two-star institutions Peoples Bank of the South in Bude and OmniBank in Mantee.
The Coral Gables, Fla.-based bank rating agency grades financial institutions on a range of zero to five stars, with five being a designation of “superior” excellent health and four-star “excellent” health. Bauer bases rankings on the current overall financial picture of the bank or credit union.
A zero rating does not mean the bank is in imminent danger of going under, but it does indicate a poor performance in the last quarter and possible difficulties with regulators and a need for raising new capital. For its part, Bauer says the zero denotes the institution is facing “considerable challenges at this time.”
Bauer gives one-star ratings to banks it considers “troubled” and two-star ratings to institutions it seems “problematic.”
The two largest banks headquartered in Mississippi – BancorpSouth (Tupelo) and Trustmark (Jackson) — received three-and-a-half stars and four stars, respectively. The three-and-a-half star designation awarded BancorpSouth denotes “good” health, according to Bauer.
The lone Mississippi bank to get a ranking of one was Cadence Bank, a nationally chartered bank in Starkville that employs 365 people and whose shareholders Thursday approved an acquisition of the bank by Houston banking group Community Bancorp.
Federal regulators had set an early September deadline for Cadence to nearly double its Tier 1 capital reserves. That order has been on hold pending the proposed acquisition.
Heritage Banking Group, a Federal Reserve non-member bank that employs 68 people, continued with a zero rating. A Federal Deposit Insurance Corporation consent order for the Carthage bank to significantly increase its capital reserves expired in August. Regulators have not signaled what, if any, action they will take against the bank.
Dr. S.L. Sethi, Heritage board member and owner of more than a third of the bank, said in late November the board is still seeking to raise the required capital. In the meantime, the board would be willing to sell “some or all” of Heritage, he said.
The FDIC lists Heritage Banking Group’s Carthage market share at 54 percent, far ahead of closest competitor First Financial Bank at 17.7 percent.