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GREENSBORO — Hundreds of banks across the nation still suffer as the economy struggles to recover.

Many of those banks are in the red zone, where federal regulators and executives both search their playbooks for survival strategies as the clock ticks down.

Asheboro’s CommunityOne Bank is one of those now under strict federal scrutiny and regulation because of its growing list of bad loans and repossessed real estate, which give it the highest “Troubled Asset Ratio” in the News & Record’s ranking of area community banks.

The Troubled Asset Ratio is a calculation used by a Washington group called the Investigative Reporting Workshop. In simple terms, the ratio adds up a bank’s “core capital,” which includes common stocks, cash reserves and other investments and compares it to “troubled assets.” Such assets include past-due loans, repossessed real estate and loans that don’t generate interest.

The ratio grows when a bank’s troubled assets surpass its good assets. And generally speaking, a ratio above 100 is bad for a bank.

Fortunately, 12 of this region’s 13 community banks score well below 100, a demarcation considered the beginning of a caution or “yellow” zone.

Four of those 12 banks have reduced their ratios in the third quarter of 2010, the most recent figures available show. Those banks are: NewBridge Bank of Greensboro, High Point Bank and Trust Co., VantageSouth Bank of Burlington and BB&T, the large regional bank in Winston-Salem.

Consumers with deposits at a troubled bank are rarely hurt if a bank is taken over or goes out of business because the Federal Deposit Insurance Corp. insures all deposits up to $250,000, regardless of the bank’s condition.

Shareholders and executives, not to mention the FDIC, which pays off the claims, are the ones hurt by troubled banks.

Without a doubt, the Troubled Asset Ratio for CommunityOne Bank is just a hint of the ugly finances behind the scenes. But one local banker believes that in most cases, the ratio doesn’t present a complete picture — and often neglects certain types of assets that make banks healthy.

“No one ratio — and this in particular — really describes or signifies what’s going on within any specific institution,” said Robert T. Braswell, president and CEO of Greensboro-based Carolina Bank.

The measure is incomplete, he said, because most banks have holding companies that possess their own money and investments. Those assets aren’t a part of the subsidiary bank’s balance sheet.

Many bank holding companies have money on reserve left over from the U.S. Department of Treasury’s Troubled Asset Relief Program. Beginning in 2008, the program initially was a cash infusion for failing banks. But many healthy community banks sold stock to the Treasury to raise money under the program’s Capital Purchase Program.

For example, Braswell said, Carolina Bank’s holding company has $5 million in reserve from the federal program. If that amount were added to Carolina Bank’s $63.5 million in capital and money put aside for loan losses, its Troubled Asset Ratio would drop from 58 to 37, he said.

Although its ratio has increased during the past three quarters, Carolina Bank and 11 others are well out of the danger zone. Not so for CommunityOne.

The bank’s bad loans and holdings have increased dramatically during the past three years, and it has reported $245.3 million in losses.

As a result, the federal Office of the Comptroller of the Currency, the bank’s primary regulator, demanded last July that the bank’s holding company, FNB United Corp., sign a consent order that requires it to increase its capital above normal government minimums and create a three-year operating plan.

According to the OCC’s website, a consent order that requires significant changes in operations and can be enforced with civil monetary penalties to the bank, directors and executives if its requirements are violated.

The order filed for FNB United is 31 pages long and reads like a comprehensive operating manual for the bank, governing the smallest details of property appraisals and strict lending regulations.

In October, the Federal Reserve Bank of Richmond also intervened and created a written agreement for FNB United. That, too, involves strict requirements to rebuild cash and capital.

FNB wrote in its response to the OCC consent order: “There can be no assurance that the Bank will be able to comply fully with the provisions of the Order, or that its efforts to comply with the Order, particularly the limitations on interest rates offered by the Bank, will not have adverse effects on the operations and financial condition of FNB United and the Bank.”

“Compliance with the Order is of highest priority to the Bank’s board of directors and management and the Bank will report to the OCC monthly regarding its progress in complying with the Order,” FNB wrote.

Adding to the bank’s troubles, the Nasdaq Stock Market, on which the bank trades, has issued a notice saying the bank’s total stock value was below $5 million for 30 consecutive days ending Dec. 17, 2010. The bank could be removed from the Nasdaq roster unless it can maintain value above $5 million for 10 consecutive days by June 20.

The stock has not traded above 87 cents a share since mid-September.

Since FNB signed the Federal Reserve agreement, two of the bank’s directors have resigned, citing personal reasons. William S. Bruton, the chief credit officer, retired.

Interim President and CEO R. Larry Campbell could not be reached for comment. But a news release said Bruton’s replacement, David C. Lavoie, has 25 years experience in banking with emphasis on consumer and commercial real estate.

His challenge will be in helping the bank manage and sell its ballooning repossessed real estate, which grew from
$24.6 million on Sept. 30, 2009, to $48.9 million on Sept. 30, 2010.

With the deluge of bad news, experts say it’s hard to know what the bank can do to preserve itself.

The Federal Deposit Insurance Corp. maintains a “troubled bank” list but does not publicly release the information. Many banks that make the list eventually are shut down or sold to other banks. Nobody knows with certainty whether CommunityOne is on that list. Federal intervention, however, is a bad sign for any bank.

An associate professor of economics at UNCG says it’s routine for the government to step in when any bank runs into big trouble.

“In this difficult environment, regulators have to take action anytime a bank’s capital is seriously impaired by loan losses so that depositors, and ultimately the FDIC insurance fund, are not further compromised,” Kenneth Snowden said.

Contact Richard M. Barron at 373-7371 or richard.barron@news-record.com