Jumbo Rate News 35:10
Bank star-ratings are now all based on December 31, 2017 financial data. As a result, several banks are in new categories and three have re-qualified for listing. They are all listed on page 2. In addition, Bauer’s Troubled and Problematic Bank Report (rated 2-Stars or below) contains fewer than 2% of all U.S. banks; that’s a number not seen since 2007.
Most states had improvements at both the recommended (5-stars or 4-stars) end and the Troubled and Problematic end of the spectrum (listed on page7) although a few are still well above the average at the low end. Most notably are:
Georgia still has 9.1% of its banks rated 2-Stars or below, but that’s a big improvement from 12.1% a year ago and 10.7% last quarter.
New Jersey has 7.1%, which is the same as last quarter but down from 10.5% with year-end 2016 data.
Florida is next with 5.3%, that’s down from 6.1% a year ago but up from 5.2% last quarter.
Alabama and Oregon each have 5% of their banks rated 2-Stars or below; both have been creeping up.
The new tax law reduced corporate tax rates but also caused a one-time write-down on deferred tax assets at some banks. (Bauer did not penalize the affected banks.) This one-time write-down was a significant contributor to the industry’s low quarterly income, which was $25.5 billion – down $17.7 billion (40.9%) from the fourth quarter 2016.
The tax law was the biggest, but not the only culprit, though. Higher noninterest expenses and loan-loss provisions also played a part. Even without the tax charge, net income for the quarter would still have been down by 2.3% from the fourth quarter of 2016.
Conversely, net interest income was 8½% higher than a year ago. We can thank the interest rate hikes for that bump. In fact, more than four out of five banks (86.4%) reported higher net interest income than a year ago. While more than two out of three (70%) reported higher net interest margins. At 3.31%, this was the highest net interest margin for the industry in five years.