All Bank Ratings Now as of March 31, 2021 Data

All Bank Ratings Now as of March 31, 2021 Data

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The U.S. banking industry has readjusted its expectations of future credit losses, for the better. That was evident in the FDIC’s Quarterly Banking Profile (QBP) for March 31, 2021 data, which shows an aggregate negative provision expense of $14.5 billion. Not only is this the first negative provision in the history of the QBP, it is $17.7 billion less (over 500%) than fourth quarter 2020 and $67.2 billion less than first quarter 2020.

This negative provision helped boost net income for the industry by $17.3 billion (29%) to $76.8 billion in the first quarter. While 75.5% of banks reported lower provisions, nearly a quarter of the nation’s banks still felt the need to beef up their cushion. (Some of them can be found on page 7.)

While the non-current loan rate for the industry dropped 4.6% during the first quarter, that was not the case for every bank. The same is true for net charge-offs, which dropped nearly 37% from a year earlier. The largest contributors to the reduction in charge-off balances were credit cards (down $3.3 billion or 36.4%) followed by commercial and industrial (down $1.2 billion or 43.5%). But again, while this reflects the majority of the industry, there are outliers.

In addition to having a Bauer Rating of 3-Stars or less, the 51 banks listed on page 7 each have the following in common at March 31st:

  • A Bauer’s Adjusted Capital Ratio <= 3%; OR A Texas Ratio >= 50%; OR
  • (Nonperforming Loans >= 2% of Average Tangible Assets; AND
  • Allowances for Loan Losses < 50% of Total Delinquent Loans).

Collectively, these 51 banks set aside $280 million for loan losses in the first quarter. 3-Star Beal Bank USA, NV was responsible for over a third of the total with a loan loss reserve of $102.2 million. It needs it.

Beal Bank has $492 million 90 days or more past due (including those no longer accruing). It only has enough reserves to cover 21% of those loans yet, it has another $98 million that’s 30-89 days past due. But don’t worry too much; it has a large capital cushion to fall back on if need be.

3-Star Emigrant Bank, NY similarly, set $81 million aside. Emigrant Bank’s 90 days or more delinquent plus nonaccruals total $206 million; 30-89 days past due are $27.8 million. (Both are much lower than Beal Bank) and its coverage ratio, while still quite low at 39.3%, is almost double that of Beal Bank. Ideally, the coverage ratio should be 100%.

The third highest amount set aside for loan losses from those listed on page 7 was $10.4 million by 2-Star Patriot Bank, CT. The rest listed set aside fairly modest amounts in the first quarter. That’s not to say there were no other large amounts reserved. There were, especially at Big Banks; they just did not have the dubious distinction of being on this list.

That being said, the FDIC currently has 55 banks on its “Problem Bank List”, down from 56 at year-end 2020. Bauer’s Troubled and Problematic Bank Report contains 65 banks rated 2-Stars or below, which is unchanged from last quarter. No banks failed in the first quarter although 25 were lost to merger. Three new banks opened (see JRN 38:19).

Of the 25 lost to merger, three were former JRN listees. None of them were straight-forward. So, to ensure you don’t end up inadvertently going over the insurance limit...

On February 1st, 5-Star Dime Community Bank, Brooklyn, NY (FDIC Certificate #16012) merged into 5-Star BNB Bank, Bridgehampton, NY (FDIC certificate #6976). BNB Bank simultaneously changed its name to Dime Community Bank. It is headquartered in Bridgehampton, but more importantly, its FDIC # is now 6976. Dime Community Bank was listed on JRN’s rate pages right up until the day it merged.

4-Star State Farm FSB, Bloomington, IL elected to exit the banking business altogether. On March 30th, it sold all of its deposits to 4-Star U.S. Bank, Cincinnati and liquidated the rest of the bank. While you may still open a CD through a State Farm agency, the deposit insurance coverage is from U.S. Bank (FDIC Certificate #6548). State Farm Bank was last listed on our rate pages in October 2020 (JRN 37:39).

And finally, on February 19th, 4-Star Main Street Bank, MI (Cert #5878) was acquired by 5-Star Superior NB, Hancock, MI. Main Street Bank was dropped from our rate pages last June (JRN 37:24) when its rating slipped to 3-Stars. The rating subsequently went back up, but it never returned due to the pending merger. Its new FDIC certificate number is 5058. (Guess that one was pretty straight forward.)

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