Rating Agencies Call One-Fourth of Northwest Banks Problematic
September 13, 2011
September 13, 2011
Washington has already experienced three bank failures in 2011. Oregon, meanwhile, remains free of bank failures this year, and the past quarter saw another decline in the number of problematic and troubled banks in the northwest, according to ratings agency numbers. However, even with this slight decline, 20 percent of northwest banks remain problematic and troubled.
The Northwest Credit Union Association (NWCUA) compared ratings from Bauer Financial and Highline Financial, a division of Thompson Reuters, and found that nearly 24 percent of Washington-based banks and 16 percent of Oregon-based banks are considered problematic or troubled. This is a three-percent improvement since last quarter, and the trend appears to be toward increased success and stability in banks. However, the numbers are skewed by the failed banks having been removed from this list.
These rates, which take into account capital levels, asset quality, earnings ratios and liquidity, were based on data released by federal regulators.
Credit unions continue to remain strong, with more than 91 percent in Oregon and Washington considered strong or adequately capitalized, according to Bauer and Highline.
The good news for banks is that, according to the FDIC’s “Problem List,” this decline is the first for banks nationally since the third quarter of 2006.
A contributing factor for the reduction in troubled and problematic banks is the allowance for loan losses (ALL). Since March 2010, northwest banks’ ALL balance has been steadily declining, which matches the national trend. The FDIC reported a total of $207.6 billion nationally for ALL, which is down 21.1 percent since their cyclical peak at the end of first quarter 2010. Similar trends have been present with northwest credit unions, though their decrease in the ALL has spanned only the past two quarters.
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Posted in Compliance News.