Banks Post Worst Earnings in 17 Years

National City Corp. has also been mentioned in various reports as a takeover target.

A fourth institution, World Savings, no longer appears on the list. The thrift's holding company, Wachovia Corporation WB, changed the institution's name to Wachovia Mortgage FSB during the quarter and shifted some of its assets to other charters.

How about smaller banks and S&Ls?

As always, we are concerned that smaller institutions have sufficient capital to weather storms like this. While only 89 out of 8,613 U.S. banks and thrifts were considered below well capitalized at year-end, this was a 51% increase from a year earlier.

The following table shows the 10 institutions assigned an E-minus (very weak financial strength) rating on the basis of Dec. 31, 2007, financial reports, with the lowest leverage capital ratios. Five of these also reported terrible asset quality.

Click here for larger image.

Should depositors be concerned about the health of these institutions?

Absolutely, especially if they have deposits exceeding FDIC insurance limits. They should also be concerned if they or someone they know are affiliated with municipalities, most of which have deposits in local banks. School districts, for example, make very large seasonal deposits, most of which are not insured.

Our ratings for banks, S&Ls, insurance companies, stocks and ETFs are available for free, using our Ratings Screener.

OK, enough of the bad news. Which institutions are rated the highest?

The following is a list of the 10 highest-ranking A-plus-rated institutions. All have very strong capital levels and consistent earnings results.

Click here for larger image.

One institution on the list, Maspeth FS&LA, reported nonperforming assets comprising 1.63% of total assets as of December 31. While this number is rather high for an A+ rated institution, Maspeth also had the highest leverage ratio on the list. It is a strongly capitalized institution with a long history of excellent financial performance.

Last quarter you said you expected layoffs at larger institutions to have a major effect on total industry employment numbers. What happened in the fourth quarter?

Banks and thrifts reported total full-time equivalent employees of 2.219 million as of Dec. 31, which was the lowest level for 2007. This was still higher than the 2.211 million at the end of 2006.

Click here for larger image.

Mr. van Doorn appreciates your feedback; click here to send him an email.