For Banks, More Trouble Just Around the Bend

Fifth Third of Grand Rapids' total nonperforming assets ratio of 3.92% was by far the highest among U.S. banks with at least $50 billion in total assets, reflecting its concentration in the troubled Michigan market. The next highest was National City Bank of Cleveland (held by National City Corp. (NCC Quote), soon to be acquired by PNC Financial Services (PNC Quote)), which had 3.22% nonperforming assets as of Sept. 30, and didn't make the above list because most of its bad loans were residential mortgages.

Loan loss reserves covered 2.71% of total loans, keeping ahead of the annualized ratio of year-to-date net charge-offs to average loans, which was 2.17%. However, the pace of charge-offs for just the third quarter was 2.93%. This means the elevated pace of provisioning for loan loss reserves is likely to continue, along with further net losses.

One bright spot for Fifth Third of Grand Rapids was that even after losing $191 million during the third quarter, the institution had a leverage ratio of 10.04%, the highest for the banks on the list. This gives the institution strength to weather more losses as it beefs up reserves. Even with the large third quarter loss, the bank's annualized return on equity was a negative 11.99%, showing that it can withstand this level of stress for quite some time.

Fifth Third Bancorp has received preliminary approval to receive a $3.45 billion preferred equity investment from the Treasury's Troubled Assets Relief Program, but it's too early to say how the holding company will allocate the money to its main banking charters.