Illinois' Strongest and Weakest Banks

CHICAGO ( TheStreet) -- Illinois, which has more banks and thrifts than any other state, counts 71 institutions with "recommended" ratings of B-plus (good) or higher, according to a review by TheStreet.com Ratings. But 11 of Illinois' 641 banks and savings and loan associations were weighed down with critically poor loan quality.

Illinois has had 17 institutions fail during the current credit crisis, trailing only Georgia, with 24 failures, and ahead of California, with 14, and Florida, with eight.

The most recent Illinois failure and the largest in the state during the crisis was Corus Bank of Chicago, closed by federal regulators on Sept. 11. Corus' deposits were sold by the Federal Deposit Insurance Corp. to MB Financial ( MBFI). (See TheStreet.com's enhanced interactive Bank Failure Map for a detailed summary.)

Strongest Illinois Banks and Thrifts

In addition to 71 institutions rated B-plus or above in the second quarter, down from 75 in the previous quarter, the state has 37 banks and thrifts rated A- (excellent) or higher.

Illinois Banks and Thrifts Rated A- and Higher (in Millions of Dollars)
Source: SNL Financial

TheStreet.com Ratings uses a very conservative model to assign bank and thrift financial-strength ratings, placing the greatest weight on capital strength, credit quality and earnings stability.

Most of the highest-rated Illinois banks and thrifts were relatively small and had nonperforming asset ratios of less than 1%. Almost all had total risk-based capital ratios greatly exceeding the 10% required for most institutions to be considered well-capitalized under regulatory guidelines.

Largest Illinois Institutions

The following includes capital, earnings and asset-quality indicators.

10 Largest Illinois Banks and S&Ls (in Millions of Dollars)
Source: SNL Financial

The largest Illinois bank or thrift held by a publicly traded holding company is Northern Trust Co., a subsidiary of Northern Trust ( NTRS), with $62 billion in total assets. It achieved a return on equity of slightly less than 20% for the first quarter and was rated B (good).

Next was Harris NA, held by Bank of Montreal ( BMO). It maintained its C-minus (fair) rating after posting a second-quarter loss of $44 million. After charging-off $248 million in problem loans in the fourth quarter, nonperforming loans crept up during the first and second quarters, leaving Harris with a nonperforming-assets ratio of 1.62% as of June 30. Loan-loss reserves covered 2.65% of total loans, well ahead of the 1.75% annualized ratio of net charge-offs to total loans for the second quarter.

The bank with the weakest asset quality among the 10 biggest in the state was Amcore Bank NA, a subsidiary of Amcore Financial ( AMFI). Amcore was in serious trouble, with an 8.98% nonperforming-assets ratio and a total risk-based capital of 8.78% as of June 30. In late June, the bank agreed with the Federal Reserve and the Office of the Comptroller of the Currency to achieve and maintain a total risk-based capital ratio of 12% by Sept. 30.

Amcore is scheduled to release third-quarter results Oct. 27. While the company announced the sale of four branches in August, it has remained silent about compliance with its regulatory capital requirement.

Illinois Banks With Weakest Loan Quality

Fifteen Illinois institutions were included in TheStreet.com's list of Undercapitalized Banks and Thrifts published Aug. 28 and based on June 30 financial reports. Of 116 undercapitalized institutions on the list, 13 have failed. From 89 banks and thrifts on a similar list published in May, more than half have been shuttered.

There were 23 Illinois banks and thrifts with nonperforming-assets ratios above 10% as of June 30. Nonperforming assets include nonaccrual loans, accruing loans past due 90 days or more, and repossessed real estate.

Illinois Banks and S&Ls with Nonperforming Assets Exceeding 15% (in Millions of Dollars)
Source: SNL Financial

Free Bank and S&L Ratings

Last year, the FDIC curtailed the likelihood of bank failures by temporarily increasing the agency's basic limit on individual deposit insurance coverage to $250,000 from $100,000. The increase has been extended through 2013.

The FDIC also temporarily waived all deposit-insurance limits for business-transaction accounts (checking accounts). That waiver is set to expire on June 30, 2010, after which business-checking accounts will revert to the $100,000 limit.

That means it will be more important than ever for business and municipal entities such as school districts to carefully monitor the health of their banks. It's easy to have more than $100,000 of somebody else's money flowing through a business account.

TheStreet.com Ratings issues independent and very conservative financial-strength ratings on the nation's 8,500 banks and savings and loans. They are available at no charge on the Banks & Thrifts Screener.

-- Reported by Philip van Doorn in Jupiter Fla.

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.

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