Preliminary Bank Star Ratings Indicate Mixed Bag

For the first time in ten years, the number of banks reporting fell by more than 100 in a single quarter. Forty-five banks failed during the second quarter ’10; 29 charters were consolidated into affiliates and 28 were lost to mergers and acquisitions. In contrast, Q2’10 marks the first quarter in 38 years (since the data is available) that no new banks were chartered.

The number of institutions on the FDIC’s “Problem List” increased from 775 to 829 with assets of $403 billion. Bauer’s preliminary analysis puts 986 banks on its Troubled and Problematic Bank Report   (rated 2-Stars or below) with total assets of $479 billion in assets and $388 billion in deposits.

We will have all ratings updated for you for next week’s issue but our preliminary ratings are broken down in the following chart—59.2% of the nation’s banks are now recommended (5-Stars or 4-Stars). That’s up from 57.4% last quarter and 55.7% a year ago. Nearly 13% (12.7%) are on our T&P Report—down from 13.7% last quarter but up from 11.5% a last year.

Those in the middle (rated 3½-Stars or 3-Stars) were down slightly from March 2010— 27.3% as opposed to 27.9%, but down a full 3% from the 30.3% June a year ago. Our mixed bag indicates a slight improvement in June over last quarter but a year over year slide.

Star Rating	Q2’10	Q1’10	Q2’09
5-Stars	36.9%	35.5%	32.0%
4-Stars	22.3%	21.8%	23.7%
3½-Stars	12.1%	12.8%	15.9%
3-Stars	15.2%	15.1%	14.4%
2-Stars	6.3%	7.0%	6.0%
1-Star	1.9%	1.8%	1.3%
Zero-Stars*	4.5%	4.9%	4.2%
Start-Up	0.8%	1.1%	2.5%
Total Banks	7,819	7,930	8,192