A well-known ratings organization ranks 15 Western Pennsylvania's financial institutions as "weak" and susceptible in an economic downturn.
TheStreet.com Ratings, based on Federal Deposit Insurance Corp. figures, identified the institutions as having the worst levels of loans not being repaid versus their capital and reserves -- a measure considered by analysts as a good way to tell how a bank is performing. The Tribune-Review reviewed ratings of all 44 banks, savings banks and savings and loans based in Western Pennsylvania.
TheStreet.com Ratings are purchased by financial institutions and institutional investors.
Local bankers defend the way they conduct business, even when the ratings suggest there are challenges.
"We read the papers, we see the problems," said Tom Smith, CEO of United-American Savings Bank on the South Side. "But we've seen no impact at all from the current economic situation."
United-American is rated by TheStreet.com Ratings with an "E+," or "very weak." The ratings firm believes the bank failed some tests that measure safety and soundness.
"If we rate an institution weak, we aren't predicting its failure, but we do believe depositors and other concerned parties should raise some questions with their bankers," said Phil van Doorn, senior banking analyst with TheStreet.com. "Overall, the local banks are doing quite well."
Van Doorn said financial institutions with a number of nonpaying loans still have a great deal of capital, the cushion of money held above what is owed to depositors. The institutions also have not had to declare a loss on their nonpaying loans.
Some bankers concede customers are concerned.
"We had lots of customers calling us and asking about FDIC insurance," said Richard Krauland, president of Farmers & Merchants Bank of Western Pennsylvania in Kittanning, Armstrong County. "There's been general anxiety."
Farmers & Merchants Bank received a "C-" rating from TheStreet.com.
Many bankers believe the $700 billion bailout authorized by Congress and the Bush Administration is designed to help only the nation's largest banks, regardless of the financial shape smaller institutions may be in.
"Will the bailout help us? Not at all," said Keith Balint, chief operating officer at Compass Savings Bank in Wilmerding, a one-office thrift that earned a "C-" TheStreet.com rating. "The government basically turned its back on us."
A level of 20 percent unpaid loans to capital a year ago was a cause for concern, experts say. Today, in some parts of the nation hard-hit by the mortgage mess, banks with levels of 100 percent or higher of unpaid loans versus capital aren't uncommon.
In the region, one of the lowest ratings went to Dwelling House Savings and Loan Association, a 118-year-old institution based in the Hill District. TheStreet.com gives it a "D+" letter grade.
Dwelling House has a nonpaying-loan-to-capital ratio of 26.44 percent. But it carries on its books nearly three times the capital and reserves that the federal government recognizes as "well-capitalized."
"The Dwelling House market always has been people who don't have and have credit difficulties," bank President Robert Lavelle said. "We carry a high level of delinquencies, but we haven't had any more due to the current economic situation outside the normal course of business."
Added van Doorn: "Dwelling House's capital ratios are so high, I think they can get through the current economic problems."
Enterprise Bank in Allison Park was rated "E+" by the ratings organization. The bank has a nonpaying loan ratio of 17.5 percent.
President Chuck Leyh said that ratio misrepresents the risk to his institution, which mainly serves businesses. Leyh said the value of the collateral put up for the loans more than supports the loan amounts.
"I could have a delinquency for two years and have no (loan) loss at all," Leyh said.
Also reviewed by the Tribune-Review were data for three Ohio-based financial institutions with a considerable regional presence: National City Bank, Fifth Third Bank and Huntington Bank.
The three banks -- counted as four since Fifth Third Bank remains chartered in both Ohio and Michigan -- are ranked among institutions operating here with high levels of nonpaying loans to capital.
National City's nonpaying loan ratio was 12.1 percent as of June 30, according to the bank. Its rating by TheStreet.com is "D."
"National City went on a buying spree a few years ago and overpaid for most of its acquisitions," van Doorn of TheStreet.com said. "It had a lot of single-family construction and mortgage loans that went bad. It was more focused on expansion."
National City spokeswoman Kelly Wagner Amen said the institution this year has "dramatically reduced our exposure to the mortgage markets and built substantial reserves against losses."
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