Iowa banks moving in the right direction

More than three-quarters of Iowa's banks are recommended by a national bank rating firm based on Dec. 31 financial data submitted to the Federal Deposit Insurance Corp.

Bauer Financial Inc. of Coral Gables, Fla., recommends 78.6 percent of Iowa's banks, up from 76.6 percent at the end of the third quarter on Sept. 30. Bauer rated 3.9 percent of Iowa's banks as troubled or problematic, unchanged from the end of the third quarter and up 0.1 percent from 3.8 percent at the end of 2009.

Bauer Financial recommends 60.1 percent of the nation's banks, up from 59.7 percent at the end of the third quarter on Sept. 30 and 56.8 percent at the end of 2009. The percentage of problematic or troubled banks rose to 12.8 percent at the end of 2010 from 12.7 percent at the end of the third quarter, but down from 13.7 percent at the end of 2009.

Fifteen Iowa banks were rated two stars (problematic) or less at the end of last year, unchanged from Dec. 31, 2009. Four banks - First Bank of West Des Moines, Patriot Bank of Brooklyn, Polk County State Bank and State Central Bank of Keokuk - did not receive any receive stars, the lowest rating given by Bauer Financial.

Bauer Financial ranks all banks in Linn, Johnson and surrounding counties at three stars (adequate) or higher on Dec. 31.

Iowa banks continued to outperform the rest of the nation in 2010, according to the FDIC  data. Institutions with a banking charter in Iowa posted net income of $487 million, a 23 percent increase over the prior year, moving the industry closer to a more normal profit level and a 0.75 percent return on assets.

The FDIC statistics also showed that 93 percent of Iowa's 360 banks were profitable in the fourth quarter of 2010, compared with 79 percent nationally.

Loan quality continues to improve for Iowa banks, as non-current loans or those 90 days or more past due and not accruing interest fell to 1.79 percent of total loans – less than half of the national average. Iowa bank equity capital grew to $6.5 billion in 2010.