Dick Bove's List of Banks In Danger of Failing

Richard (Dick) Bove or Landenburg Thalmann has compiled a list of banks he considers "in the danger zone" for failure. He started with a list of 107 banks with assets over $5 billion which represents about 79% of total industry assets at nearly 8,500 US thrifts and banks.

First Bove looked at nonperforming assets as a percentage of its loans at the end of the first quarter. Nonperforming assets include nonperforming loans, foreclosed assets and loans that are more than 90 days past due. Dick Bove said a ratio over 5% "represents danger."

According to the SF Chronicle the banks on this list and their ratios were:

1. Downey Financial (13.9%)
2. Corus Bankshares (13.2%)
3. Doral Financial (12.8%)
4. IndyMac Bancorp (10.5%)
5. FirstFed Financial (6.7%)
6. Oriental Financial Group (6.12%)
7. Bank United Financial (5.4%).

Washington Mutual was #12 on the list and one of the largest banks in the country, was number twelve on the list with a 3.9% ratio.

Next Bove looked at non performing assets as a percentage of equity. A ratio over 40% is in the danger zone vai Bove's method and eleven companies made the list:

1. IndyMac at 146.2%
2. Downey Financial
3. Doral Financial
4. BFC Financial
5. BankUnited Financial
6. Corus Bankshares
7. FirstBanCorp.
8. FirstFed Financial
9. Flagstar Bancorp
10. Santander BanCorp
11. Washington Mutual at 40.6%

Other signs of trouble, according to James Abbott, a regional-bank analyst with Friedman Billings Ramsey are:

1. Offering above-average yields to attract deposits. This often gets "hot money" that can flee at the first sign of trouble or move elsewhere to get better rates.
2. A relatively high level of uninsured deposits. Now that IndyMac bank has failed, these folks should be cashing in now before their bank gets hit.
3. A low level of asset quality
4. Low levels of equity. Hard to withstand a run on the bank if #1 and #2 above leave.
   

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