Jim Boswell of Quanta Analytics (QA) fame has just finished compiling the Quanta Analytics Troubled Bank List for 2011 and Beyond. Boswell used the 9/30/2010 banking data from the FDIC’s database to compile his list.
Here are some relevant pieces of information that you should know with regards to the list:
- Boswell’s Quanta Analytics List is about half the size of the FDIC’s problem bank list. The FDIC says their list has 860 banks on it with an asset value of $448 billion
- The QA list has only 448 banks on it with a total asset base of $218 billion
You can look at the QA list from three different perspectives:
- By individual bank — this is the first view and the banks are sorted by the one’s in the worst shape downward
- By risk quandrant (below the individual bank view) — problem banks are placed in one of four different risk quadrants
- By state (below the risk quandrant view) in which the bank resides
Quanta Analytics estimates that the FDIC losses associated with these banks could be in the range of $13.2 billion (but of course, you probably have to double that amount to account for all of the legal, accounting, and government bungling that takes place during a shutdown).
A bank gets on the Quanta Analytics list if the amount of its Non-Performing Assets (NPA) is greater than its Equity. Non-performing assets are essentially loans that are 90 plus days delinquent in payment or in foreclosure. The key performance measurement that Boswell uses therefore is NPA / Equity. The 448 banks are placed in the following four risk quadrants:
- NPA / Equity > 3.00 (102 banks)
- NPA / Equity between 2.00 – 2.99 (94 banks)
- NPA / Equity between 1.50 – 1.99 (93 banks) and
- NPA / Equity between 1.00 – 1.49 (159 banks)
I know it might not sound like “economic rocket science”, but Boswell’s list has identified 52 of the last 53 FDIC shutdowns using this same rationale. And recall that he is using a list less than half the size of the FDIC’s.
If you understand Boswell’s rationale for what constitutes a troubled bank, you will see why he says TARP simply wasn’t necessary, and if anything, incited fear which almost drove us into a depression.
The Quanta Analytics List of Troubled Banks for 2011 is available by contacting Jim Boswell through the following email address: firstname.lastname@example.org. And from a perspective standpoint, keep in mind that the FDIC bank database contains information on more than 7,700 banks with a total asset base of $13.4 trillion.