PALM BEACH, Fla. — In between rounds of golf at Sandler O’Neill & Partners’ annual financial services conference here last week, bankers took some time to discuss the latest issue in banking, the credit-quality problems dogging the industry.

In presentations, the focus quickly shifted from building fee income and the development of an online strategy to the growing concern over nonperforming assets.

The problem isn’t as widespread or as bad as one might think, and there are ways to avoid getting burned, including raising deposits and diversifying a loan portfolio, the bankers said.

Brian Arsenault, who heads investor relations at BankNorth Group Inc. in Portland, Maine, said that less than 5% of the company’s commercial loans are unsecured, and only 3% are shared national credits.

BankNorth’s portfolio of consumer lending, an area seen as less risky than commercial loans, has increased slightly, while its commercial lending program has slowed significantly, he said.

The company’s third-quarter loans grew 11% from the same period last year, but the company’s consumer and commercial loans will increase at a slower rate next year, Mr. Arsenault said. Meanwhile, demand deposits rose 14%. BankNorth is clearly not looking to increase credit risk, he said.

Neal E. Arnold, chief financial officer of Fifth Third Bancorp in Cincinnati, said that if a credit problem does occur, “we will find a way to pay for it.”

Mr. Arnold said he is more confident than ever that the bank’s revenue stream is sufficient to cover any eventuality.

On Nov. 20, Fifth Third announced a deal to buy Old Kent Financial Corp. of Grand Rapids. Mich. Combined the two companies generate 37% of their income from retail banking and 32% from fee-based business. Total transaction deposits have grown 16% since the start of the year.

Henry Williamson Jr., chief operating officer BB&T Corp. in Winston-Salem, N.C., said that his company’s chargeoff ratio of 0.23% is lower than the industry average of 0.57%, according to FDIC numbers, and that the company’s third-quarter ratio of nonperforming assets was 0.28%, versus 0.67% for the industry.

Mary Lou Christy, a vice president at Fannie Mae, on the other hand, said that asset quality is not an issue for her company. While the company’s third-quarter issuance of mortgage-backed securities rose 16.6% from the previous quarter, to $56.7 billion, credit losses fell 4.8%, to $19.5 million.

Fannie has taken new precautions to secure itself against possible losses, such as early counseling of delinquent customers, Ms. Christy said. “Of 10 people missing payments, three you should worry about, and one is in serious trouble.” Fannie’s real concern is finding the one with the real problem and preventing that customer from “digging a hole” of debt, she said.

The company also takes efforts to increase the value of a defaulted loan by directly negotiating with contractors of the failed mortgage, Ms. Christy said. About half of the company’s decrease in credit losses is because of the strong economy, but the other half is the result of Fannie’s own strategy, she said.

Henry Meyer, president and chief operating officer of KeyCorp, said the Cleveland banking company keeps loan-loss reserves of $1 billion, or 1.51% of the company’s outstanding loans.

Eugene S. Putnam Jr., senior vice president and head of investor relations at SunTrust Banks Inc., said what “matters for the loan-loss portfolio is the credit mix, not the loan-loss ratio.”

The $100 billion-asset Atlanta company keeps reserves of 1.21% of its loans, which is “in the lower end” of the industry, but SunTrust has a better mix of loans on its books than most banking companies, he said. SunTrust’s chargeoff ratio was 0.26% for all of last year, but only 0.15% for the first three quarters of this year.

“We are the only bank I know which was forced by the SEC to lower its reserve level because it was considered too high,” Mr. Putnam said.

Consumer loans make up 15% of SunTrust’s portfolio, commercial real estate 15%, commercial and industrial 42%, and mortgages 28%.

Robert E. Lowder, chairman and chief executive officer of Colonial BancGroup Inc. of Birmingham, Ala., said his company’s loan portfolio is “one of the strongest in the business.” He emphasized the fact that 80% of the company’s loans are in the real estate sector. “That is what we know.”

Mr. Lowder said he is proud of Colonial’s 0.21% chargeoff ratio, as well as the fact that its third-quarter loan portfolio grew 16% from a year earlier, though he put particular emphasis on the company’s growing noninterest income.

Still, for investors the outlook is murky, especially when determining where the problem of credit quality will likely rise next.

Jeff Miller, managing partner and co-founder of Acadia Investment Funds Inc., said that the size of the commercial loan portfolios is troublesome. Several financial institutions, particularly thrifts, have relied too much on loan growth to increase their earnings, he said.

Felice Gelman, managing partner and co-founder of Sunova Capital, said that it is too early to determine when and where “hot loan round two” will occur, and that the industry has not seen any of the delinquencies that will come as a result of the economic slowdown. “Commercial banks have done a lousy job in deposit growth.”

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