BALTIMORE -- Although many of the nation's largest banks have been establishing large loss reserves as they write down troubled Latin American loans, most Maryland banks are healthy and have improved earnings, according to a recent rating.

About 45 percent of Maryland bank holding companies and banks had "superior" and "excellent" ratings in the second-quarter figures released by IDC Financial Publishing of Hartland, Wis. The firm uses data submitted to the Federal Deposit Insurance Corp. and the Federal Reserve Board to analyze the financial strength of commercial banks.

The state's average for all the banks rated put Maryland in the "excellent" category, behind only Alabama, Delaware, Maine, Rhode Island and West Virginia, for the quarter ended June 30.

Maryland's generally healthy economy has kept the banks in sound shape, unlike banks in the Southwest, for example, suffering under the collapse of the oil and gas industry.

The IDC ratings take into account capital risk, loan and delinquency mixes, interest spreads, interest rate risk, profitability and flexibility for the specific period being analyzed. The firm cautions that its ratings have no value in forecasting future financial conditions for the banks.

IDC's Bank Financial Quarterly uses 300 as the highest rating and 1 as the lowest, which places a bank near failure.

A rating of 200 or higher is considered "superior;" from 165 to 199 is "excellent;" from 125 to 164 is "average;" from 50 to 124 is "below average;" and the "lowest" category is reserved for banks with ratings of 49 and below.

Only one Maryland Bank -- Heritage International Bank of Bethesda -- had a rating of 1, which was a result of large loan loss provisions that amount to 99 percent of its equity. Its current equity is about 1.4 percent of its assets.

W. Griffin Morrel Jr., Heritage's president and chief executive, said that an infusion of several million dollars of capital in July will be reflected in next quarter's figures.

The rating for Signet Bank-Maryland dropped to 96 from the 120 of the previous quarter mainly because the bank wrote off about $30 million of its troubled international loans, which reduced the bank's equity and increased its loan-loss reserve.

Although the loan writeoff hurt Signet's rating for the second quarter, bank officials say it ultimately will improve the bank's financial condition for the next quarter.

"We have improved the quality of our balance sheet in reserving for these bad loans and moving them off the books," said William H. Cowie Jr., president and chief executive of Signet Bank-Maryland. "We are much stronger for having done it."

In a number of cases, the Maryland subsidiaries of large money center banks had much better ratings than their parent companies. Citibank (Maryland) N.A. had a 300 rating although its parent company, which established loan loss reserves of $40 billion for possible bad loans, had a "below average" rating.

Chase Bank of Maryland received a superior rating, as its parent labors under the weight of problem real estate, Latin American and energy loans.

Mellon Bank of Maryland, whose parent has been rocked by losses of $626 million during the first half of the year, received an "excellent" rating.

One of the key indicators in IDC Financial analysis is the equity-to-assets ratio, which shows the relationship between the bank's capital and the loans and investments it has on its books. A strong ratio indicates security, while a low ratio indicates the bank could be hurt if large numbers of borrowers defaulted. IDC Financial, like the FDIC, sets 6 percent as the minimum acceptable equity-to-assets ratio.

Nearly all of Maryland's major bank holding companies -- those with at least $1 billion in assets -- had equity-to-assets ratios greater than 6 percent. Citizens Bancorp, the $1.7 billion company headquartered in Riverdale, had the strongest with a ratio of 10.7. Mercantile Bankshares had a rating of 9.6, Baltimore Bancorp 8.3, First Maryland Bancorp 6.2, Equitable Bancorporation 5.9, and MNC Financial, the parent company of Maryland National Bank, had 6.2.

Among Maryland's smaller banks, several had ratios above 15 -- including Sterling Bank and Trust Co., Bank of Maryland and Eastville Bank, a Mercantile Bankshares subsidiary in Virginia.

While IDC Financial places a great deal of importance on the strength of a bank's capital compared to its assets, there is a lively debate among bankers over whether capital adequacy is an appropriate measure of a bank's strength.

Many larger banks, which take more loan risks, are penalized because they try to lend to their legal limit, resulting in smaller equity-to-assets ratios than at smaller banks.

Another important factor in determining a bank's financial health is the composition and condition of its loan portfolio -- broken down by IDC Financial into four categories -- commercial-industrial, farm, personal and real estate. The company also tracks the loan delinquencies in the four loan categories.

Some of Maryland's banks are included among those that have delinquency problems in their loan portfolios, including several with problem foreign loans that have lowered their ratings.

Maryland National Bank has a relatively small foreign loan portfolio -- 5 percent of its total loan portfolio -- but it is responsible for 70 percent of the bank's total delinquencies.