Dedham Institution for Savings was among the Massachusetts financial institutions that recently received the highest possible rating from BauerFinancial, an independent bank rating and research firm based in Florida.

Massachusetts banks and credit unions are doing something right. In a recent national rating of banks and credit unions, many of the Bay State’s financial institutions scored the highest rating possible: five stars. But although the financial condition of those institutions is strong, some industry experts say that means banks don’t have enough lending opportunities.

BauerFinancial, an independent bank rating and research firm based in Florida, compiled the financial data, such as income levels and capital ratios, for the nation’s more than 8,800 banks and 8,900 credit unions. The star ratings are given based on a bank’s financial condition. In Massachusetts, many institutions received high marks.

“A lot of banks are still rated five stars,” said Robert B. Segal of J. William Mantz Investment Advisors in Gloucester. “The industry is financially strong.”

The majority of banks received either four or five stars. Five-star banks included Dedham Institution for Savings, Hingham Institution for Savings and Natick-based Middlesex Savings Bank, while Worcester-based Commonwealth National Bank, Danversbank, and Franklin-based Strata Bank were among the four-star institutions.

While there were some institutions that were given a three or three-and-a-half star rating, they were generally regional institutions, like Bank of America, Citizens Bank of Massachusetts and TD Banknorth. A few community institutions, such as Georgetown Savings Bank and Capital Crossing Bank in Boston, also received three-and-a-half stars.

Five stars is considered superior financial condition, four stars is excellent, three-and-a-half is good and three is considered adequate.

Many of the state’s credit unions also reported strong financial data. Only a few had troubling ratings (one star), such as Our Lady of the Angels Federal Credit Union in Fall River and Delta Wye Federal Credit Union in Dorchester.

Segal said the banks have built up and sustained high capital levels over the last few years. Profitability, he said, also has been strong in recent years.

Although banks have been concerned with narrowing margins, there have still been record earnings for the industry, Segal said.

‘Strong Footing’
As banks bask in their strong financial condition, there can be drawbacks. Segal noted that some banks may be overcapitalized. While lending opportunities are better than they have been, he said most banks would like to lend a little more. Many institutions, he said, would like to put more capital to work on the commercial side.

Because liquidity in the corporate world has been high, Segal said many companies are able to fund a lot of activities with cash on their balance sheet and therefore loans are not necessary.

“They are only so many loans to go around,” he said.

Looking ahead, Segal said he expects banks to remain in strong financial positions.

“Conditions could stay pretty strong,” he noted.

There are no expectations that banks will become more lenient with their loans and credit conditions are unlikely to deteriorate.

“Credit quality has been remarkably good,” said Segal.

Don’t expect community banks to start offering nontraditional loan products, such as option adjustable-rate mortgages, he added. Large out-of-state banks and mortgage companies will fill that void.

Banks have become more conservative and feel more comfortable operating with more capital on hand, Segal noted.

“A lot of them probably have more capital than they need for the long term,” said Segal.

Daniel J. Forte, president of the Massachusetts Bankers Association, said because of the diverse bank chartering system in Massachusetts, banks have been able to build their capital by carving out a niche.

“That gives them an opportunity to create niches based on their management style,” said Forte. “If you look at the banking industry in Massachusetts from a macro perspective, we are doing very, very well.”

Because there are many types of banks in the area, including a number of regional and national institutions, consumers have had a myriad of products and services offered to them. The financial condition of the banking industry is also strong because 70 percent of banks in Massachusetts are mutual, Forte said.

Forte noted that the Massachusetts Legislature and his predecessors at the MBA realized in the 1980s that banks couldn’t continue doing business as they were. During that decade, commercial lending authority was introduced to savings institutions. Forte said that allowed many institutions to overcome bumps in the economy.

“That gave our banks strong footing Â… to have over 25 years of history in commercial lending,” Forte said.

Bank leaders that were doing business in the last two decades also have learned lessons, Forte said. Banks are much more conservative in today’s marketplace.

“Bankers leading institutions today survived some pretty tough times,” said Forte, adding that higher capital levels are a good cushion during a slowdown in the economy. “There has been a certain cautiousness. They’ve used their capital very prudently.”

Banks also have brought in income by delving into other areas of the financial services industry. Insurance and security sales have given banks many more products with which to compete. That has been especially important, Forte said, because mortgage companies and large credit unions have become fierce competition for banks.

“This is a competitive financial services environment,” he said. “[Mortgage companies] have captured a very large market share.”

Although banks appear to have a comfortable cushion, it begs the question of whether some banks have too much money. Forte said stock banks have to leverage their capital by not putting it to work all at once. Strong capital ratios are also demographic, Forte said. Massachusetts banks are all competing for the same business but there has been less growth in the Bay State than in other parts of the country.

“It’s tougher to deploy capital [here],” Forte said.

Despite all the lessons learned and good business tactics, Forte said the banking industry does have challenges ahead.

“The yield curve has been tough,” said Forte, referring to short-term rates moving up faster than long-term rates.

Looking forward, Forte said if banks continue using technology to keep costs down and remain competitive, that will be one way to stay ahead.

“Platforms have been greatly enhanced,” he said.

It also will be important for banks to offer other products and services, such as insurance, he added.

Ultimately, Forte said, it is believed the banking industry should remain in good financial condition if it takes a cue from the past.

“The future bodes well if we learned our lessons,” he noted.