FDIC's List of "Problem" Banks Grows to 884

Posted on Wednesday, March 16, 2011

The number of lending institutions on the FDIC’s problem-bank watch list rose to 884 as of the end of last year. That’s up from 860 three months earlier, but the agency noted that the rate of increase in the number of “problem” banks has declined in each of the past four quarters.
The FDIC does not release the names of the banks on its watch list, for fear that the stigma attached would cause a run on those banks, and the agency says a “vast majority,” in fact, are able to get back on their feet.
During the 2010 calendar year, 157 FDIC-insured lending institutions went under.
“As we have repeatedly stated, we believe that the number of failures peaked in 2010, and we expect both the number and total assets of this year’s failures to be lower than last year’s,” said FDIC Chairman Sheila Bair.
With the additional names added to the watch list, total loan assets held by problem institutions increased to $390 billion, up from $379 billion during the third quarter of 2010 but below the $403 billion reported at year-end 2009.
The FDIC’s deposit insurance fund balance increased for the fourth consecutive quarter, rising from negative $8.0 billion to negative $7.4 billion. The increase in the fund stemmed primarily from assessment revenues and an improving outlook for losses from future failures. The contingent loss reserve, which covers the costs of expected failures, fell from $21.3 billion to $17.7 billion during the fourth quarter.
Bair said she expects the agency’s deposit insurance fund to turn positive in 2011.
Bad real estate loans have been weighing heavy on banks’ balance sheets and forcing many to go under since 2009. The FDIC’s latest report shows that insured lenders shed $32.5 billion in real estate construction loans during the fourth quarter of last year and $11 billion in home equity loans.
Loan balances increased during the quarter in portfolios of one- to four-family residential real estate loans (up $17 billion) and loans to commercial and industrial borrowers (up $11.8 billion).
However, total loans and leases held by insured institutions fell for the ninth time in the past ten quarters, dropping by a net $13.6 billion during the last three months of 2010. Almost 60 percent of banks insured by the FDIC reported declines in loan balances in the fourth quarter.
“Cleaning up balance sheets is only a first step,” Bair said. “Now, we are looking to the industry to take the next step, and begin to build their loan portfolios. The long-term health of both the industry and our economy will depend on a responsible expansion of bank lending at this pivotal point in the economic recovery.”
Asset-quality trends showed further improvement in Q4 as noncurrent loans and leases (those 90 days or more past due or in nonaccrual status) fell for a third consecutive quarter. Insured banks and thrifts charged off $41.9 billion in uncollectible loans during the quarter, down $13 billion, or 23.7 percent, from a year earlier.
For all of 2010, insured institutions earned an aggregate $87.5 billion, the highest full-year total since 2007. The industry posted a $10.6 billion loss for 2009. The FDIC attributes the improvement largely to lower expenses for loan-loss provisions, which were $92.6 billion lower than in 2009.
“Overall, 2010 was a turnaround year with four straight quarters of positive earnings,” said Bair. “We are encouraged not only by the rising trend in total industry net income, but also by the fact that a substantial majority of insured institutions are participating in this trend.”
By: Carrie Bay, DS NEWS

Supporting Materials


1000 characters maximum Your Name:    

By Category

Recommended Sites