Tuesday, November 25, 2008

FDIC: Number of Problem Banks Increased Sharply in Q3

by Calculated Risk on 11/25/2008 11:38:00 AM

A couple key points:

  • the number of problem banks increased to 171 from 117 in the quarter.
  • charge-offs and loans losses are at the highest level since the early '90s, with problems in both consumer and commercial portfolios.

    From the FDIC: Insured Banks and Thrifts Earned $1.7 Billion in the Third Quarter
    Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported net income of $1.7 billion in the third quarter of 2008, a decline of $27.0 billion (94 percent) from the $28.7 billion that the industry earned in the third quarter of 2007. With the exception of the fourth quarter of last year, the latest earnings were the lowest for the industry since the fourth quarter of 1990.

    "We've had profound problems in our financial markets that are taking a rising toll on the real economy. Today's report reflects these challenges," said FDIC Chairman Sheila C. Bair.
    ...
    Nine FDIC-insured institutions failed in the third quarter, the most since the third quarter of 1993. The failures included Washington Mutual Bank, with assets of $307 billion. The FDIC's "problem list" grew during the quarter from 117 to 171 institutions, the largest number since the end of 1995. Total assets of problem institutions increased from $78.3 billion to $115.6 billion.
    And on loan losses and charge-offs:
    Provisions for loan losses continue to rise. Higher levels of troubled loans, in both consumer and commercial portfolios, led to increased provisions for loan losses in the quarter. Loss provisions totaled $50.5 billion, compared to $16.8 billion in the third quarter of 2007. ...

    Charge-offs and noncurrent loans are still increasing. Insured institutions charged off (removed from their balance sheets because of uncollectibility) $27.9 billion in troubled loans in the third quarter. The annualized net charge-off rate of 1.42 percent was the highest quarterly average since 1991. The amount of noncurrent loans and leases (90 days or more past due or in nonaccrual status) increased by $21.4 billion (13.1 percent) during the third quarter. At the end of the quarter, 2.31 percent of all loans and leases were noncurrent, the highest level for the industry since the third quarter of 1993.