Tuesday, February 24, 2015

FDIC: Fewer Problem banks, Residential REO Declines in Q4

by Calculated Risk on 2/24/2015 03:41:00 PM

The FDIC released the Quarterly Banking Profile for Q4 today.

The banking industry continued to improve at the end of the year. Although total industry earnings declined as a result of significant litigation expenses at a few large institutions and a continued decline in mortgage-related income, a majority of banks reported higher operating revenues and improved earnings from the previous year. In addition, banks made loans at a faster pace, asset quality improved, and the number of banks on the problem list declined to the lowest level in six years.
[F]ourth quarter net income was 36.9 billion dollars, down 7.3 percent from the prior year. The principal reasons for the decline were a 4.4 billion dollar increase in litigation expenses concentrated at a few large institutions and a 1.6 billion dollar decline in mortgage-related noninterest income.
emphasis added
FDIC Problem Banks Click on graph for larger image.

The FDIC reported the number of problem banks declined (Note: graph shows problem banks quarterly for 2014, and year end prior to 2014):
The number of banks on the problem list fell to the lowest level since the third quarter of 2008. There were 291 banks on the problem list at the end of 2014, less than one-third of the 888 problem banks at the peak in March 2011. Total assets of banks on the problem list fell to 87 billion dollars.

This is the first time problem bank assets have been below 100 billion dollars since March 2008.
FDIC Insured Institution REOThe dollar value of 1-4 family residential Real Estate Owned (REOs, foreclosure houses) declined from $6.10 billion in Q3 2014 to $5.98 billion in Q4. This is the lowest level of REOs since Q3 2007.

This graph shows the dollar value of Residential REO for FDIC insured institutions. Note: The FDIC reports the dollar value and not the total number of REOs.