Bank Failures Up to 73, But Troubled Loans Slowing: FDIC

U.S. bank failuresPinehurst Bank in St. Paul, Minnesota became the 73rd bank failure this year – one of a string of neighborhood banks throughout the country unable to survive faltering loans and slumping demand for credit.
Pinehurst was the sixth bank to fail in Minnesota this year, each with less than $60 million in deposits.
The Federal Deposit Insurance Corp. expects the rate of bank closures to peak later this year, and it reported some encouraging signs in the overall banking industry’s recovery with its first quarter results released Thursday.
Despite a record-level of troubled bank assets, the FDIC said the first quarter of 2010 saw a slowing down in the growth of troubled loans for a fourth consecutive quarter.
The percentage of loans and leases that were non-current – 90 days or more past due or in non-accrual status – rose from 5.38 percent to 5.45 percent at the end of the first quarter, the highest level in the 27 years that insured institutions have reported these data.
But the $17.4 billion – or 4.4 percent increase – in non-current loans was the smallest quarterly increase in two and a half years, as “the amounts of commercial and industrial loans and construction and development loans that were non-current each declined for the second consecutive quarter.”
However, the number of institutions on the FDIC’s “Problem List” rose to 775, up from 702 at the end of 2009.  The total assets of “problem” institutions jumped during the first quarter from $403 billion to $431 billion.
The one-branch Pinehurst takeover marked a significant slowdown – at least for this week – in an otherwise high rate of bank failures in March, April and the first half of May for the FDIC.  The regulator has said it expects this year’s closures to surpass last year’s 140 failures.
Coulee Bank, of La Crosse, Wisconsin, will assume all of Pinehurst’s $58 million in deposits.
The FDIC estimates that the cost to its Deposit Insurance Fund (DIF) will be $6 million from the Pinehurst failure. Combining the fund’s balance with its contingent loss reserve, total DIF reserves stood at $20 billion at the end of the first quarter.
For all FDIC-insured banks in the first quarter, lower provisions for loan losses and reduced expenses from new accounting rules lifted to $18 billion.
“While still low by historical standards, first quarter earnings represented a significant improvement” from the $5.6 billion the industry earned in first quarter of 2009 and it is the highest quarterly total since first quarter 2008, the FDIC reported this week.
“There are encouraging signs in the first-quarter numbers,” said FDIC Chairman Sheila C. Bair. “Industry earnings are up. More banks reported higher earnings, and fewer lost money.”
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