FDIC: ‘Problem’ Banks Up to 775, But Industry Earnings Up

Federal Deposit Insurance Corp.The number of insured commercial banks and savings institutions on the Federal Deposit Insurance Corp.’s “Problem List” jumped from 702 to 775 during the first quarter, with their total assets increasing from $403 billion to $431 billion.
However, the FDIC reported overall “positive signs of recovery” in the banking industry in its first quarter 2010 report released today.
Lower provisions for loan losses and reduced expenses for “goodwill impairment” that stem from new accounting rules lifted the earnings of FDIC-insured commercial banks and savings institutions to $18.0 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 2009, and are the highest quarterly total since first quarter 2008,” the FDIC reported.
The largest year-over-year first quarter increases were reported by the largest banks, but a majority of institutions – 52.2 percent – reported net income growth.
“This is the highest percentage of institutions reporting increased quarterly earnings in more than three years (since third quarter 2006),” the FDIC said.
The number of institutions reporting quarterly financial results declined by 80 in the first quarter, from 8,012 to 7,932. Forty-one FDIC-insured institutions failed during the quarter, while 37 institutions were merged into other charters.
But the number of failed banks this year reported by the FDIC through last week is 72, a pace certain to surpass last year’s total of 140 bank closures.
In its first quarter report, the FDIC said the number of insured commercial banks and savings institutions on the FDIC’s “Problem List” increased from 702 to 775, and total assets of “problem” institutions increased from $403 billion to $431 billion.
Overall, insured institutions set aside $51.3 billion in provisions for loan and lease losses in the first quarter, a $10.2 billion, or 16.6 percent decline from a year earlier.
However, only about one-third of insured institutions saw year-over-year declines in loss provisions, with much of the overall reduction concentrated among a few of the largest banks, the FDIC said.
Loan losses posted a year-over-year increase for a 13th consecutive quarter. Net charge-offs totaled $52.4 billion, an increase of $14.5 billion – 38.4 percent – from a year earlier.
Credit cards represented nearly three quarters, or $10.4 billion, of the growth in charge-offs.
“Charge-offs were up from a year ago in most major loan categories, although the increases were smaller than in recent quarters,” the regulator said.
An exception to the trend was loans to commercial and industrial (C&I) borrowers, where charge-offs fell for the first time since first quarter 2006, declining by $675 million, or 10.2 percent.
Net charge-offs of real estate loans, secured by non-farm nonresidential real estate properties, increased by $1.6 billion (155.5 percent).
Charge-offs of residential mortgage loans were $1.6 billion, or 22.9 percent, higher than a year earlier, while charged-off home equity loans rose by $1.2 billion, or 29.9 percent.
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