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FDIC's Third Quarter Report - Number of Problem Banks Increased to 171

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The FDIC released its third quarter report on the banking industry. Also, the FDIC updated its database with the banks' financial data for the end of the third quarter. Ratings services like BauerFinancial and Bankrate use this data for their star ratings. Recent ratings had been based on 6/30/08 data. Their new ratings based on 9/30/08 data should be out soon.

As expected, the report showed worsening conditions. One example is the number of problem banks which grew from 117 to 171. Here are excerpts from the press release:

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.
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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.
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As expected, the FDIC's Deposit Insurance Fund (DIF) reserve ratio fell. Higher loss provisions for bank failures were primarily responsible for a decline in the fund balance to $34.6 billion at September 30th from $45.2 billion at June 30th.

The press release ends with some assurances regarding the FDIC's ability to deal with future bank failures:
The FDIC has ample authority to raise assessments to ensure that banking industry resources absorb all losses from bank failures and to protect insured depositors. The capital of the banking industry is available to support the fund. Well-capitalized institutions held $1.25 trillion in total capital at September 30th, including $235 billion above the threshold for well-capitalized status. The FDIC also can borrow from the Treasury to ensure that the agency can meet all of its obligations in a timely manner.


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