FDIC's 3rd Quarter Report & Our Updated Health Ratings

The FDIC released its third quarter 2011 profile on the banking industry on Tuesday. Here are some of the noteworthy excerpts from the press release:

• Commercial banks and savings institutions insured by the [FDIC] reported an aggregate profit of $35.3 billion in the third quarter of 2011, an $11.5 billion improvement from the $23.8 billion in net income the industry reported in the third quarter of 2010.
• The number of "problem" institutions declined from 865 to 844. This is the second time since the third quarter of 2006 that the number of "problem" banks has fallen.
• Total assets of "problem" institutions declined from $372 billion to $339 billion
• 26 insured institutions failed during the third quarter, four more than in the previous quarter, but 15 fewer than in the third quarter of 2010. Through the first nine months of 2011, there were 74 insured institution failures, compared to 127 failures in the same period of 2010.
• The Deposit Insurance Fund (DIF) balance continued to increase. The DIF balance — the net worth of the fund — rose to $7.8 billion at September 30th from $3.9 billion at June 30th.
• Loan balances posted a quarterly increase for the second quarter in a row and for only the third time in the last 12 quarters
• Large institutions again experienced sizable deposit inflows. Deposits in domestic offices increased by $279.5 billion (3.4 percent) during the quarter. Almost two-thirds of this increase ($183.8 billion or 65.8 percent) consisted of balances in large noninterest-bearing transaction accounts that have temporary unlimited deposit insurance coverage. The 10 largest insured banks accounted for 75.7 percent ($139.1 billion) of the growth in these balances.
• 7,437 banks and savings associations deposits insured by the FDIC (down from 7,513 in the last quarter)

The sizable deposit inflow is noteworthy for savers. Deposits increased 3.4% in the third quarter, and almost "two-thirds of this increase ($183.8 billion or 65.8 percent) consisted of balances in large noninterest-bearing transaction accounts that have temporary unlimited deposit insurance coverage." This is probably yet another thing that has put downward pressure on interest rates. This temporary unlimited deposit insurance coverage will continue through 2012. So it may continue to put downward pressure on deposit rates until this temporary coverage ends.

In terms of bank failures, the FDIC confirmed what we have seen. The number of bank failures is going down. Fewer banks have failed in this first nine months of 2011 (74) compared to the first nine months of 2010 (127). As of November 25th, the total number of failures is 90.

In addition to a decline in bank failures, the number of problem banks has gone down. The number of "problem" institutions is now 844, down from 865 at the end of Q2.

The FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 977 problem banks based on public enforcement actions. When I reported on the FDIC's Q2 report 3 months ago, the unofficial problem bank number was 984.

Health Ratings

In addition to the quarterly report, the FDIC updated its database with the banks' financial data for September 30, 2011. This is the data that is used to determine the health ratings of banks.

We will be updating our bank health scores and Texas Ratios soon based on this new data. You can view a table of banks and credit unions with the worst Texas Ratios in our Bank Health Ratings page. From here you can also search for your bank and credit union to view its Texas Ratio, health score and other financial data.

BauerFinancial typically takes a couple of weeks to update its ratings. Bankrate.com has been taking over a month before it updates its ratings.