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FDIC's Fourth Quarter Report - Number of Problem Banks Increased to 252


The FDIC released its fourth quarter report on the banking industry. As you might expect, the fourth quarter was especially bad with FDIC-insured banks losing $26.2 billion. Here are a few interesting excerpts from the FDIC press release:
  • This was the first quarterly loss since 1990
  • More than two-thirds of all insured institutions were profitable in the fourth quarter, but their earnings were outweighed by large losses at a number of big banks.
  • Total deposits increased by $307.9 billion (3.5 percent), the largest percentage increase in 10 years
  • The FDIC's "Problem List" grew during the quarter from 171 to 252 institutions, the largest number since the middle of 1995. Total assets of problem institutions increased from $115.6 billion to $159 billion.
  • Loan-loss provisions totaled $69.3 billion in the fourth quarter, a 115.7 percent increase from the same quarter in 2007
  • Insured institutions charged off $37.9 billion of troubled loans, more than twice the $16.3 billion that was charged-off in the fourth quarter of 2007
  • Deposit insurance fund balance declined during the fourth quarter by $16 billion, to $19 billion at December 31.

Note the large increase in deposits at FDIC-insured banks. The FDIC chairman had a comment about this:
Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times.

As we've seen in the last few months, banks are taking in more deposits than they can put to use through loans. This has put downward pressure on deposit rates.

In addition to the quarterly report, the FDIC updated its database with the banks' financial data for the end of the fourth quarter. Ratings services like BauerFinancial and Bankrate use this data for their star ratings. Recent ratings had been based on 9/30/08 data. Their new ratings based on 12/31/08 data should be out soon.

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Anonymous   |     |   Comment #1
That makes sense. More money being deposited and less being loaned out. So no demand for loans and therefore no need to offer high rates. The early part of this decade was a period of high leveraged use of money. That period appears to be over for now. So if you want high rates, you will have to make the American public take out more loans. At this point in time, that ain't gonna happen.
Chris from St. Mary's
Chris from St. Mary's   |     |   Comment #2
"Deposit insurance fund balance declined during the fourth quarter by $16 billion, to $19 billion at December 31."

Look at this! The fund balance went down by nearly half in one quarter! So does that mean the banks are going to get charged more for the insurance?
Anonymous   |     |   Comment #3
I know we discuss banks and their failing but I wonder how sound are some of the Credit Unions, I know many who get mortgages from Credit Unions!
Anonymous   |     |   Comment #4
FDIC raising fees on banks, adds emergency fee
FDIC raising fees on banks, charging emergency fee to rebuild depleted insurance fund
Friday February 27, 2009, 10:06 am EST
Yahoo! Buzz Print WASHINGTON (AP) -- Federal regulators are raising the fees paid by U.S. banks and thrifts, and levying an emergency premium to rebuild a deposit insurance fund depleted by a cascade of bank failures.

The Federal Insurance Deposit Corp. says it now expects bank failures will cost the insurance fund around $65 billion through 2013, up from an earlier estimate of $40 billion.

The FDIC says the economic crisis, which has caused dozens of recent bank failures and the insurance fund to drop to its lowest level in a quarter-century, warranted extending the plan to rebuild the insurance fund from five years to seven.
ichaelm   |     |   Comment #5
The FDIC is ridiculously low with its estimates. How can it project that bank failures will cost $65 billion through 2013 (over 5 years) when they cost $16 billion IN 3 MONTHS ALONE, and things just continue to get worse and worse?? I'm amazed that the media has largely ignored this press release.
Anonymous   |     |   Comment #6
Maybe the FDIC estimate is based on the expected bank failure cost up to 2013 with the possible number of banks on the low end of the rating scale? Maybe their estimate is based on the cost of those possible failures and does not include any possible massive bank closings? If there is run on bank closings, then the FDIC might end up like the FSLIC.
Anonymous   |     |   Comment #7
The "Big Bang Therory" scientists have been studying for years may turn out to be the U.S. financial system "CRASH".
Anonymous   |     |   Comment #8
"The US government is warning banks that its deposit insurance fund could go broke this year as bank failures mount."