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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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FDIC's Fourth Quarter Report - Number of Problem Banks Increased to 884


FDIC's Fourth Quarter Report - Number of Problem Banks Increased to 884

The FDIC released its fourth quarter 2010 profile on the banking industry. Here are some of the noteworthy excerpts from the press release:

  • Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $21.7 billion in the fourth quarter of 2010, a $23.5 billion improvement from the $1.8 billion net loss the industry reported in the fourth quarter of 2009.
  • The number of institutions on the FDIC's "Problem List" rose from 860 to 884.
  • Total assets of "problem" institutions increased to $390 billion from $379 billion in the prior quarter, but are below the $403 billion reported at year-end 2009.
  • The Deposit Insurance Fund (DIF) balance increased for the fourth consecutive quarter. The DIF balance - the net worth of the fund - rose from negative $8.0 billion to negative $7.4 billion (unaudited) during the fourth quarter.
  • Thirty insured institutions failed during the fourth quarter, bringing the total number of failures for the full year to 157.
  • Total loans and leases fell for the ninth time in the past ten quarters (the one exception resulted from changes in reporting rules, not from actual loan growth). The net decline in balances in the fourth quarter totaled $13.6 billion (0.2 percent).
  • Total insured deposits increased by 14.8 percent ($799 billion) during the quarter. This increase reflects additional, temporary coverage of non-interest bearing transaction accounts authorized by the Dodd-Frank Act.
  • 7,657 FDIC-insured banks and savings associations (down from 7,760 in the last quarter)

I find the large increase in the total insured deposits interesting. It was claimed that the increase of almost 15% was due to the temporary coverage of non-interest accounts. This new temporary provision is similar to the FDIC's Transaction Account Guarantee Program (TAGP) that ended in 2010. However, banks could choose not to participate in TAGP. With the new provision, non-interest accounts at all banks will receive this temporary deposit insurance coverage. That must have resulted in this large increase in insured deposits. If that's the case, banks may not have seen more deposits but just more insured deposits. When banks have plenty of deposits but low loan demand, they have no incentives to raise deposit rates.

According to Chairman Bair, they "believe that the number of failures peaked in 2010, and we expect both the number and total assets of this year's failures to be lower than last year's," Last year there were 157 bank failures. So far we've had 22 bank failures. That's a pace of around 163 failures for the year. So if the number of failures do decline this year, it will probably still be close to last year's number.

The FDIC doesn't name any of the 884 problem banks. Calculated Risk Blog has an unofficial list of 951 problem banks based on public enforcement actions.

Health Ratings

In addition to the quarterly report, the FDIC updated its database with the banks' financial data for the end of 2010. In the next few days we should have our database of bank financials updated so our health scores and Texas Ratios will be based on this latest 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 one to two months before it updates its ratings.

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Anonymous   |     |   Comment #1
Things will become a lot worse before they get better.