There are some shocking numbers in Federal Deposit Insurance Corp’s (FDIC) quarterly banking report for the three months to September 30, which the agency released on Tuesday.
Numbers like: -$8.2bn and 552. The first figure represents the balance on the FDIC’s insurance fund. That’s right – for the first time since 1992, the FDIC’s insurance fund has fallen — quite dramatically — into the red.
According to the report, the precipitous decline in the insurance fund was due to an additional $21.7bn set aside in the third quarter for expected bank failures. At the end of the second quarter, the FDIC’s insurance fund a balance of$10.4bn.
As for 552 – that’s how many US banks may claim, as of September 30, the dubious distinction of being included on the FDIC’s lists of “troubled” financial institutions. Total assets of “problem” institutions increased from $299.8 billion to $345.9 billion, the agency said.
To date, 124 US banks have failed. According to the FDIC, during the third quarter of 2009:
Forty-seven institutions were absorbed by mergers during the quarter, while 50 institutions failed. This is the largest number of failures in a quarter since the fourth quarter of 1992, when 55 insured institutions failed. Only three insured institutions were chartered in the quarter, the smallest quarterly total since World War II.
Both the number and assets of “problem” institutions are now at the highest level since the end of 1993, FDIC said.
On an industry-wide basis, institutions insured by the FDIC earned $2.8bn in net income in the third quarter, versus the loss of $4.3bn posted in the second quarter of the year.
Growth in net interest income, lower realized losses on securities and other assets, higher noninterest income, and lower noninterest expenses, all contributed to the year-over-year increase in net income. Only 43 percent of all institutions reported higher quarterly earnings compared to a year ago, but this is the highest proportion reporting improved earnings in the past six quarters. More than one in four institutions (26.4 percent) was unprofitable in the third quarter, up slightly from 24.6 percent a year ago.
Here’s another scary number: $62.5bn. According to the report, that’s how much banks have put aside for loan and lease losses to date.
The third quarter total was $11.3 billion (22.2 percent) higher than a year earlier, but it was $4.8 billion (7.1 percent) less than the amount that insured institutions set aside in the second quarter. It was also the smallest year-over-year increase in quarterly loss provisions in the past eight quarters. Almost two out of three institutions (62.6 percent) increased their loss provisions over year-earlier levels.
The increase in loss reserves is a clear indicator that FDIC-insured banks expect continued woes relating to their commercial real estate and consumer credit portfolios, a premise given addition support by the disclosure on loan losses.
Emphasis ours:
Net charge-offs continued to rise, registering a year-over-year increase for an 11th consecutive quarter. Insured institutions charged off $50.8 billion (net) in the quarter, an increase of $22.6 billion (80.5 percent) compared to the third quarter of 2008. Net charge-offs were higher, year-over-year, at 60 percent of insured institutions. The annualized net charge-off rate rose to 2.71 percent, from 1.43 percent a year earlier and 2.56 percent in the second quarter. This is the highest annualized net charge-off rate in any quarter since insured institutions began reporting quarterly income and expenses in 1984, and it marks the third time in the past four quarters that the net charge-off rate has reached a new high.
The year-over-year increase in charge-offs was led by loans to commercial and industrial (C&I) borrowers, but all major loan categories had sizable increases in charge-offs. Net charge-offs of C&I loans were $4.6 billion (117.5 percent) higher than a year ago. Chargeoffs of credit card loans were $4.4 billion (78.2 percent) higher, residential mortgage charge-offs were up by $3.7 billion (63.4 percent), charge-offs of real estate construction and development (C&D) loans rose by $3.1 billion (68.1 percent), and charge-offs of home equity lines of credit were $2.2 billion (78.4 percent) higher.
There are many more numbers in the report , but only one chart, which we think speaks for itself:
Related links:
The FDIC is not bust, ok? – FT Alphaville
FDIC, the ‘D’ stands for… - FT Alphaville
FDIC insurance, inspected – FT Alphaville
FDIC eyes bank pre-payments to plug deposit insurance gap – FT