FDIC's Q3 Report Shows Profits Rose, But Troubled Loans Continued to Rise; "Problem List" Up to 552 and Deposit Insurance Fund $8.2B In the Hole

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November 24, 2009 10:34 AM EST

The FDIC released their third quarter banking profile, which showed that the industry posted net profits of $2.8 billion, more than three times the $879 million they earned a year earlier and an improvement over the $4.3 billion net loss posted in the second quarter of 2009.

The Deposit Insurance Fund (DIF) decreased by $18.6 billion during the third quarter to a negative $8.2 billion (unaudited) primarily because of $21.7 billion in additional provisions for bank failures. Also, unrealized losses on available-for-sale securities, combined with operating expenses, reduced the fund by $1.1 billion. Accrued assessment income added $3.0 billion to the fund during the quarter, and interest earned, combined with realized gains from sale of securities and surcharges from the Temporary Liquidity Guarantee Program, added $1.2 billion.

Net interest income at banks was $4.6 billion (4.8 percent) higher than in the third quarter of 2008. The average net interest margin (NIM) in the third quarter was 3.51 percent, the highest quarterly average since the third quarter of 2005.

Provisions for loan and lease losses totaled $62.5 billion, marking the fourth consecutive quarter that industry provisions have exceeded $60 billion. 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.

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.

The amount of loans that were noncurrent (90 days or more past due or in nonaccrual status) also continued to rise. Noncurrent loans and leases increased by $34.7 billion (10.5 percent) in the third quarter, to $366.6 billion, or 4.94 percent of all loans and leases, the highest noncurrent rate registered in the 26 years that insured institutions have reported noncurrent loan data.

Total assets of insured institutions fell for a third consecutive quarter. The $54.3 billion (0.4 percent) decline followed a $237.9 billion decrease in industry assets in the second quarter and a $303.2 billion drop in the first quarter. The decline in assets was led by falling loan balances.

Total deposits increased by $79.8 billion (0.9 percent).

The number of insured institutions on the FDIC's "Problem List" rose from 416 to 552 during the quarter, and total assets of “problem” institutions increased from $299.8 billion to $345.9 billion. Both the number and assets of “problem” institutions are now at the highest level since the end of 1993.

Link to Full Release http://www2.fdic.gov/qbp/2009sep/qbp.pdf