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Number of 'Problem' Banks Falls Below 700 for First Time in Three Years

Joe Mont | December 4, 2012

The number of "problem" institutions scrutinized by the Federal Deposit Insurance Corporation fell below 700 for the first time in three years.,

According to the FDIC's latest Quarterly Banking Profile, released today, the number of banks on the FDIC's "Problem List" fell from 732 to 694, marking the sixth consecutive quarter the tally has fallen. The total assets of these institutions declined from $282 billion to $262 billion.

The number of bank failures (12 in the third quarter) fell for the eighth time in the last nine quarters. It was the smallest number of failures in a quarter since the fourth quarter of 2008, when there were also 12. An additional seven banks have failed so far in the fourth quarter, bringing the year-to-date total to 50. Through Dec. 4, 2011, there had been 90 failures year-to-date.

The FDIC analysis also found that as its insured commercial banks and savings institutions reported aggregate net income of $37.6 billion in the third quarter of 2012, a $2.3 billion (6.6 percent) improvement from the same period last year.The gains marked the 13th consecutive quarter that earnings registered a year-over-year increase. Increased non-interest income and lower provisions for loan losses accounted for most of the improvement.

In a statement, FDIC Chairman Martin Gruenberg said the statistics show “steady recovery” and progress in a number of indicators, including loan growth, asset quality and profitability. More than 55 percent of all banks reported loan growth and small banks also increased lending, including loans to small businesses."

More than half of all FDIC-insured institutions reported improvements in their quarterly net income from a year ago while the share of institutions reporting net losses for the quarter fell to 10.5 percent from 14.6 percent a year earlier. The average return on assets, a basic yardstick of profitability, rose to 1.06 percent from 1.03 percent a year ago.

Loans to commercial and industrial borrowers increased by $31.8 billion (2.2 percent), while residential mortgages rose by $14.5 billion (0.8 percent) and auto loans grew by $7.4 billion (2.4 percent). Home equity lines of credit, however, declined by $12.9 billion (2.2 percent), and real estate construction and development loans fell by $6.9 billion (3.2 percent).

Third-quarter loan loss provisions totaled $14.8 billion, 20.6 percent less than the $18.6 billion that insured institutions set aside for losses in the third quarter of 2011. Asset quality indicators also continued to improve as insured banks and thrifts charged off $22.3 billion in uncollectible loans during the quarter, down $4.4 billion from a year earlier. The amount of non-current loans and leases (90 days or more past due) fell for the 10th consecutive quarter, and the percentage declined to the lowest level in more than three years (since the first quarter of 2009).