By Karey Wutkowski
WASHINGTON, Feb 23 (Reuters) - The number of 'problem' U.S. banks jumped 27 percent during the fourth quarter of 2009 to 702, the highest level since 1993 and a sign the industry's recovery is still shaky, regulators reported on Tuesday.
The Federal Deposit Insurance Corp said the industry overall eked out a profit of $914 million for the quarter, benefiting from a healing economy, but said the improvement was concentrated in the largest banks.
FDIC Chairman Sheila Bair said the profit was a huge improvement over the $37.8 billion loss the industry reported in the fourth quarter of 2008. 'It's not that this was a strong quarter. It's simply that everything was so bad a year ago,' Bair said in a statement.
Smaller institutions are still struggling with deteriorating loan portfolios, especially with loans tied to commercial real estate. The FDIC set aside an additional $17.8 billion during the fourth quarter for expected bank failures.
Regulators have closed 20 U.S. banks so far this year and 185 since January 2008, as banks continue to struggle with loan portfolios stocked with souring loans.
The additional provisions for expected bank failures sunk the balance of the FDIC's insurance fund even further to a negative $20.9 billion at the end of the year.
Despite a negative balance for the FDIC's insurance fund, which safeguards accounts up to $250,000, the agency says it has plenty of cash to operate and back customer accounts.
At the end of 2009, it asked banks to prepay three years of industry fees, worth about $45 billion, but while it received the cash, it could not put the money toward the insurance fund balance.
The FDIC said indicators of asset quality at banks worsened during the fourth quarter.
The annualized net charge-off rate for bad loans rose to 2.89 percent, compared to 2.72 percent during the third quarter. That is the highest net charge-off rate in the 26 years for which data is available.
Deterioration in assets drove up the number of institutions of the FDIC's problem list.
Problem banks are troubled institutions whose regulatory rating has been downgraded due to issues related to liquidity, capital levels, or asset quality.
Total assets at problem banks were $402.8 billion at the end of the fourth quarter, compared to $345.9 billion at the end of the third quarter.
The woes in the industry have been migrating from mortgage-backed securities to deteriorating home loans and are now largely tied to commercial real estate (CRE) loans that remain a looming problem.
Loan and lease balances dropped for the sixth quarter in a row, falling by 1.7 percent in the fourth quarter, the FDIC said. The Obama administration has repeatedly urged banks to loosen credit for small businesses, a key driver for the economy and job growth.
Banks, however, have argued that they are getting conflicting messages from policymakers urging lending and bank supervisors that are scrutinizing the prudence of every loan.
(Reporting by Karey Wutkowski; Editing by Tim Dobbyn) Keywords: BANKS/FDIC (E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, Feb 23 (Reuters) - The number of 'problem' U.S. banks jumped 27 percent during the fourth quarter of 2009 to 702, the highest level since 1993 and a sign the industry's recovery is still shaky, regulators reported on Tuesday.
The Federal Deposit Insurance Corp said the industry overall eked out a profit of $914 million for the quarter, benefiting from a healing economy, but said the improvement was concentrated in the largest banks.
FDIC Chairman Sheila Bair said the profit was a huge improvement over the $37.8 billion loss the industry reported in the fourth quarter of 2008. 'It's not that this was a strong quarter. It's simply that everything was so bad a year ago,' Bair said in a statement.
Smaller institutions are still struggling with deteriorating loan portfolios, especially with loans tied to commercial real estate. The FDIC set aside an additional $17.8 billion during the fourth quarter for expected bank failures.
Regulators have closed 20 U.S. banks so far this year and 185 since January 2008, as banks continue to struggle with loan portfolios stocked with souring loans.
The additional provisions for expected bank failures sunk the balance of the FDIC's insurance fund even further to a negative $20.9 billion at the end of the year.
Despite a negative balance for the FDIC's insurance fund, which safeguards accounts up to $250,000, the agency says it has plenty of cash to operate and back customer accounts.
At the end of 2009, it asked banks to prepay three years of industry fees, worth about $45 billion, but while it received the cash, it could not put the money toward the insurance fund balance.
The FDIC said indicators of asset quality at banks worsened during the fourth quarter.
The annualized net charge-off rate for bad loans rose to 2.89 percent, compared to 2.72 percent during the third quarter. That is the highest net charge-off rate in the 26 years for which data is available.
Deterioration in assets drove up the number of institutions of the FDIC's problem list.
Problem banks are troubled institutions whose regulatory rating has been downgraded due to issues related to liquidity, capital levels, or asset quality.
Total assets at problem banks were $402.8 billion at the end of the fourth quarter, compared to $345.9 billion at the end of the third quarter.
The woes in the industry have been migrating from mortgage-backed securities to deteriorating home loans and are now largely tied to commercial real estate (CRE) loans that remain a looming problem.
Loan and lease balances dropped for the sixth quarter in a row, falling by 1.7 percent in the fourth quarter, the FDIC said. The Obama administration has repeatedly urged banks to loosen credit for small businesses, a key driver for the economy and job growth.
Banks, however, have argued that they are getting conflicting messages from policymakers urging lending and bank supervisors that are scrutinizing the prudence of every loan.
(Reporting by Karey Wutkowski; Editing by Tim Dobbyn) Keywords: BANKS/FDIC (E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.