The numbers are rising slower than in quarters past, but the total amount of banks that have a significant risk of failing reached a 17 year high according to Tuesday’s report.
The levels are the highest since 1993 according to the report as they rose by 53 to a whopping 829 total. However the increase is the smallest the industry has seen since the first quarter of 2009. But that doesn’t make the news positive. Only 416 banks were labeled in danger a year ago and in the first quarter of 2010 the number was only 775. That’s a tremendous increase over the past year having doubled the amount of banks in danger. It also is quite a large jump from the beginning of 2010 to now with an increase of 54 banks.
The list is made up of those banks that are deemed to be most in danger of failure, but very few will actually reach that point. Over the years only 13% of the institutions on the list completely failed. The tally this year so far is 118 banks with 45 of those in the last quarter. It is yet to be seen what the final tally of banks that fail will be for the 2010 year but it will not be nearly the number on the watch list.
Sheila Bair, FDIC Chief, fully expects that the failures seen in 2010 will be greater than the number of 140 that the industry saw in 2009. But she also adds that since the banks have been fixing their balances the assets of those failures will be lower than previous years.
The FDIC is happy to have seen its second quarter of increases in the deposit fund that will cover the consumers if a bank fails. Even though the fund is still not operating in the black, it saw an increase of $5.5 billion. Bair did say that they felt there was plenty to cover any failures that should occur.
Two-thirds of the banks are reporting profits higher than one year ago and need fewer funds to cover those bad loans. The actual quarterly loan-loss provisions for the banks went down to $40.3 billion, which is a drop of 40% from the same time last year.
Bair remains optimistic about the state of the banks. She feels as things progress that the banks will remain profitable and begin to remove themselves from the watch list.
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