Friday, June 8, 2012

FDIC Problem Bank List Decreases to 9-Quarter Low

The FDIC problem bank list decreased by 41 to 772 at March 31, 2012 for the 4th consecutive quarterly decrease. The total continues very high, but has dropped below 800 after 7 consecutive quarters above. If the problem list has peaked and continues a downtrend, then bank failures will also continue decreasing accordingly over time. Bank failures and the related charts of total failures and cost to the FDIC Deposit Insurance Fund are posted weekly on this website.

There were 7,307 financial institutions reporting and the problem bank list of 772 represents 10.57% of the total, which is very high. This is down from 11.05% in the prior quarter 12-31-11 and down from 11.72% in the prior year quarter 3-31-11. In a healthy economy and banking system, less than 1% of financial institutions are on the problem bank list and this can be as low as 0.50% (1/2 percent).

FDIC Problem Banks by Quarter The FDIC problem bank list peaked at 888 at March 31, 2011. The total problem banks remain elevated but is decreasing. The problem bank list has decreased 4 consecutive quarters, after increasing 18 consecutive quarters (from Q4 2006 through Q1 2011). The total assets of the problem banks from the year-ends 2004 through 2011 (in billions) were $28, $7, $8, $22, $159, $403, $390, and $319, respectively. The total assets of the current (3/31/2012) 772 problem banks is $292 billion, or an average of $378 million in total assets per problem bank. The FDIC reports the total problem banks on a quarterly basis.

Only 16 Banks Fail in the First Quarter (FDIC Quarterly Banking Profile, May 24, 2012) The number of insured institutions reporting quarterly financial results declined to 7,307, from 7,357 at year-end 2011. Two institutions’ financial reports had not been received at the time this publication was prepared. Mergers absorbed 27 institutions during the quarter, while 16 insured institutions failed. This is the smallest number of bank failures in a quarter since fourth quarter 2008, when there were 12 failures. For the second quarter in a row, no new reporters were added. In the last five quarters, the only new charters that have been added have been charters created to absorb or liquidate failed banks. The number of insured institutions on the FDIC’s "Problem List" declined from 813 to 772 during the quarter, and assets of “problem” banks fell from $319 billion to $292 billion. The number of “problem” institutions has fallen in each of the last four quarters, and is now at its lowest level since year-end 2009.

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