INDUSTRY EARNINGS
FDIC Reports Banking
Industry Essentially Broke
Even in 4th Quarter of 2009
Source:
Federal Deposit Insurance Corporation
www.fdic.gov
Commercial
banks and
savings institutions
insured
by the
FDIC reported
an aggregate profit of $914 million in
the fourth quarter of 2009, a $38.7 billion
improvement from the $37.8 billion
net loss the industry sustained in
the fourth quarter of 2008. More than
one-half (50.3%) of all institutions reported
year-over-year improvements
in their quarterly net income. Almost
one-third (32.7%) of all institutions
reported net losses for the quarter,
compared to 34.6% a year earlier. For
the full-year of 2009, banks reported
net income totaling $12.5 billion, up
from $4.5 billion reported for 2008.
For the full-year of 2009, industry
earnings represented an ROAA of
0.09%, up from 0.03% in 2008.
The FDIC reported that several factors
contributed to the year-over-year
improvement in quarterly earnings.
• Non-interest income was $21.7
billion (53.2%) higher and non-interest
expense declined by $16.2 billion
(14.2%).
• Realized losses on securities and
other assets were $8.7 billion lower.
• Net interest income was $1.7 billion
(14.1%) higher.
• Provisions for loan losses totaled
$61.1 billion in the quarter, a decline
of $10 billion (14.1%) from the fourth
quarter of 2008. This is the first time
since the third quarter of 2006 that
quarterly loss provisions have been
below year-earlier levels.
Total loans and leases declined by
$128.8 billion (1.7%) during the fourth
quarter of 2009. This is the sixth consecutive
quarter in which the industry’s
loan balances declined. Loans to
C&I borrowers declined by $54.4 billion
(4.3%) and real estate construction
and development loans declined
by $41.5 billion (8.4%).
Total assets of insured institutions
declined by $137.2 billion (1.0%).
while total loans and leases declined
as mentioned above, banks’ investments
in mortgage-backed securities
increased by $44.8 billion (3.3%) and
U.S. Treasury securities rose by $15.9
billion (18.3%).
Now for the bad news. The FDIC
noted that indicators of asset quality
continued to deteriorate during the
fourth quarter, although the pace of
deterioration slowed for a third consecutive
quarter. Insured banks and
thrifts charged off $53.0 billion in uncollectable
loans during the fourth
quarter, up from $38.6 billion charged
off a year earlier. Noncurrent loans
and leases increased by $24.3 billion during the fourth quarter. At the end
of 2009, noncurrent loans and leases
totaled $391.3 billion, or 5.37% of the
industry’s total loans and leases.
As expected, the number and total
assets of institutions on the FDIC’s
“problem list” continued to rise. At
the end of December 2009, there were
702 insured institutions (8.8% of the
nation’s 8,012 banks and savings associations)
on the list, up from 552 on
September 30, 2009. The total assets
of “problem” institutions increased
during the quarter from $345.9 billion
to $402.8 billion. Forty-five institutions
failed during the fourth quarter
of 2009, bringing the total number of
failures for the year to 140, the highest
annual total since 1992.
Total insured deposits in the nation’s
8,012 insured institutions increased
by 13.5% ($641.3 billion) during
2009, which reflects the temporary
increase in the standard maximum
FDIC deposit insurance amount from
$100,000 to $250,000.
The FDIC’s liquid resources, cash
and marketable securities, increased
to $66 billion at year-end 2009 from
$23 billion at the end of September
2009. The liquid resources position
reflects the almost $46 billion in deposit
insurance premiums, about
three years worth, that most insured
institutions prepaid by the end of the
fourth quarter.
The FDIC’s Deposit Insurance Fund
(DIF) balance decreased by $12.7 billion
during the fourth quarter. The
fund balance of negative $20.9 billion
(unaudited) as of December 31, 2009,
reflects a $44 billion contingent loss
reserve that has been set aside to
cover estimated losses. Combining
the fund balance with this contingent
loss reserve shows total DIF reserves
of $23.1 billion.