FDIC: Problem Banks Increase 36 Percent In Second Quarter

By Chris Carey, Bailout Sleuth

The number of troubled banks
rose 36 percent in the second quarter, the Federal Deposit Insurance Corp.
reported, as combined losses among banks insured by the agency totaled $3.7
billion.

By comparison, the banks
covered by the FDIC had $4.8 billion in profits in the second quarter of 2008.

The FDIC said there were 416
banks on its “Problems List” in June, up from 305 at the end of March. Banks
are typically put on the list for failing to maintain adequate capital levels,
among other regulatory concerns.

So far this year, the agency
has closed or taken over the operations of 81 banks, including 24 in the second
quarter. As recent as last Friday, the FDIC shut down four banks, including
Texas-based Guaranty Trust.

Provisions for loan losses
by the FDIC-insured banks totaled $66.9 billion in the second quarter, up 32.8
percent from a year earlier. Nearly three out of 10 insured institutions
reported a net loss for the quarter.

“Deteriorating loan quality
is having the greatest impact on industry earnings as insured institutions
continue to set aside reserves to cover loan losses,” FDIC Chairman Sheila
Bair said in a statement.

“Of all the major
earnings components, the amount that insured institutions added to their
reserves for loan losses was, by far, the largest drag on industry earnings
compared to a year ago.”

The FDIC earlier this year
announced a special assessment to cover anticipated losses prompted by the
collapse of the housing market. The agency said the surcharge had raised $5.5
billion. Nevertheless, the FDIC loss reserve fund declined to $10.4 billion
from $13 billion in the first quarter.

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