Sure, earnings at FDIC-insured banks and thrifts slid a whopping $27 billion, or 94 percent, to $1.7 billion in the third quarter, but that wasn’t the biggest news in the release.
More astounding, was the rate at which FDIC-insured institutions are going sour and ending up on the so-called “problem list.”
The secret list of banks and thrifts at risk of failure increased from 117 at the end of the second quarter to 171 as of September 30, the highest total since the end of 1995.
Total assets at “problem institutions” increased from $78.3 billion to $115.6 billion, putting the FDIC’s Deposit Insurance Fund (DIF) in a precarious position.
The fund balance slipped further during the quarter, falling to $34.6 billion, down from $45.6 billion a quarter earlier, while the reserve ratio declined to 0.76 percent from 1.01 percent.
And with a handful of bank failures already on the books for the fourth quarter, including the failure of Downey Savings, it could be tough going for the FDIC in the not-so-distant future.
Nine FDIC-insured institutions failed during the third quarter, the highest total since the third quarter of 1993.
And through November 25, another nine have failed in the fourth quarter, with more likely to go before the year is up.
The FDIC said earnings were impacted by higher loan loss provisions, which totaled $50.5 billion during the quarter, up from $16.8 billion a year earlier.
Check out the latest list of closed lenders, mortgage layoffs and mergers.