Profits at federally insured banks and thrifts plummeted $9.4 billion, or 24.7% from a year-ago to $28.7 billion during the third quarter thanks to surging loan defaults, the FDIC said today.
It was the worst performance since the first quarter of 2003, as provisions for loan losses totaled $16.6 billion, the highest amount since the second quarter of 1987, and the second-largest quarterly loss provision ever reported by the industry.
The FDIC said loan delinquency and loss rates were up “across all major loan categories” in the third quarter.
Sheila Bair, the FDIC’s chairman, noted that the industry “was hurt by asset-quality problems and volatility in financial markets during the third quarter.”
“Residential mortgage loans were the focal point of asset-quality problems.”
The amount of loans and leases that were non-current rose for the sixth straight quarter, rising by $16 billion, or 23.8%, with loans secured by residential real estate accounting for more than half of the growth.
Non-current residential mortgage loans increased by $7.5 billion, or 27.2%, while non-current home equity lines of credit rose by $783 million, or 27.4%.
The amount of loans and leases that were non-current totaled $83 billion as of the end of September, the highest level since the third quarter of 1992.
Almost half of all its insured institutions reported year-over-year earnings declines in the third quarter, the FDIC said.
“Going forward, the outlook for the industry depends on the severity of the housing downturn and the extent to which it spills over into the broader economy,” Bair added.
As of November 21, there were 8,575 FDIC-insured institutions nationwide.