FDIC List of Problem Banks up 30%: On Tuesday, August 26, 2008 the Federal Deposit Insurance Corporation (FDIC www.fdic.gov) announced in its quarterly banking report that their list of "problem banks" (see "Problem List" below) for the second quarter of 2008 increased 30% from to 117 financial institutions. The 117 institutions on the problem list is the largest number since the middle of 2003. Total assets of institutions on the problem list increased 200% from $26 billion to $78 billion. $32 billion of this $56 gain came from
IndyMac Bank, F.S.B., Pasadena, CA, which failed in July.
Reported net income of member institutions fell 86.5% or $31.8 billion to only $5.0 billion, the lowest earnings for the industry except for the fourth quarter last year (2007) and the fourth quarter of 1991.
"By any yardstick, it was another rough quarter for bank earnings, but the results were not unexpected as the industry coped with financial market disruptions, the housing slump, worsening economic conditions and the overall downturn in the credit cycle." said FDIC Chairman Sheila C. Bair.
This decline in the banking industry is reflected in the Economic Cycle Research Institute's (ECRI) Weekly leading index which has fallen to a 28-year low, the lowest reading since June 13, 1980.
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Other major findings in the FDIC's latest Quarterly Banking Profile include:
Provisions for loan losses continue to be the main cause of falling earnings.
"Rising levels of troubled loans, particularly in real estate portfolios, led many institutions to increase their provisions for loan losses in the quarter. Loss provisions totaled $50.2 billion, more than four times the $11.4 billion the industry set aside in the second quarter of 2007.
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