Banking industry news: FDIC quarterly report

BUMPThe FDIC released its quarterly banking profile on February 23, which reported data from the fourth quarter of 2009 and provided a cumulative analysis for the year compared with previous years.

According to the profile, the fourth quarter average return on assets (the basic measure of bank profitability) for all four of the featured asset size groups of institutions was better than a year ago. Additionally, industry net income in 2009 increased by approximately $8 billion (from $4.5 billion in 2008 to $12.5 billion in 2009).

Despite these positive signs, there are still severe bumps in the road:

  • While 2009 net income increased by $8 billion, the number of institutions that reported negative net income for the year increased by nearly 5 percent – giving 2009 the highest proportion of unprofitable institutions since 1984.
  • Total loans and leases fell by $587 billion (7.5 percent) in 2009.
  • At yearend, noncurrent loans and leases (90 days or more past due) made up 5.37 percent of all loans and leases – the highest level for the industry’s noncurrent rate in the 26 years that FDIC-insured institutions have reported noncurrent loan data.
  • In 2009, 31 new charters were added (the smallest annual total since 1942), 179 institutions were absorbed by mergers and 140 FDIC-insured institutions failed (the largest number of failures since 1992).

Additionally, the profile reported on the Deposit Insurance Fund (DIF) – which ended 2009 with a negative balance of $20.9 billion – and steps taken by the FDIC to safeguard the future health of the fund. While the aftermath of the economic crisis is still being played out and sorted through in the banking industry, a more favorable 2009 return on assets throughout all sizes of institutions and an $8 billion increase in industry net income could be viewed as a glass-half-full sign.

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