FDIC REPORTS INSURED INSTITUTIONS’ NET INCOME MORE THAN TRIPLES

The Federal Deposit Insurance Corporation (FDIC) reported that net income earned by FDIC-insured U.S. banks and savings institutions in the third quarter more than tripled to $2.8 billion, up from $879 million in third quarter 2008. This increase occurred despite a 22% climb in loan loss provisions to $625 billion; a 80.8% jump in net charge offs to $50.8 billion, up from $28.1 billion, and a $34.7 billion increase in noncurrent loans and leases to $366.6 billion, or 4.94% of all loans and leases, the FDIC reports. Noninterest income topped net interest income in growth, increasing by $4.8 billion or 6.8%, while net interest income rose 4.8% or $4.6 billion, on an average net interest margin of 3.51%. Fifty institutions failed in the third quarter; 47 were absorbed by mergers and acquisitions, and banks on the “Problem List” grew 32.7% from 416 to 552. Only three institutions were newly chartered, the smallest quarterly number since World War II. The FDIC’s Deposit Insurance Fund (DIF) balance fell below zero for the first time since 1992, dropping to a negative $8.2 billion, reflecting the setting aside of $38.9 billion in a contingent loss reserve with a positive balance of $30.7 billion. The FDIC expects to build the DIF with $45 billion in pre-paid premiums due in December. FDIC Chairman Sheila Bair said, “Today’s report shows that, while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance.” Bair said that if the industry addresses the problems banks face head on, “we will see clear sign of improvement in bank earnings and lending in 2010.” To read the FDIC’s Quarterly Banking Profile, click here