FDIC: Banks Report $3.7 Billion Loss; 'Troubled' List Swells to 416The Federal Deposit Insurance Corp. released data today showing commercial banks and savings institutions insured by the FDIC lost $3.7 billion in the second quarter of 2009.
This number represents a decline of $8.5 billion from the $4.8 billion in profits the industry reported in the second quarter of 2008. Insured institutions earned $424 million in net operating income during this latest quarter. These earnings come despite a special assessment of $5.5 billion to bolster the FDIC's insurance fund. But banks' one-time losses and other items totaling $4.1 billion pulled the industry results into negative territory.
FDIC Chairman Sheila Bair's positive mood was reflected in her comment, "While challenges remain, evidence is building that the U.S. economy is starting to grow again." She adds banking industry performance is "as always -- a lagging indicator. The banking industry, too, can look forward to better times ahead. But, for now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry's bottom line."
Provisions for loan losses totaled $66.9 billion in the quarter, an increase of $16.5 billion (32.8 percent) over the second quarter of 2008. Extraordinary losses stemming from writedowns of asset-backed commercial paper totaled $3.6 billion, compared to extraordinary losses of $366 million a year earlier. Noninterest expenses were $1.7 billion (1.7 percent) higher, primarily due to increased FDIC deposit insurance premiums.
This report comes a day after the FDIC Board approved policy setting standards on the acquisition of failed institutions and investment by private investment companies. The FDIC's Deposit Insurance Fund has $42 billion in its reserves, but the number of banks on FDIC's Troubled Bank list rose to 416, up from 305 earlier in March.