The U.S. Federal Deposit Insurance Corp 'PROBLEM' List of Financial Institutions is arguably the WORLD's Most important list that doesn't actually list or name ANYthing. Nitpicky 'list' issue aside, the report provides some valueable 'numeric' PERSPECTIVE on the current (sorry) state of the U.S.financial industry. The FDIC is a Washington-based bank regulator that insures deposits at 8,451 financial institutions with $13.3 TRILLION in assets. Today the FDIC presented its quarterly 'Problem List' and disclosed that it was actively monitoring/overseeing 117 U.S. financial institutions it deemed as troubled for the quarter ended 6/30/08. In other words, the FDIC believes that there are at least 117 financial institutions (mostly banks) in the United States facing a credible risk of insolvency (bankruptcy).
FDIC 2Q08 'Problem List' Stats (paraphrased from the Bloomberg link below):
bloomberg.com/apps/news?pid=20601087&sid=afbiu
* Regulators rate FDIC-insured banks on a numerical scale (1 being the highest and 5 the lowest) using their CAMELS system evaluating: Capital, Asset quality, Management, Earnings, Liquidity, Sensitivity to interest-rate or market risk - and other fiscal measures. Banks are ranked on a numerical scale, with 1 being the highest and 5 the lowest. A rating of 4 or 5 places a bank on the 'Problem List'.
* Out of 8,451 U.S. members, the FDIC was carefully monitoring 117 'problem' institutions as of 6/30/08 (1.4% of ALL member institutions are 'problem' institutions)...117 'problem' FDIC-insured lender institutions represent the highest amount in 5 years
* The FDIC 'Problem List' grew by 30% over the past quarter (from 90 at the end of 1Q08 to 117)
* FDIC-insured lenders reported 2Q08 profit of $4.96 Billion vs. $36.8 Billion in the same quarter a year ago. (FDIC Member Bank Profits were Down 87% year over year !)...2Q08's profit of $4.96 Billion was the second-lowest net income reported since the fourth quarter of 1991 (throwback to the 1990's Savings and Loans Crisis ERA...speaking of which, feel free to check my related 7/14/08 post titled 'The U.S. Savings and Loans Crisis')...behind the $600 million reported in the fourth quarter of 2007
* FDIC-insured lenders reported 1Q08 profits of $19.3 Billion (2Q08 profits were down $14.34 Billion or 74% quarter over quarter/'sequentially')
* Funds set aside by banks to cover loan losses/writedowns more than quadrupled to $50.2 Billion from $11.4 Billion in 2Q07...A year over year loan loss/writedown provision increase of 340% !
* Loans 90 Days or more Overdue, deemed troubled by the FDIC, jumped 20% to $162 Billion from $136 Billion in the first quarter. Real-Estate Loans accounted for almost 90% of the rise in the past three quarters !
* To date, Nine U.S. financial institutions have FAILED/Collapsed in 2008...California-based mortgage lender IndyMac Bank's recent failure will cost the U.S. deposit insurance fund about $8.9 Billion, exceeding a $4 Billion to $8 Billion estimate, said Diane Ellis (the associate director of financial- risk management).
* The FDIC's deposit insurance fund fell 14% to $45.2 Billion and the Reserve Ratio (the FDIC's balance divided by insured deposits) was 1.01%...The FDIC is required to shore up the fund when the ratio falls below 1.15%... In order to 'shore up' the fund, the FDIC will consider a plan in October to replenish the account that will likely require an increase in the premiums charged to banks
* Lenders on the 'Problem List' had total assets of $78.3 Billion at the end of the second quarter, triple the $26.3 Billion in the first quarter...The FDIC said IndyMac's assets represented $32 Billion of the increase.
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* FYI + per Wikipedia, The FDIC is a United States 'government corporation' that was created by the Glass-Steagall Act of 1933 during The Great Depression. The FDIC's function is to provide deposit insurance which guarantees the safety of checking and savings deposits in member banks...currently the FDIC provides insurance protection of up to $100,000 per member-bank depositor.
Data Courtesy: Bloomberg
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