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U.S. Problem Banks Rose in 2009

Many financial companies were off to a bad start in 2009, with over 300 banks and thrifts becoming “problem” institutions by Federal Deposit Insurance Corp (FDIC) standards.

According to an FDIC report issued Wednesday, there were 305 problem banks in the first quarter of 2009, a 21% rise from last quarter’s 252. The rise is the highest recorded since 1994.

Together, the problem banks lost $220 billion worth of assets in the first quarter, up significantly from the $159.4 billion loss posted in the last quarter of 2008.

Experts blame the sharp rise to increasing credit losses, particularly in the credit card, home mortgage, and commercial real estate markets. The FDIC’s deposit insurance fund also dropped from $17.3 billion in late 2008 to just $13 billion in the first quarter.

FDIC Chairman Sheila Bair believes the mounting failures are just the beginning. In a statement to reporters, Bair said that more banks will succumb to the recession at least in the next few months.

Thirty-six bank failures have been recorded in 2009 alone, compared to 25 in 2008 and only three in 2007. At the current pace, over 100 FDIC-insured lenders could fail before the end of the year.

The list is compiled from confidential assessments of the banks’ earnings, asset quality, liquidity, management, and capital adequacy. The FDIC does not release the names of the problem institutions.

 

Earlier in Mortgage Servicers & Lender News:
Citigroup Joins Second Mortgage Modification Program
Seven Banks Shut Down; U.S. Total Now 37
What Is A Point According To Mortgage Terms?

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