Tag Archives: Quarterly Banking Profile

FDIC Quarterly Banking Profile: The Good, The Bad and the Basics

The FDIC just released its Quarterly Banking Profile (“Report”) for the period ending December 31, 2011.

Although, the Report shows a decline in the number of problem institutions compared to recent periods, the number is still elevated compared to historical levels.   Therefore, this decline does not mean that the current banking crisis has passed.

What is a problem institution?

A “problem” institution is a bank that has been rated by the FDIC as either a “4” or a “5” on the agency’s 1-to-5 scale of ascending order of supervisory concern.

How do the current number of problem institutions compare to historical levels?

The Report shows 813 problem institutions compared to 844 at the end of the third quarter and 884 at the end of 2010.  The quarterly decline amounts to a drop of approximately 3.6%.  The 2011 annual decline represents about an 8% drop.

What were the number of problem institutions in 2007 and 2008?

At the end of 2007, there were 76 problem institutions.  At the end of 2008, there were 252 problem financial institutions.

Do a declining number of problem institutions indicate improvement?

Fewer problem institutions is not an indication of a greater number of improving institutions.  In fact, most of the decline is due to problem banks either failing or merging with other banks. The total number of reporting institutions has declined from 8,305 at the end of 2009 to 7,658 at the end of 2010 and only 7,357 at the end of 2011.  The Report does not include information indicating how much of the decline is due to improvement versus other factors overall as this information either has not or cannot be assessed.

What does a decline in the number of bank failures mean?

There has been a decline in the number of bank failures. So far, for the year 2012, there have been only 11 bank failures compared to 23 at this time last year. However, it is difficult to draw a conclusion based on this number. With over 800 problem institutions and banks continuing to fail, it is clear that we are still in a problem period.

What is the good news?

The Report indicates that the overall outlook for the industry is one of recovery, growing net income, declining loan loss provisions, and declines in noncurrent loan balances.

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