The FDIC reported Thursday that the number of institutions on its problem list rose to 416.
The number is the largest since June 30, 1994, when 434 institutions were on the list.
The FDIC also delivered more bad news: commercial banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter. That 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 the latest quarter even after a special assessment of $5.5 billion to bolster the FDIC’s insurance fund, the FDIC stated. However, one-time losses and other items totaling $4.1 billion pulled the industry results into negative territory.
Total assets of “problem” institutions increased during the quarter from $220 billion to $299.8 billion, the highest level since Dec. 31, 1993.
“While challenges remain, evidence is building that the U.S. economy is starting to grow again,” FDIC Chairman Sheila Bair said. “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.”
“Deteriorating loan quality is having the greatest impact on industry earnings as insured institutions continue to set aside reserves to cover loan losses,” Bair said.
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 with extraordinary losses of $366 million a year earlier.
