Number of Troubled Banks Rises to 552 ... FDIC Fund Sinks Into the Red

By Ernest Bey
Wednesday, November 25, 2009 at 8:50am

Number of Troubled Banks Rises to 552
FDIC Fund Sinks Into the Red

NOVEMBER 25, 2009
By JESSICA HOLZER

WASHINGTON — The government insurance fund that protects more than $4.5 trillion of U.S. bank deposits slipped into the red at the end of September, after fifty banks collapsed during the third quarter.

The deposit insurance fund dropped by $18.6 billion during the third quarter of 2009 to negative $8.2 billion, as the Federal Deposit Insurance Corp. set aside $21.7 billion in provisions for additional bank failures. This is the second time in the agency’s history that the balance has fallen into negative territory.

The FDIC has already called on the industry to prepay $45 billion in assessments at the end of the year that will be set aside to cover the cost of bank failures in 2010.

Fifty U.S. banks failed in the third quarter, the largest quarterly total since 55 banks went bust during the second quarter of 1990. The FDIC’s list of "problem" banks swelled to 552 at the end of September, its highest level in 16 years and up from 416 in June.

Despite the turmoil in the industry, banks posted a modest $2.8 billion profit in the third quarter of 2009, as their securities portfolios recovered and banks with less than $10 billion in assets saw margins improve. Bank profits were more than triple the $879 million they earned in the third quarter of 2008 and improved from a $4.3 billion loss in the second quarter of 2009.