The improvement in the banking sector continued in the
first quarter of 2013, according to the FDIC's Quarterly Banking Profile for
the first quarter of 2013, which the agency released on May 29, 2013. A copy of
the Quarterly Banking Profile can be found here. Overall the industry
reported aggregate first quarter net income of $40.3 billion, which represents
a 15.8% increase in aggregate net income compared to the first quarter of 2012.
More than half of the reporting institutions reported year-over-year increases
in their quarterly earnings and the number of unprofitable banks dropped to
8.4% of reporting institutions, down from 10.6% in last year's first quarter.
The agency's May 29, 2013 press
release about the Quarterly Banking Profile quotes FDIC Chariman Martin J.
Gruenberg as saying that "Today's report shows further progress in the
recovery that has been underway in the banking industry for more than three
years. We saw improvement in asset quality indicators over the quarter [and] a
continued increase in the number of profitable institutions."
Gruenberg also noted that there were "further declines"
in the number of problem banks and bank failures during the quarter. The number
of "problem institutions" did indeed decline again in the first quarter of
2013. (A "problem institution" is an insured depositary institution that is
ranked either a "4" or "5" on the agency's 1-to-5 scale of risk and supervisory
concern. The agency does not release the names of the banks on the "problem"
During the quarter, the number of problem institutions
declined, from 651 at the end of 2012 to 612 at the end of the first quarter of
2013. The number of problem institutions has declined significantly from
the end of 2010, when there were 884 problem institutions. The FDIC reports
that the decline in the number of problem institutions in the first quarter of
2013 represents the eighth consecutive quarter in which the number of problem
institutions declined. The aggregate assets that the problem institutions
represent also decline during the quarter, from $233 billion at the end of
2012, compared to $213 billion at the end of the first quarter. (By way of
comparison, the equivalent figure at the end of 2009 was $402 billion.)
Though the number of problem institutions has declined,
so too has the number of banking institutions. The number of reporting
institutions declined from 7,083 at the end of 2012 to 7,019 at the end of the
first quarter. And so while the number of problem institutions is declining,
the percentage of problem institutions remains stubbornly high. The 612 problem
institutions at the end of the first quarter represents 8.7% of all reporting
institutions (down slightly from 9.1% at the end of 2012). And so while the banking
sector overall is improving, a troublingly large number of banks continue to
struggle to recover.
One of the more noteworthy effects of the crisis that
banking sector has been through over the last several years has been the
dramatic shrinkage in the number of banks. At the end of 2007, there were 8,534
banking institutions, meaning that between December 31, 2007 and March 31,
2013, 1,515 banks went out of existence, representing a decline of over 17%.
Yet despite that substantial decrease (resulting from closures, mergers and so
on), there are still 612 problem institutions in the industry, as of March 31,
If there is some good news here about the persistently
high number of problem institutions, it is that the numbers of bank that
actually are failing finally seems to be declining. There were only four bank
closures in the first quarter of 2013, the smallest quarterly number since the
second quarter of 2008, when two banks failed. Year to date, there have been 13
failures in 2013, compared to 24 during the same period in 2012. 51 banks total
failed in 2012. Overall, 478 banks have failed since January 1, 2008.
The banking industry as a whole remains on the road to
recovery. However, the problems from the credit crisis continue to haunt the
industry. The number of problem institutions, though improving both in absolute
numbers and in percentage terms, persists at an elevated level.
other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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