FDIC Report Shows Improvement in Banks

The FDIC has just released its Quarterly Banking Profile (QBP) for the second quarter of 2010, showing improvement in bank balance sheets since last quarter and at the same point last year. 

After the collapse of the subprime mortgage market, many banks were hemorrhaging money as many of those loans and the mortgage-backed securities attached to them went south. The financial collapse in September 2008 greatly worsened the problem and sent the number of bank failures in the following year skyrocketing. In 2009, 140 banks failed at a cost to the FDIC of $36 billion. 

But in 2010, with an economic recovery seeming to take hold, banks have gotten out of a two year tailspin. The QBP reported that among FDIC-insured institutions, profits were about $22 billion in the second quarter of this year, compared to a $4 billion loss in the same period last year and an $18 billion profit in the first quarter of this year. The 2010 Q2 profit total represents the highest mark in three years.

With banks doing better in the aggregate, the cost of bank failures this year has gone down as well. As of August 27, bank failures have cost the FDIC about $20 billion in 2010; if this pace keeps up, the total cost for the year should come in much lower than the cost in 2009. However, the total still completely dwarfs the total cost of bank failures from 2000-2007, a reminder of how deep the financial crisis and recession were.

Year Number of Bank Failures Cost to FDIC (billions)
2000-2007 24 $1*
2008 25 $22
2009 140 $36
2010 121 $19
Total 286 $78

 *The FDIC did not provide cost estimates for nine of the 24 closings during this period. Still, the total should not come close to approaching the costs of bank closings froom 2008 through 2010 since most of these banks were smaller.

In somewhat contrasting news, though, on August 20, Chicago's ShoreBank failed, at a cost to the FDIC of almost $400 million. This represents the largest cost by a single bank failure in four months.

Remember, you can check the FDIC cost of bank failures, along with any other government actions to help the economy at Stimulus.org.