…But Number Of Problem Banks Continues to Rise

Bank profits rose in the fourth quarter of 2010 and for the year, as we just reported. But it turns out that not everything is rosy. Consider that the number of institutions on the FDIC's "Problem List" rose from 860 to 884, and that total assets of "problem" institutions increased to $390 billion from $379 billion in the prior quarter (that is below the $403 billion reported at year-end 2009). 

In addition, the Deposit Insurance Fund balance increased for the fourth consecutive quarter. The DIF balance — the net worth of the fund — rose from negative $8.0 billion to negative $7.4 billion (unaudited) during the fourth quarter. The increase in the fund stemmed primarily from assessment revenues and an improving outlook for losses from future failures. The contingent loss reserve, which covers the costs of expected failures, fell from $21.3 billion to $17.7 billion during the quarter. While part of the decline reflects the removal of amounts reserved for banks that failed, part also reflects lower anticipated costs from future failure activity. Liquid resources (cash and marketable securities) stood at $46.2 billion at the end of the year, compared to $43.7 billion at the end of the third quarter.