tab header

Banks emerging from three-year financial crisis

March 17, 2011 |

The banking industry has been through a tumultuous three years since the financial crisis exploded in early 2008. So it’s not saying much to say that conditions improved in 2010, perhaps laying the foundation for a stronger year this year.

To be sure, the nation’s banks earned net profits of $87.5 billion, up from a net loss of $10.6 billion in 2009. A great deal of the improvement came because banks were finally able to stop adding additional money to account for possible loan losses.

The Investigative Reporting Workshop’s BankTracker project has been keeping tabs on how the financial crisis affected banks and credit unions across the nation since it was first published in March 2009.

Looking back over quarterly reports banks filed with the Federal Deposit Insurance Corp. for the past three years, a Workshop analysis shows there are fewer banks, which are, on average, bigger. The number of banks the FDIC considers “problems” continues to expand, mostly because of an historic increase in the amount of bad assets on bank books.

Bigger banks take more market share, as numbers dwindle

The number of banks has fallen from 8,542 at the end of 2007 to 7,666 at the end of 2010. While much of the 11 percent decline can be attributed to the failure and closing of 322 banks since 2008, it also is clear that the industry continues to consolidate through mergers.

The biggest declines occurred in Georgia, which now has 84 fewer banks, and Florida, where there are 70 fewer banks than three years ago. That’s hardly surprising, considering that more than a third of all bank failures since the beginning of 2008 have occurred in those two states.

In fact, even after last year’s debate over whether to limit the size of the biggest banks, they have increased their share of assets since the end of 2007. At the end of 2010:

Banks with more than $50 billion in assets accounted for 68 percent of banking assets, up from 64.5 percent at the end of 2007. Some of that increased concentration occurred because large banks, such as Bank of America and Wells Fargo, were involved in mega-mergers in 2008. Bank of America took over Countrywide and Merrill Lynch. Wells Fargo merged with Wachovia.

Lending continues to lag, but troubled assets increase

The twin effects of write-downs of bad loans and slowing demand because of the recession resulted in loan volume falling by 8.3 percent since the end of 2007.

The amount of bad assets on bank books started to decline in the second half of 2010. But bad assets still have nearly tripled since the end of 2007. The FDIC reports show that the combination of non-performing loans and foreclosed property peaked at $382.1 billion at the end of March and fell to $322.6 billion as of Dec. 31. Troubled assets totaled $109 billion at the end of 2007.

Last year’s improvements helped stabilize the number of banks facing significant stress. According to the Investigative Reporting Workshop analysis, 389 banks ended 2010 with more troubled assets than capital. That’s down slightly from 411 at the end of March.

By contrast, on Dec. 31, 2007, only 24 banks were in that group.

Meanwhile, the number of problem banks on the FDIC list keeps expanding, up to 884 at the end of the year, compared with 76 in December 2007. The FDIC doesn’t reveal which banks it considers problems, but the list generally is based on ratings assigned by bank examiners.  Part of the reason the number of problem banks keeps rising, banking industry observers generally agree, is that regulators are taking a harder edge, requiring banks to hold more capital and to act more quickly to acknowledge and write off troubled loans.

Banks still owe the government’s Troubled Asset Relief Program more than $30.8 billion out of nearly $245 billion the Treasury invested to shore up bank capital starting in October 2008.

While most of the money was originally given to the nation’s biggest banks, many of those that still have not repaid the government investments are smaller institutions. The largest outstanding capital purchase balance is $4.85 billion owed by SunTrust Banks, the 11th largest bank in the nation.

IN PARTNERSHIP WITH

MSNBC logo

BANKTRACKER

SEARCH FOR A BANK
SEARCH FOR A CREDIT UNION
2017 FAILED BANK LIST
2016 FAILED BANK LIST
2015 FAILED BANK LIST
2014 FAILED BANK LIST
2013 FAILED BANK LIST
2012 FAILED BANK LIST
2011 FAILED BANK LIST
2010 FAILED BANK LIST
SEARCH TARP RECIPIENTS
BANK METHODOLOGY
CREDIT UNION METHODOLOGY
ABOUT THE AUTHOR
CONTRIBUTORS

RECENT STORIES

BankTracker updates

We've continued to report on banks and you'll find most of that coverage now under the Investigative Reporting Workshop's main site at investigativereportingworkshop.org. You can read more about our 2016 analysis of eight years' worth of banking and credit union here: http://bit.ly/2mITpcO More

Bank profits hit new high in 2013

The nation’s banks have recovered strongly from the financial crisis, and the results for 2013 provide even more evidence: Profits for the year hit $154.7 billion, according to reports filed with the Federal Deposit Insurance Corp. That's the highest level ever. And only 24 banks failed last year, the fewest since 2007. More

Credit unions still recovering but worries linger

Solid loan growth and continued low interest rates have helped the nation’s 6,600 credit unions rebuild from the 2008-09 financial crisis, according to new data from the National Credit Union Administration. But there might be storm clouds on the horizon. NCUA Chair Debbie Matz warned recently that the prospect of higher interest rates could cut into credit union profits.  More

Bank Tracker: Five-Year Review

By most accounts TARP achieved its primary purpose: To help bring about stability in the midst of the worst financial crisis since the Great Depression. But the program has been called "one of the most hated, misunderstood and effective policies in modern economic history.”  More

Smaller banks rebound more slowly

The latest data from the Federal Deposit Insurance Corp. shows that the nation’s banks continue to recover from the financial crisis, reporting stronger earnings and increasing loan volume. But an analysis by the Investigative Reporting Workshop shows that for the vast majority of banks — those with less than $1 billion in assets — profits are harder to come by as they continue to try to work their way through a disproportionate amount of troubled loans and foreclosed property. More

Reshaped banking industry emerges from crisis

The banking industry has emerged shaken but in some senses thriving. Last year was the second most profitable ever for the nation’s banks, according to reports filed with the Federal Deposit Insurance Corp., but it is unmistakably true that the industry is fundamentally different today than it was five years ago.   More

More money, fewer banks

Banks are closer to pre-recession profit and lending levels, but there are fewer of them. More