June 11, 2009 |
Despite the infusion of nearly $200 billion worth of federal bailout money into the banking system since last October, the nation’s banks had another rough quarter in the first three months of this year. And, according to an analysis of federal bank data, it appears that mid-size banks are suffering more than the largest banks.
From the data, it is difficult to find the effects of the Treasury Department’s so-called TARP (Troubled Asset Relief Program), either on bank capital or on bank lending activity.
The analysis is based on quarterly condition reports filed with the Federal Deposit Insurance Corp ., the federal agency that protects deposits and is part of the bank regulatory system.
The largest 10 banks, which have nearly half of all bank assets, reported earning about $10 billion from Jan. 1 through March 31. Much of the gain, according to the FDIC, came from securities trading profits at the largest banks, which also now control some of the largest investment banks and brokerages.
The remaining 8,240 banks as a group lost more than $2.5 billion. That still was considerably better than the fourth quarter of 2008, when banks as a group lost $36.9 billion. A year ago in the first quarter, banks made $19.3 billion.
Even with the overall profit, the FDIC reported that three in five banks saw their earnings decline in the first three months of 2009, compared with the first quarter of 2008. And more than one in five lost money in the quarter.
Meanwhile, banks of all sizes saw more bad loans pile up on their books, as the deepening recession, combined with devastated real estate markets in most areas of the nation, took their toll.
Total troubled assets – the sum of loans more than 90 days past due and the value of foreclosed property banks on bank books – increased to $285 billion at the end of March, up from $237 billion at the end of 2008. At the end of March 2008, the banks only had $137 billion in nonperforming loans and foreclosed property on their books.
The combination of lower profits and more bad loans meant that more banks saw their capital under growing stress. As of March 31, 238 banks had more troubled assets on their books than they had in capital and loan loss reserves. At the end of December 2008, 165 banks had a “troubled asset ratio” of greater than 100 percent. Only 44 banks fell into that category a year ago.
While the “troubled asset ratio” is not a predictor of bank failure, 29 of the 37 banks that have failed so far this year had ratios of greater than 100 percent.
The FDIC reported that it was carrying 305 banks on it list of “troubled institutions.” That’s up from 252 at the end of last year. Those 305 banks had total assets of $220 billion. The agency does not disclose the names of banks on its list.
There is perhaps one bright spot in the loan data. The amount of loans 30-90 days past due was flat in the first quarter, at $158.3 billion, after ballooning by more than $37 billion in the fourth quarter. This could indicate that fewer borrowers are falling into default, despite the rising levels of joblessness. A year ago, loans in the 30-90 day past due category were $110 billion.
One sign of the effect of the recession is having on banks was another decline in lending, compared to the fourth quarter of 2008. The amount of loans outstanding fell to $7.5 trillion at the end of March, compared to $7.7 trillion at the end of December. It was the third consecutive quarterly decline, brought on by tightening credit standards, as well as a drop in loan demand from both businesses and consumers.