BairThe number of problem banks in the U.S. reached its highest totals since 1992 in the second quarter, but the Federal Deposit Insurance Corp. (FDIC) also reported Tuesday on signs that the banking industry is making positive strides toward getting back to functioning normally. While the number of problem banks and bank failures are increasing, the agency also said the number of bank loans 90 days or more past due has declined for the first time in four years.

The FDIC reported that its "problem bank list" grew to 829, up from 775 banks last quarter. FDIC chair Sheila Bair (pictured, right) said the agency expects the number of failed banks this year to exceed last year's total, with failures peaking in the third quarter. Already 118 banks have failed in 2010; there were 140 bank failures in 2009.

Assets of Problem Banks Decreased

However, the increased number of failures wasn't all bad news.

"While the number of banks that will fail this year will be higher than last year, it is generally speaking smaller-sized institutions," said Diane Ellis, an associate director with the FDIC during a morning press conference. "The way this crisis has unfolded is that the largest institutions were sort of hit first and smaller institutions later, and that's the way the failures are playing out as well."

Even though bank failures have increased, the assets of the "problem" institutions have decreased -- a positive sign. During the second quarter, assets of institutions on the FDIC "problem bank list" dropped to $403 billion from $431 billion in the first quarter.

FDIC chairman Bair said that the agency has enough money to cover the increased number of bank failures, reporting its insurance fund increased by $5.5 billion during the quarter.

"Best Quarterly Almost Three Years"

In addition to the good news about the number of past-due loans declining, which helped decrease loan losses at banks, the FDIC also reported that earnings at FDIC-insured institutions increased some $21.6 billion in the second quarter. As loan losses declined, banks didn't have to place as much money in reserve, which helped their overall profits.

"This is the best quarterly profit for the banking sector in almost three years," said Bair. "Nearly two out of every three banks are reporting better year-over-year earnings."

While she acknowledged the industry still faces challenges, Bair said that if economic conditions remained positive, many institutions could maintain profitability and hopefully increase lending.

"The banking sector is gaining strength. Earnings have grown, and most asset quality indicators are moving in the right direction, putting banks in a stronger position to lend," said Bair.

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September 01 2010 at 9:47 PM Report abuse -1 rate up rate down Reply

Nothin better than the first national bank of "under my pillow" NO FEES!I HATE BANKS! look into credit unions as an alternative, they are much safer.

September 01 2010 at 4:56 PM Report abuse rate up rate down Reply

Get rid of "The Creature From Jekyll Island" -- the nefarious Federal Reserve. (Ron Paul & the Libertarian Party are trying to investigate!) More Illuminati shennanigans = more inflation = less money in our pockets! (There is actually a BOOK whose title is "The Creature From Jekyll Island". Read it!)

September 01 2010 at 3:04 PM Report abuse rate up rate down Reply

These banks deserve to fail, and so did the ones that were bailed out. They approved and made loans based on bogus appraisels and or bogus credit reports(mortage loans). Before the ink was dry they sold these mortages to Fannie and Freddie(the govt.)knowing that these loans would never be paid back. Fannie and Freddie never checked the credibly of these loans, they took the banks word that they were good. When these loans defaulted Fannie and Freddie backed them up. The banks got their money!!!! Where does Fannie and Freddie get their money? (From us MR,and MRS. taxpayer) This is legal stealing of tax dollars!!! And, nothing has been done to stop the banks from doing this again in the future!!

September 01 2010 at 1:02 PM Report abuse +2 rate up rate down Reply

In order for a bank to "steal" from you, you first have to accept the loan and receive the money.

September 01 2010 at 12:57 PM Report abuse -1 rate up rate down Reply
2 replies to Paul's comment

Can you buy a home with cash????

September 01 2010 at 10:12 PM Report abuse rate up rate down Reply

Not unless it's Chineese Yen!

September 02 2010 at 11:15 AM Report abuse rate up rate down Reply

Let the banks fail!. The government should have let the bad ones fail and NOT done the bailout before! Capitalism works. If a poorly run bank fails then the employees/board of directors, etc loose their jobs and bloated bonuses. The depositors, us, have FDIC insured accounts up to $250,000. (I do not know anyone who has that much in the bank but certainly would like that problem.) We, the depositors, take our money and move it to a well run, conservative, solid banks. In southern California two that I am aware of are Farmers & Merchants, City National Bank. So, the well run banks increase their cash holdings and have more money to loan to QUALIFIED applicants who will PAY their loans off and it's a "win-win" scenario. Unfortunely the political hacks like Congresscrook Maxine Waters from Los Angeles had bailout money going to poorly run banks that she and her family have a financial interest in. Political payoffs and we the people get hosed.

September 01 2010 at 12:50 PM Report abuse +4 rate up rate down Reply

It sounds like you all are under the impression that banks actually hold your money for you. HAHAHAHAHAHAHAHA!

September 01 2010 at 11:51 AM Report abuse +1 rate up rate down Reply

The banks have been stealing from the american public for quite sometime now and the goverment has done nothing. The money they owe the arabs and chineese on the futures is now being stolen from the american consumer to pay back the bank debt.

September 01 2010 at 11:13 AM Report abuse +2 rate up rate down Reply

Next it will be the PMI companies that are crying they need a bailout. Here is what the banks are doing; they are choosing to foreclose over short sales and collecting the PMI insurance then buying the house back and selling it as a foreclosure. I would call that double dipping! One of my clients had a house under contract since February, it was a short sale that at one point we were told the bank accepted only to find out last week that they sold it at auction bought it back and will be listing it with a REALTOR. My client twice had conditional bank commitment hoping that would move the bank to move faster in closing the deal with her. That was to no avail. Another client had a short sale under contract with BofA was told that they accepted the offer only to be told a week later that they could not accept it because the Seller was not in arrears. The consumers are not being protected from the greed of the banks and our Politicians need to wake up before all of the PMI companies fall prey to the banks failures.

September 01 2010 at 10:25 AM Report abuse -1 rate up rate down Reply


September 01 2010 at 9:48 AM Report abuse +4 rate up rate down Reply
1 reply to John's comment

Closed my bussines.My bank made more money from my account then did last year No car payment.No morgage.No credict cards.No bank

September 01 2010 at 10:27 PM Report abuse rate up rate down Reply