Troubled Banks on FDIC Watch List Multiply

The number of at-risk banks on the FDIC’s watch list shot up to 171 institutions as of September 30, 2008, the end of the third quarter.

While the FDIC doesn’t disclose the names of at-risk banks, FDIC Chairwoman Sheila Bair blamed weak third-quarter earnings for insured banks (the weakest since 1990); significantly higher loan losses, mostly concentrated in residential mortgages and construction and development loans; and the fact that nearly one in four banks reported a net loss for the third quarter, more than double the number reporting unprofitability a year ago.

Thus far in 2008, 22 banks have failed, including nine banks that went under in the third quarter.

The contagion may be spreading. “Smaller banks … those with assets of under $1 billion … are beginning to show stress similar to the industry as a whole. Still, capital levels among these banks remain higher than the industry average,” Bair said.

Bair ended her November 25 press conference on a positive note: “… [E]ven amid these adverse conditions, most banks remain well-capitalized, profitable and sound.”

Are you feeling as positive?

Tags: fdic, fdic insured banks

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