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Bank Beat---No Failures on Friday, but a lot of cash

by Christopher Menkin


There have been several Fridays this year where there were no banks closed. Except for the closing of Gelt Financial dba Public Savings Bank, Huntingdon Valley, Pennsylvania, as the officers were Jewish Orthodox and as Friday was Sabbath, the FDIC announces the take over mostly on Friday at 5pm when they actually walks in and take over, getting ready most often for the "new" bank to open on Saturday (most banks today are open on Saturday.)

The good news is the number of "problem" institutions has declined from 888 to 865 this year. This is the first time since the third quarter of 2006 that the number of "problem" banks fell; first time in 19 quarters.

Total assets of "problem" institutions declined from $397 billion to $372 billion. Twenty-two insured institutions failed during the second quarter, four fewer than in the previous quarter, and the fewest since the first quarter of 2009.

The FDIC also reported Insured banks and thrifts charged off $28.8 billion in uncollectible loans during the quarter, down $20.9 billion (42.1 percent) from a year earlier. This also resulted in commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reporting an aggregate profit of $28.8 billion in the second quarter of 2011, a $7.9 billion improvement from the $20.9 billion in net income the industry reported in the second quarter of 2010

Enforcement actions have also been looking better, as well as community involvement reports.

Asset quality showed further improvement as noncurrent loans and leases (those 90 days or more past due or in nonaccrual status) fell for a fifth consecutive quarter. Insured banks and thrifts charged off $28.8 billion in uncollectible loans during the quarter, down $20.9 billion (42.1 percent) from a year earlier.

The Deposit Insurance Fund (DIF) balance was positive for the first time in two years. The DIF balance — the net worth of the fund — rose from a negative $1 billion to a positive $3.9 billion during the second quarter.

There still remains a major disparity between the "large" and "smaller banks" as the 10 largest insured banks accounted for 82 percent ($229 billion) of the growth in large-denomination deposits. Much of the money comes from larger corporations who are sitting on their cash, here and overseas, as well as reports much is also from consumers, creating an "all time high of $9.8 trillion at the end of June.

“We projected this phenomenal growth in deposits and the shift from term to liquid accounts in the analysis we produce last year,” said Dan Geller, Ph.D. Executive Vice President at Market Rates Insight, “the reason we are witnessing such growth and shift in deposits despite meager interest rates is because consumers are very fearful about the economy, and are fleeing to the safety and security of insured and liquid deposits.”

Federal Reserve chairman, Ben S. Bernanke, said Friday," “The country would be well served by a better process for making fiscal decisions.” Certainly an understatement, and definitely "safe" to observe.

Tracking Bank Failures Map:

List of Bank Failures:

Bank Beat: