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FDIC report: Nevada banks still struggling

BAD LOANS BRING INCREASE IN FDIC'S BANK 'PROBLEM LIST'

WASHINGTON -- The apparent end of the recession and stabilizing financial markets have not cured the banking industry, as souring and past-due loans have reached the highest levels in 26 years, the Federal Deposit Insurance Corp. said Tuesday.

Banks earned $2.8 billion in the third quarter, but nearly 40 percent of that was from a one-time accounting trick. Loan balances plummeted and the fund that insures their deposits was $8.2 billion in the red.

The number of banks on the FDIC's "problem list" rose to 552 from 416 on June 30, the highest level in 16 years. Fifty banks failed during the quarter -- the largest number since the second quarter of 1990.

The FDIC's fund that insures bank deposits fell by $18.6 billion, mostly because $21.7 billion was set aside for expected losses on future bank failures. The last similar deficit was in December 1991, when a predecessor fund was more than $7 billion in the red.

Separately, the Office of Thrift Supervision said Tuesday that thrifts eked out a $200 million profit in the third quarter. The agency called it "another break-even quarter," after a small second-quarter profit was revised downward to a $94 million loss.

Still, it was the first profitable quarter since the same period in 2007. The nominal profit was $1.3 billion, but $1.1 billion was a one-time gain at a single institution. The thrift's holding company, which the OTS did not identify, shifted assets to reduce future tax expenses, agency officials said.

The agency says the number of "problem thrifts" rose to 43 from 40 last quarter.

Thrifts differ from banks in that they are required, by law, to have at least 65 percent of their lending in mortgages and other consumer loans. That makes them especially vulnerable to the housing downturn and unemployment.

The FDIC voted this month to require banks to prepay three years of deposit insurance premiums by the end of next month to help replenish the dwindling deposit insurance fund, which is at its lowest point on record. That will raise about $45 billion.

But bank failures this year through 2013 are expected to cost the fund $100 billion, so the prepayments won't provide a long-term fix for the insurance fund. It does spare ailing banks the immediate cost of paying a second emergency fee this year.

DANIEL WAGNER/THE ASSOCIATED PRESS

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By JOHN G. EDWARDS
LAS VEGAS REVIEW-JOURNAL
Posted: Nov. 25, 2009 | 10:00 p.m.
Updated: Apr. 10, 2012 | 10:04 a.m.

Banks with Nevada charters continued to bleed red ink in the third quarter as the economy limped along, according to data released by the Federal Deposit Insurance Corp. on Tuesday.

"Overall, it shows that banks in Nevada continue to be distressed," said Bill Uffelman, chief executive officer of the Nevada Bankers Association. "It's not a pretty picture."

The 27 state-chartered institutions lost $177 million in the first three quarters, compared to profit of $19 million at the same time last year. The banks recorded $370 million in profit in the same period two years ago.

The percentage of banks that are unprofitable jumped to 85 percent from 61 percent a year ago and 29 percent two years ago.

Loan portfolios continued to deteriorate for Nevada banks, said Dale Gibbons, chief financial officer of Western Alliance Bancorporation, the holding company for Bank of Nevada.

Nonperforming assets almost doubled as a percentage of assets, to 6.4 percent from 3.23 percent a year ago.

Yet Gibbons said banks are operating more efficiently and have increased the assets and lowered expenses.

The banks employed 2,315 workers, down 12 percent from 2,638 a year ago. Employment has dropped 23 percent from 2,989 two years ago.

Deposits increased 25 percent over a year ago to $13.6 billion.

Assets that include loans also increased 23 percent over the year.

Nationally, banks are doing better than in Nevada.

The FDIC reported $2.8 billion in third-quarter net income nationally, more than three times the $879 million a year earlier. Banks recorded a $4.3 billion net loss in the second quarter of 2009.

FDIC Chairwoman Sheila Barr in a statement said earnings have improved at banks and thrifts although "the effects of the recession continue to be reflected in their financial performance."

"Today's report makes clear that in spite of the difficulties, signs of improvements are appearing, with net profits of $2.8 billion, capital ratios at their highest levels in 19 years, problem loans growing more slowly, and noninterest income rising," James Chessen, chief economist for the American Bankers Association ,said in a statement. "Significant challenges still remain, of course, as banks continue to work through these difficult economic times."

The economist said no customer has ever lost insured deposits backed by the FDIC fund. Each depositor is fully insured up to $250,000.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.

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  1. SO? Nov. 25, 2009 | 1:15 p.m. Report Abuse

    REALLY--- what, you want John Edwards to lie? Things are bad, and John is only telling the truth and reporting reality. That's what newpaper reporters are supposed to do. In fact, I would maintain that things are probably WORSE than John is reporting. Get your head out of the sand and smell the depression REALLY.

  2. globarrvers Nov. 25, 2009 | 12:52 p.m. Report Abuse

    Fact writes "maybe everybody should take there money to a Credit Union that has private insurance (ASI) where their money is backed by actual money and not a print press."

    And when ASI goes under?

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