We are excited to be the cover story in the February 2009 issue of Michigan Banker. This year, we celebrate our 10 year anniversary and enjoyed reliving our past and discussing our thoughts about the future.
We are pleased to announce that Jim was published in the Florida Banker's Associate Trust Talk January 2009 Newsletter. His article on Auction Rate Securities is very timely, considering what a hot topic this is in the financial industry. We hope you find his article helpful, and invite you to contact us for further information.
Charley will be presenting at the Michigan Credit Union League's 2009 Spring Leadership Development Conference on May 2, 2009. Charley will be holding a discussion on Asset Liability Management Best Practices - Ensure your Asset Liability Management model is an accurate tool for modeling your credit union and will lead an open forum on Credit Risk issues. We look forward to seeing you there!
White Papers
1/5/2010- Michigan's Economic Outlook for 2010
2/13/2009 - Michigan's Economic Outlook - 1st quarter 2009
10/8/2008 - Michigan's Economic Outlook - 3rd quarter 2008
10/7/2008 - Changes in the Current Banking Environment
2/1/2008 - Auction Rate Securities, Understanding the Risks
Press Releases
10/30/2008 - McQueen Financial Advisors announces expanded advisory services to address the significant opportunities in the Emergency Economic Stabilization Act of 2008.
8/27/2009
FDIC Insurance Fund Shrinks to $10.4 Billion
WASHINGTON -- The Federal Deposit Insurance Corp.'s fund that protects more than $4.5 trillion in U.S. bank deposits fell to just $10.4 billion at the end of June, as the banking industry continues to struggle with souring loans and regulators brace for pain in trying to clean up the mess.
The level of the FDIC's fund, the lowest since the savings and loan crisis, almost guarantees that the government will have to hit the banking industry with another special fee to recapitalize its reserves. Officials could also consider borrowing up to $100 billion from the Treasury Department, but government officials have avoided this option so far.
"The FDIC was created specifically for times such as these," FDIC Chairman Sheila Bair said. "No matter how challenging the environment, the FDIC has ample resources to continue protecting depositors as we have for the last 75 years."
The deposit insurance fund topped $45.2 billion a year ago.
The agency said it had 416 banks on its "problem" list at the end of the second quarter, up from 305 at the end of March. Banks on the problem list are considered a higher risk of failure and face tougher regulatory scrutiny. The FDIC said the total assets of banks on the problem list was $299.8 billion, which suggests that Citigroup Inc. and some of the country's other largest banks, remained off the list.
The FDIC, in its Quarterly Banking Profile, said the industry posted an aggregate net loss of $3.7 billion in the second quarter, mostly because the industry increased expenses for bad loans. This is a reversal from the first quarter, when the banking industry turned a slight profit, and shows banks still have a long way to go to work through their problems.
The FDIC also said borrowers are falling behind on loans at record levels and across most major loan categories. The number of loans at least 90 days past due climbed for a 13th consecutive quarter, while the percentage of loans at least three months overdue hit 4.35%, the highest level recorded since the FDIC began collecting this data 26 years ago.
"Deteriorating loan quality is having the greatest impact on industry earnings as insured institutions continue to set aside reserves to cover loan losses," Ms. Bair said.
The biggest problem areas continued to be property-related loans, suggesting the housing market is still under stress despite some recent good news. The FDIC said residential mortgage loans at least 90 days past due climbed 12.7% in the quarter, construction and development loans at least three months behind increased 16.6%.
More
Banks responded to the credit problems by writing off assets at a record pace and continuing to add to their reserves. Banks added $16.8 billion to their loan loss reserves during the second quarter, while writing off $48.9 billion. The annualized net rate of write downs hit 2.55% in the quarter, topping the previous record, as banks wrote abandoned soured credit-card loans at a record pace.
Despite banks socking away funds to cover losses, the deterioration of outstanding loans continues to outpace banks' ability to set aside funds. The FDIC said U.S. banks had only 63.5 cents in reserve for every dollar of loans at least 90 days past due at the end of the second quarter, the lowest level since the third quarter of 1991.
The $10.4 billion in the deposit insurance fund was down from an already low $13.3 billion at the end of March. The "deposit insurance fund ratio," which is a way the FDIC measures its fund against insured deposits, stood at just 0.22% on June 30, the lowest level since March 31, 1993.
The FDIC said assessments, including a $5.6 billion special fee charged against banks at the end of June, pushed the fund up by $9.1 billion for the quarter. The FDIC also added $1.1 billion to the fund through interest earned and gains associated with fees from its Temporary Liquidity Guarantee Program.
In addition to the $10.4 billion remaining in the fund, the FDIC set aside $11.6 billion to prepare for future bank failures. Eighty-one banks have already failed so far this year, up from 25 in 2008. Bank failures this year have already cost the FDIC roughly $19 billion.
The FDIC said the U.S. had 8.195 banks at the end of June.
Write to Damian Paletta at damian.paletta@wsj.com and Michael R. Crittenden at michael.crittenden@dowjones.com
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