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TheStreet Open House

Community Banks Remain Reluctant To Lend

NEW YORK ( TheStreet) -- The 7,019 FDIC-insured financial institutions earned a record $40.3 billion in the first quarter of 2013, up a solid 15.8% year-over-year. This marks the 15th consecutive quarter of YoY gains. The improvements however, continue to be dominated by increased noninterest income, lower noninterest expenses and reduced loan loss provisions, not increased lending. An FDIC concern is tighter net interest margins.

The FDIC list of problem banks fell to 612 from 651 in the first quarter from the fourth quarter of 2012. This remains extremely elevated given the fact that at the end of 2007 when the "Great Credit Crunch" began the list totaled only 76.

Year to date bank failures total only 16 bringing the total for the credit crunch to 481. My prediction remains that 500 will fail before the crisis ends. The Deposit Insurance Fund (DIF) rose to $35.7 billion primarily on assessments from member banks. Insured deposits rose 2.6% in the quarter to about $7.6 trillion. If this were September 2020 the DIF would have to be funded at $102.6 billion.

Noncurrent loans peaked at $405.4 billion at the end of the first quarter of 2010. In the first quarter of 2013 noncurrent loans were down to $261.2 billion, still up 137.6% since the end of 2007. Loan loss provisions fell to $155.5 billion in the first quarter of 2013 down 4.1% sequentially and down 15.2% year over year.

Other Real Estate Owned (OREO) peaked at $53.2 billion in the third quarter of 2010. Currently OREO is down to $35.9 billion, still up 195.5% since the end of 2007.

The number of publicly traded banks overexposed to C&D loans fell to 67 from 73 in the first quarter. Those overexposed to CRE loans only fell to 404 from 451. 50 publicly traded banks have their CRE loan pipelines 100% funded, while 250 have at least 80% of their CRE loan commitments fully funded.


At ValuEngine we show that 471 publicly traded banks qualify to be on the ValuEngine List of Problem Banks, a clear sign that the stresses of the "Great Credit Crunch" continue.

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