Troubled asset ratio paints a worrysome picture of bank health

The FDIC may end up taking over many more banks, if recent reports are correct. Image from Flickr.

Since its inception, the Federal Deposit Insurance Corporation has asked that member banks provide information on their assets and liabilities. These financial reports are used to judge bank health. The most recent reports show that bank profits are skyrocketing – but troubled assets are also increasing. This report, once again, calls into question the “recovery” of the banking system.

Investigative Reporting Workshop reports

The FDIC itself does not release most of the lists and data compilations it makes from the data banks provide. Instead, the FDIC provides the raw data to the public. The Investigative Reporting Workshop at American University uses this data to create the “Bank Tracker.” The Bank Tracker reports on the troubled asset ratio, profits, deposits, loans and health of banks in the United States.

The health of banks in the first quarter

The reports on the status of banks in the first quarter of 2010 are just beginning to emerge, and the picture is not pretty. In total, the nation’s 7,941 banks made just more than $18 billion in quarterly profits — twice what they made in the first quarter of last year. However, those banks are also carrying $382.1 billion in troubled assets. More than 10 percent of mortgages currently held are at least 30 days past due — a number that continues to rise year after year.

Where the numbers point

Given the lower number of quick loans that banks are giving out, rising profits and increasing risk in the banking industry, the outlook is not good. Until the number of troubled assets on the books start to go down, banks will not be able to claim a strong core business. With an increasing chance of defaults, this does not appear to be likely anytime soon. This is not to say that the U.S. banking system is due for another crash, but “market correction” may well put another few hundred banks out of business before this is over.