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The full report is available on their website.

Of particular interest was:

Insured institutions continued to build their loan-loss reserves in the first quarter. They added $37.1 billion in loss provisions to their reserves, which was $17.5 billion more than was subtracted from reserves by charge-offs. The increased loss provisions were the main reason that reserves increased by $18.5 billion (18.1 percent) during the quarter, to $120.9 billion. The industry’s ratio of loss reserves to total loans and leases increased from 1.30 percent to 1.52 percent, the highest level since the first quarter of 2004. However, the growth in loss reserves was outstripped by the rise in noncurrent loans, and the industry’s “coverage ratio” fell for the eighth consecutive quarter, to 89 cents in reserves for every $1.00 of noncurrent loans from 93 cents at the end of 2007. This is the lowest level for the coverage ratio since the first quarter of 1993.

Capital levels benefited from a reduction in dividend payments by many institutions during the quarter. Of the 3,776 insured institutions that paid common stock dividends in the first quarter of 2007, almost half (48 percent) paid lower dividends in the first quarter of 2008, including 666 institutions that paid no dividends. Insured institutions paid $14.0 billion in total dividends in the first quarter, down $12.2 billion (46.5 percent) from a year earlier. Retained earnings (net income after dividends) totaled $5.3 billion, down $4.1 billion (43.6 percent) from a year earlier despite the lower dividend payments. Slightly more than half of all institutions (51.8 percent) reported year-over-year declines in retained earnings. Total regulatory capital increased by $25.5 billion (2.0 percent) in the first quarter, as tier 1 capital rose by $15.0 billion (1.5 percent) and tier 2 capital increased by $10.5 billion (4.1 percent). All of the increase in tier 2 capital consisted of higher loan-loss reserves. The industry’s core capital (leverage) ratio declined from 7.97 percent to 7.87 percent during the quarter, the tier 1 risk-based capital ratio slipped slightly from 10.11 percent to 10.10 percent, while the total risk-based capital ratio increased from 12.78 percent to 12.83 percent. Ninety-nine percent of all insured institutions continued to meet or exceed the highest regulatory capital standards as of the end of the first quarter. Equity capital increased by $13.5 billion in the quarter. The relatively low level of retained earnings and a sharp increase in unrealized losses on available-for-sale securities were the chief reasons for the modest rise in equity. Other comprehensive income, which includes unrealized losses on securities, reduced equity capital by $12.1 billion in the first quarter.
…
The number of institutions on the FDIC’s “Problem List” increased from 76 to 90 in the first quarter. Total assets of “problem” institutions rose from $22.2 billion to $26.3 billion. This is the sixth consecutive quarter that the number of “problem” institutions has increased, from a historic low of 47 institutions at the end of third quarter 2006. The current level represents the largest number of institutions on the list since third quarter 2004, when there were 95 “problem” institutions.

It is also interesting that the Deposit Insurance Fund (and as I have remarked, in the US they have a REAL deposit insurance fund) made money in the quarter, but did not increase as fast as insured deposits, resulting in a small decline in coverage.

There’s lots of numbers in this report! No matter what investment conclusion you’re determined to make, you’ll be able to justify it somehow!

This entry was posted on Wednesday, June 4th, 2008 at 12:22 pm and is filed under Interesting External Papers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.