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List of ‘problem banks’ gets smaller

By Allison Ross · Bankrate.com
Wednesday, May 28, 2014
Posted: 4 pm ET

U.S. bank earnings fell 7.6 percent from a year ago to $37.2 billion in the first quarter of 2014, according to the Federal Deposit Insurance Corp. But on a brighter note, the number of "problem banks" continued to fall for the 12th consecutive quarter, the agency said.

The FDIC's list of banks at risk of failure declined to 411 from 467, which means it's at less than half the post-crisis high of 888 banks from the first quarter of 2011, agency said.

Five FDIC-insured banks failed in the first quarter. So far in the second quarter, three more banks have failed.

"We saw further improvement in the condition of the banking industry in the first quarter," FDIC Chairman Martin J. Gruenberg said in a press release. "Asset quality continues to improve, loan balances are trending up, fewer institutions are unprofitable and the number of problem banks continues to decline."

Community banks

The FDIC said industry revenue was affected by lower income from reduced mortgage activity and a drop in trading revenue. It noted that, despite the decline in overall net income, the banks that were unprofitable in the first quarter fell to 7.3 percent from 8.5 percent a year ago.

While community banks, which make up 93 percent of all FDIC-insured institutions, saw net income decline 1.5 percent to $4.4 billion, the net decline among these banks was smaller than the decline seen in the industry overall. The FDIC also noted that loan balances at community banks grew at a faster pace than the industry overall.

To get a sense of how your bank is faring, check out Bankrate's Safe & Sound ratings.

Follow me on Twitter: @allisonsross.

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