The most recent Quarterly Banking Profile details the continued woes facing America’s banking institution. CalculatedRisk has highlighted the deterioration of the “coverage ratio”, which is “loss reserves as a percentage of nonperforming loans” is now at it’s lowest level since 1993.
Noncurrent Loan Growth Remains High
Even with the heightened level of charge-offs, the amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) rose by $26.0 billion (23.6 percent) in the first quarter, following a $27.0-billion increase in the fourth quarter of 2007. Loans secured by real estate accounted for close to 90 percent of the total increase, but almost all major loan categories registered higher noncurrent levels. The amount of real estate construction and development loans that were noncurrent increased by $9.5 billion (47.2 percent) during the quarter, while noncurrent loans secured by 1-4 family residential properties other than home equity lines of credit increased by $9.3 billion (20.2 percent). Noncurrent real estate loans secured by nonfarm nonresidential properties increased by $2.2 billion (28.5 percent), and noncurrent home equity lines of credit rose by $1.5 billion (29.5 percent). Noncurrent C&I loans increased by $2.4 billion (24.9 percent). During the quarter, the percentage of total loans and leases that were noncurrent rose from 1.39 percent to 1.71 percent, the highest noncurrent rate for the industry since the first quarter of 1994. At institutions with assets greater than $1 billion, the average noncurrent rate at the end of the quarter was 1.74 percent. At smaller institutions, the average rate was 1.52 percent. More than half of all insured institutions — 52.2 percent — saw their noncurrent rates rise during the first quarter. Restructured loans and leases (which are current under modified terms) increased by $4.0 billion (57.6 percent) during the quarter, but almost half of the increase was caused by banks including restructured 1-4 family residential real estate loans for the first time. These restructured loans added $1.8 billion to the total amount of restructured loans at the end of the first quarter. [emphasis added]
As CalculatedRisk has been saying for some time, the wave of bank failures is coming. The FDIC isn’t on a hiring spree just to beef up their softball team with professional MLB ringers a la Mr Burns from the Simpson’s…
UPDATE: Commenter Michael McKinlay points to this figure at istockanalyst.com. The figure was put out by Credit Suisse last summer I believe. I’ve heard it referred to several times as the “Reset Tsunami”. And Michael McKinlay is right; there is a lot more ugly to come, and a lot of it has to do with the mortgage mess.
Also, I believe this reset schedule has been revised since Credit Suisse put this one together. If anyone knows where there is a more recent schedule, I’ll update the post with a link.