WASHINGTON, DC-The Federal Deposit Insurance Corp. reports that the number of “problem” banks fell for the first time in 19 quarters, or since Q3 2006. The agency now classifies 865 institutions in this category, down from 888. “Banks have continued to make gradual but steady progress in recovering from the financial market turmoil and severe recession that unfolded from 2007 through 2009,” said FDIC acting chairman Martin J. Gruenberg in a prepared statement. He went on to say that “this trend has expanded to include a growing proportion of insured institutions.”

The total assets of “problem” institutions declined from $397 billion to $372 billion, the FDIC reported. Other positive metrics: 22 insured institutions failed during the second quarter, four fewer than in the previous quarter, and the fewest since the first quarter of 2009. Through the first six months of 2011, there have been 48 insured institution failures, compared to 86 failures in the same period of 2010. Also, loan portfolios grew for the first time in three years by 0.9% to $64.4 billion. Loans to commercial and industrial borrowers increased by $34.3 billion, the FDIC reported.

 

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How beneficial this will be to the commercial real estate community is unclear. In a separate report earlier this month, the Federal Reserve Bank reported positive trends for borrowers--unless they were in the commercial real estate sector. Its July 2011 Senior Loan Officer Opinion Survey on Bank Lending Practices found that, on net, banks continued to ease lending standards and most terms on all major types of loans other than loans secured by real estate over the past three months.

For both commercial and residential real estate, domestic banks said standards were unchanged over the past three months and that the demand for CRE loans in the current survey declined in comparison with the April survey.

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