The number of banks in the United States with major problems continues to increase, according to the latest data from the Federal Deposit Insurance Corporation (FDIC).
In its quarterly bank profile report, the FDIC said the number of U.S. banks on its "problem bank list" rose to 68 in the third quarter. The number represents the fifth quarterly increase in the number of banks that received a 4 or 5 rating on the CAMELS rating system since the second quarter of 2023.
A CAMELS rating of 4 means that the bank is experiencing financial, operational or management problems (or a combination of these problems) that could threaten its soundness if not resolved. Meanwhile, a CAMELS system score of 5 means that the bank is seriously deficient in one or more areas and requires urgent remediation.
"Total assets held by problem banks increased by $3.9 billion to $87.3 billion. Problem banks account for 1.5% of the total number of banks, which is within the normal range of 1% to 2% of all banks in non-crisis times," the report noted.
Meanwhile, the amount of unrealized losses on banks' balance sheets declined. The FDIC said banks had book losses of $364 billion through the third quarter of this year, largely due to exposure to residential real estate and Treasury markets. Unrealized losses represent the difference between the price banks paid for securities and the current market value of those assets.
Banks’ book losses in the third quarter were down $148.9 billion from $512.9 billion in the second quarter. However, FDIC Chairman Martin J. Gruenberg said the reduction in bank book losses last quarter was only temporary. Changes in long-term interest rates since the end of the third quarter suggest that U.S. banks’ current unrealized losses may be close to $500 billion. (The Daily Hodl)