DIF - - Deposit Insurance Fund

US bank lending fell last year at the highest rate since 1942.

Loans fell 7.5 percent in 2009, the largest annual decline since 1942, according to the Federal Deposit Insurance Corporation (FDIC), the Great Depression era agency which guarantees bank deposits.

Full-year 2009 net income at US banks was $12.5 billion, up from $4.5 billion in 2008, but well below the $100 billion in net income the industry reported for 2007. As was the case in 2008, full-year industry earnings for 2009 (which consist of calendar-year net income of 8,012 insured institutions filing December 31 financial reports) would have been significantly lower if losses experienced by institutions that failed during the year were reflected in year-end reporting.

More than one in four institutions (29.5 percent) reported negative net income for the year, up from 24.8 percent in 2008. This is the highest proportion of unprofitable institutions in any year since at least 1984.

The FDIC has 702 banks with $402.8 billion in assets on the confidential monitoring list as of Dec. 31st, a 27 percent increase from 552 banks with $345.9 billion in assets at the end of the third quarter, the regulator said. “Problem” banks account for 8.7 percent of all US lenders.

Total assets of the nation’s 8,012 FDIC-insured commercial banks and savings institutions decreased by $137.2 billion (1.0 percent) during the fourth quarter of 2009. Total deposits increased by $125.7 billion (1.4 percent),
domestic deposits increased by $143.6 billion (1.9 percent), and foreign office deposits decreased by $17.8 billion (1.2 percent).

The agency insures deposits at 8,012 institutions with $13.1 trillion in assets. The insurance fund is maintained to reimburse customers for deposits of as much as $250,000 when a bank fails.

The insurance fund deficit rose to $20.9 billion from $8.2 billion in the previous quarter, when the account went into the red for the first time since 1992. The FDIC last year forced banks to prepay three years of premiums, raising $46 billion on Dec. 30th, the agency said on Tuesday. The fourth-quarter balance doesn’t reflect the payments, as premiums are to be phased in each quarter during the next three years, the FDIC said.

FDIC Chairman Sheila Bair said banks are "bumping along the bottom of the credit cycle" and that the number of bank failures in 2010 will likely eclipse the 140 recorded last year.