Chairman Sheila Bair of the FDIC gave her fourth quarter update on February 23rd regarding the state of the US Banks.  Here are some of the highlights.

*Net Income for all institutions was positive, but just barely so at less than $1 billion for the quarter from all FDIC institutions. This was the first time there were back to back positive quarters in net income since the second and third quarter of 2008.

*Half of all institutions actually saw an increase in quarterly net income, off from the lows of 33% in the second quarter of 2009.

*Noncurrent loans saw a decrease as net charge off's raised slightly. Looks like tighter lending standards are starting to improve portfolios.

*Noncurrent loans exceed loan-loss reserves which has been the case since the middle of 2007. However, the coverage ratio (Reserves / Noncurrent Loans) has dropped to 60%, compared to 2006 when the ratio was 160%.

*DIF (Deposit Insurance Fund) continues to languish in the red, at negative $20.1 billion. The FDIC has collected three years of prepayments amounting to $46 billion that does NOT factor in that number, so the FDIC will quarter by quarter recognize the income stream. FDIC does not anticipate it will need to look to the Fed for more capital.

*Troubled institutions are now at extremely high levels, 702 institutions or almost 1 out of 11 are troubled. These institutions are likely candidates to fail over the next 6 to 12 months.

So what does this ultimately mean to consumers, employees of banks, and those that sell their solutions to banks? Clearly rough times in the near term will continue and some of the places that we bank at or sell our services to will not be around in 2011. Banks lag in any recovery due to the nature of how loans work through before they are charged off. In addition, new regulation may put even further pressure on banks to come up with ways to recapture lost revenue. The FDIC, by raising premiums and getting advanced payments, will only continue to drive banks to pass those fees on to customers. The cycle will break, but the banking landscape will certainly continue feel the effects of this environment for many years to come.  As always, we welcome your thoughts on this topic.