Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported a net loss of $26.2 billion in the fourth quarter of 2008, a decline of $27.8 billion from the $575 million that the industry earned in the fourth quarter of 2007 and the first quarterly loss since 1990. Rising loan-loss provisions, losses from trading activities and goodwill write-downs all contributed to the quarterly net loss as banks continue to repair their balance sheets in order to return to profitability in future periods.

More than two-thirds of all insured institutions were profitable in the fourth quarter, but their earnings were outweighed by large losses at a number of big banks. Total deposits increased by $307.9 billion (3.5 percent), the largest percentage increase in 10 years, with deposits in domestic offices registering a $274.1 billion (3.8 percent) increase. And at year-end, nearly 98 percent of all insured institutions, representing almost 99 percent of industry assets, met or exceeded the highest regulatory capital standards.

"Public confidence in the banking system and deposit insurance is demonstrated by the increase in domestic deposits during the fourth quarter," FDIC Chairman Sheila Bair said. "Clearly, people see an FDIC-insured account as a safe haven for their money in difficult times."

For all of 2008, insured institutions earned $16.1 billion, a decline of 83.9 percent from 2007 and the lowest annual total since 1990. Twelve FDIC-insured institutions failed during the fourth quarter and one banking organization received assistance. During the year, a total of 25 insured institutions failed. The FDIC's "Problem List" grew during the quarter from 171 to 252 institutions, the largest number since the middle of 1995. Total assets of problem institutions increased from $115.6 billion to $159 billion.

In its latest release, the FDIC cited deteriorating asset quality as the primary reason for the drop in industry profits. Loan-loss provisions totaled $69.3 billion in the fourth quarter, a 115.7 percent increase from the same quarter in 2007. In addition, the industry reported $15.8 billion in expenses for write-downs of goodwill (which do not affect regulatory capital levels), $9.2 billion in trading losses and $8.1 billion in realized losses on securities and other assets.

The FDIC provided data on industry use of the Temporary Liquidity Guarantee Program (TLGP), which was established in mid-October to address credit market disruptions and improve access to liquidity for insured financial institutions and their holding companies. The TLGP, which is entirely funded by industry fees that totaled $3.4 billion as of year-end, has two components. One provides a 100 percent guarantee of all deposits in noninterest-bearing transaction accounts, such as business payroll accounts, at participating institutions. The other provides a guarantee to newly issued senior unsecured debt at participating institutions. At the end of December, more than half a million deposit accounts received over $680 billion in additional FDIC coverage through the transaction account guarantee, and $224 billion in FDIC-guaranteed debt was outstanding.

"The debt guarantee program has been effective in reducing borrowing spreads and improving access to short- and intermediate-term funding for banking organizations," Chairman Bair noted. "In recent weeks, banks have been able to issue debt without guarantees and other corporate borrowers have issued debt more frequently and in larger amounts. These are positive signs."

Financial results for the fourth quarter and full year are contained in the FDIC's latest Quarterly Banking Profile, which was released today. Among the major findings:

Provisions for loan losses continued to weigh on earnings. Rising levels of charge-offs and noncurrent loans have required insured institutions to step up their efforts to increase their reserves for loan losses. The $69.3 billion in provisions that the industry added to reserves in the fourth quarter represented over half (50.2 percent) of its net operating revenue (net interest income plus total noninterest income), the highest proportion in any quarter in more than 21 years.

The rising trend in troubled loans persisted in the fourth quarter. Insured institutions charged off $37.9 billion of troubled loans, more than twice the $16.3 billion that was charged-off in the fourth quarter of 2007. The annualized net charge-off rate of 1.91 percent equaled the previous quarterly high set in the fourth quarter of 1989. The amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) increased by $44.1 billion (23.7 percent) during the fourth quarter. At the end of 2008, a total of 2.93 percent of all loans and leases were noncurrent, the highest level for the industry since the end of 1992.

The FDIC's Deposit Insurance Fund reserve ratio fell. A higher level of losses for actual and anticipated failures caused the insurance fund balance to decline during the fourth quarter by $16 billion, to $19 billion (unaudited) at December 31. In addition to having $19 billion available in the fund, $22 billion has been set aside for estimated losses on failures anticipated in 2009. The fund reserve ratio declined from 0.76 percent at September 30 to 0.40 percent at year end. The FDIC Board will meet tomorrow to set deposit insurance assessment rates beginning in the second quarter of 2009 and to consider adopting enhancements to the risk-based premium system.

I recently opened an account with JP Morgan Chase having previously used Citibank for all of my financial needs.

I am startled by how poor the interfaces are. It really feels as if the internet were just invented yesterday when I use this thing. None of the menus are logical or easy to navigate. The two things that irk me the most are the following:

1) When I use the online payment functionality to issue a check online, the money is withdrawn the instant that the check is written, not when it is cashed. Aside from the fact that I lose the interest that I should be accruing between the time that it is issued and cashed (this interest is obviously now accruing to Chase), I have no way to ever know whether the check has been received, unless I am contacted later by the person or organization that I am trying to pay saying that it has not been received.

2) There is no way to get a summary online of all of the recent activity in the account. I need to go into each separate folder - deposits, checks written, online checks. When several checks are deposited at once, they do not appear individually on statements, but as one deposit, and there is absolutely no way to go back more than 12 months to see activity (I need to get all of my statements out in order to prepare my prior year returns).

I am not sure who built Chase's online banking system, but it is highly inferior to Citibank's or any other bank's that I used.

Citi and BoA may be the banks in trouble today, but if these banks are to be judged by ability to adapt to technology and consumer needs in the the 21st Century, JP Morgan Chase is in the worst position of all.

Friday the 13th saw four bank failures - Pinnacle Bank, Corn Belt Bank and Trust, Riverside Bank of the Gulf Coast, Sherman County Bank - the most of any Friday so far. The FDIC generally closes banks on Fridays to allow it time to deal with depositors and make an orderly transition to a new bank or to put deposit insurance in place by the time the bank reopens on Monday morning. So far of the thirtnees bank failures this year, every bank failure has fallen on a Friday. According to the FDIC there were 25 bank failures all of last year.

In each case, the FDIC has arranged a buyer for each of the banks who will take over deposits.

All deposit accounts were transferred for Pinnacle Bank and Sherman Bank. That means that even if you had deposits in excess of $250,000 they will transferred and available at the new institution. All non-brokered deposit accounts were transferred for Corn Belt Bank and Trust, and Riverside Bank of the Gulf Coast. If you deposited your money into a brokered account, the FDIC will cover some of the loss. You should contact your broker for more information.

In all four cases, each bank will be open for business on Tuesday following the President's Day weekend under its new name. All checks issues will be cashed by the new bank. Over the weekend, customers can access funds via check or by the ATM machines.

Below is some specific information about each closing. For more detail, please visit the FDIC website.

Information for Pinnacle Bank, Beaverton, Oregon

Pinnacle Bank, Beaverton, Oregon, was closed today by the Oregon Division of Finance and Corporate Securities, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Washington Trust Bank, Spokane, Washington, to assume all of the deposits of Pinnacle Bank.

As of December 31, 2008, Pinnacle Bank had total assets of approximately $73 million and total deposits of $64 million. In addition to assuming all of the deposits of the failed bank, including those from brokers, Washington Trust Bank agreed to purchase approximately $72 million in assets at a discount of $7.6 million. The FDIC will retain the remaining assets for later disposition.

The FDIC and Washington Trust Bank entered into a loss-share transaction. Washington Trust Bank will share in the losses on approximately $66 million in assets covered under the agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers as they will maintain a banking relationship.

Corn Belt Bank

Corn Belt Bank and Trust Company, Pittsfield, Illinois, was closed today by the Division of Banking, Illinois Department of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with The Carlinville National Bank, Carlinville, Illinois, to assume all of the deposits of Corn Belt Bank and Trust Company.

As of December 31, 2008, Corn Belt Bank and Trust Company had total assets of approximately $271.8 million and total deposits of $234.4 million. The Carlinville National Bank will pay the FDIC a premium of 1.75 percent.

The Carlinville National Bank will not assume $92 million in brokered deposits held by Corn Belt Bank and Trust Company. The FDIC will pay the brokers directly for the amount of their insured funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits

Information for Riverside Bank of the Gulf Coast, Cape Coral, FL

Riverside Bank of the Gulf Coast, Cape Coral, Florida, was closed today by the Florida Office of Financial Regulation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with TIB Bank, Naples, Florida, to assume all of the deposits of Riverside Bank.

As of December 31, 2008, Riverside Bank had total assets of approximately $539 million and total deposits of $424 million. TIB Bank agreed to pay the FDIC a premium of 1.3 percent.

TIB Bank will not assume $142.6 million in brokered deposits held by Riverside Bank. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

Sherman County Bank, Loup City, Nebraska

Sherman County Bank, Loup City, Nebraska, was closed today by the Nebraska Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Heritage Bank, Wood River, Nebraska, to assume all of the deposits of Sherman County Bank.

As of February 12, 2009, Sherman County Bank had total assets of approximately $129.8 million and total deposits of $85.1 million. Heritage Bank will pay the FDIC a premium of six percent. In addition to assuming all of the deposits of Sherman County Bank, Heritage Bank agreed to purchase approximately $21.8 million in assets, comprised mainly of cash, cash equivalents and marketable securities. The FDIC will retain the remaining assets for later disposition.

Sherman County Bank, Loup City, Nebraska, was closed today by the Nebraska Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Heritage Bank, Wood River, Nebraska, to assume all of the deposits of Sherman County Bank.