Federally insured banks and savings institutions saw fourth-quarter earnings plummet 83 percent — their lowest levels since 1991 — and failed to boost loss reserves as fast as borrowers became delinquent on loans, the FDIC reported today.

Fourth-quarter net income fell to $5.8 billion at 8,500 banks and savings and loans insured by the Federal Deposit Insurance Corp., down from $35.2 billion a year ago. For the year, net income fell 27 percent, to $105.5 billion, as banks more than doubled loan loss provisions to $68.2 billion.

One of four insured institutions with assets of more than $10 billion reported a net loss for the fourth quarter, and the percentage that were unprofitable in 2007 — 11.6 percent — was the highest since 1991.

At the end of 2007, there were 76 FDIC-insured commercial banks and savings institutions on the “Problem List,” with combined assets of $22.2 billion, up from 65 institutions with $18.5 billion at the end of the third quarter.

Weakness in the housing sector and the credit squeeze in financial markets brought to an end six consecutive years of record earnings, and made 2007 “a very challenging time for many institutions,” FDIC Chairwoman Sheila Bair said in a statement accompanying the release of the FDIC’s Quarterly Banking Profile. Bair said those problems will continue in 2008, but said “most institutions are so far successfully coping with the challenges they face.”

Commenting on the report, American Bankers Association Chief Economist James Chessen said banks are “well-positioned” to handle the downturn, and continue to build capital and set aside reserves to cover potential losses. At year-end, the banking industry had $1.35 trillion in capital, an increase of $25 billion from the fourth quarter, Chessen said, and $8.4 trillion in deposits.

But the FDIC’s survey suggests that banks aren’t adding to reserves as fast as loans are going bad, and that more trouble lies ahead.

Loans 90 days or more overdue were up 32.5 percent in the last three months of the year — the largest quarterly increase in the 24 years that FDIC’s been collecting that statistic. The percentage of noncurrent loans at year-end was 1.39 percent, the highest level since the third quarter of 2002. The percentage of noncurrent residential mortgage loans rose to 2.06 percent, the highest level in 17 years of reporting data.

Net charge-offs rose to $16.2 billion in the fourth quarter, nearly double the $8.5 billion seen a year ago. The annualized net charge-off rate in the fourth quarter was 0.83 percent, the highest since the fourth quarter of 2002.

Net charge-offs were up year-over-year in all major loan categories except loans to the farm sector. Net charge-offs of residential mortgage loans increased by 144 percent, to $1.3 billion, while charge-offs of home equity lines of credit increased 378 percent, to $1 billion.

Although FDIC-insured banks and savings and loans posted their largest increase in loss reserves in 20 years, that growth did not keep pace with growth in noncurrent loans, the FDIC warned. The coverage ratio of reserves to noncurrent loans fell from $1.05 in reserves for each $1 of noncurrent loans to 93 cents by the end of the year.

“This is the first time since 1993 that the industry’s noncurrent loans have exceeded its reserves,” the report noted. At the end of 2007, one in three institutions had noncurrent loans that exceeded reserves, compared with less than one in four a year earlier.

Three FDIC-insured institutions failed in 2007 — the most since 2004. The number of insured institutions declined from 8,559 to 8,533 during the quarter as 74 institutions were absorbed by mergers and only 50 were newly chartered.

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