Estimate of banks’ fourth-quarter losses expands

WASHINGTON —  Federal regulators now say the nation’s banks lost $32.1 billion in the final quarter of last year, even worse than the $26.2 billion originally reported last month.

The Federal Deposit Insurance Corp. said Friday that “significant” revisions it received from banks also lowered the industry’s net income for all of last year to $10.2 billion from $16.1 billion.

Rising losses on loans and eroding values of assets bit into the revenue of U.S. banks and thrifts in late 2008, causing them to post the first quarterly deficit in 18 years.

The $26.2-billion loss originally reported for the October-December period already was the largest on 25 years of FDIC records. It compared with a $575-million profit in the fourth quarter of 2007. And the originally reported 2008 net income of $16.1 billion was the smallest annual profit since 1990, during the savings and loan crisis.

The FDIC’s revised banking industry data also include “substantially higher” charges for an accounting item known as goodwill impairment, which reduced the overall net income for the quarter.

Goodwill is an asset on a company’s balance sheet, which gives an idea of what it is worth beyond the tangible -- the added value from the potential for future success, for example.

The recession and stressed financial markets have reduced the goodwill value, for example, of companies that were acquired by others. So the acquiring company has had to write down the asset and take a goodwill impairment charge on it.

The FDIC said last month that there were 252 banks in trouble at the end of 2008, up from 171 in the third quarter.

The agency expects U.S. bank failures to cost the deposit insurance fund more than $40 billion over the next four years.

Eighteen federally insured institutions already have failed this year, extending a wave of collapses that began in 2008. Last year’s tally of 25 failed banks was more than in the previous five years combined, and up from only three in 2007.

The failures sliced the the deposit insurance fund to $18.9 billion as of Dec. 31, the lowest level since 1993. That compares with $52.4 billion a year earlier.