On Tuesday, the Federal Deposit Insurance Corp. (FDIC) released second-quarter statistics that showed bank profitability is on the rise and loan portfolios are expanding, while the number of problem banks and uncollectible loans are decreasing. Moreover, for the first time in two years, the FDIC's Deposit Insurance Fund crept into positive territory, with the fund's net worth growing from a negative $1 billion to a positive $3.9 billion during the second quarter.
FDIC-insured institutions reported an aggregate profit of $28.8 billion in the quarter – a $7.9 billion improvement from one year earlier. The second-quarter numbers, released Tuesday, make last quarter the eighth consecutive quarter in which earnings registered a year-over-year increase.
As was true in each of the last seven quarters, lower provisions for loan losses led to the improvement in earnings. Second-quarter loss provisions totaled $19 billion – less than half the $40.4 billion that FDIC banks set aside in the second quarter of 2010. Net operating revenue (net interest income plus total non-interest income) fell $3 billion, or 1.8%, from the second quarter of 2010, and realized gains on securities declined $1.3 billion, or 61.1%.
‘Banks have continued to make gradual but steady progress in recovering from the financial market turmoil and severe recession that unfolded from 2007 through 2009,’ said FDIC Acting Chairman Martin J. Gruenberg in a statement.
Sixty percent of institutions reported improved quarterly net income as compared to the same period in 2010, the FDIC's data shows.
Loan performance also improved, as non-current loans and leases – those 90 days or more past due or in non-accrual status – fell for a fifth-consecutive quarter. Insured banks and thrifts charged off $28.8 billion in uncollectible loans during the quarter, which is a 42.1% drop from a year earlier.
The number of banks on the FDIC's ‘Problem List’ fell for the first time in 19 quarters, declining from 888 to 865. Bank failures have totaled 48 this year – a steep fall from the 86 failures recorded in the same period in 2010.
Additionally, loan portfolios grew for the first time in three years. Loan balances posted a quarterly increase for only the second time in the last 12 quarters. (The other increase, which happened in the first quarter of 2010, was artificial in the sense that it reflected new accounting rules.) Total loans and leases increased by $64.4 billion, as loans to commercial and industrial borrowers increased by $34.3 billion, auto loans rose by $9.7 billion and credit card balances grew by $5.2 billion.
