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FDIC-Insured Banks Report Earnings Growth in Q2

Income at financial institutions insured by the ""FDIC"":http://www.fdic.gov/ rose during the second quarter, and fewer institutions failed or are on the brink of failure, according to a report released Thursday by the agency.


Total net income at FDIC-insured institutions increased 22.6 percent year-over-year to $42.2 billion in the second quarter, according to the report.

More than half--53.8 percent--of the institutions experienced a rise in income over the second quarter.

Income has been on the rise at FDIC-insured institutions for the past 16 quarters, according to the FDIC.

Twelve FDIC-insured banks failed during the second quarter. While this is up from just four in the first quarter, the year-to-date total--20 banks--is down significantly from the 40 banks that failed over the same period last year, the FDIC reported.

Also, the number of ""problem banks"" declined from 612 at the end of the first quarter to 553 at the end of the second quarter.


""The trends we have seen in recent quarters continued in the second quarter,"" said FDIC Chairman Martin J. Gruenberg.

""Asset quality continues to recover, loan balances are trending up, fewer institutions are unprofitable, the number of problem banks is down, and the number of failures is significantly below levels of a year ago,"" he said.

The percentage of unprofitable banks declined from 11.3 percent in the second quarter of last year to 8.2 percent in the second quarter of this year.

Noninterest expenses declined 1.4 percent in the second quarter, while noninterest income rose 11.1 percent.

Interest income fell by 1.7 percent over the quarter.

The amount banks held for loan losses drifted down 39.6 percent from the second quarter of last year.

The total loan balances held by FDIC-insured institutions rose by 1.8 percent.

Residential real estate loan balances decreased over the quarter. Home equity loan balances decreased 1.8 percent, while other residential real estate loans declined 1.2 percent.

On the other hand, nonresidential real estate loan balances increased 1 percent over the second quarter.

Rising interest rates led to an 89.1 percent decline in unrealized gains on securities portfolios at FDIC-insured banks over the second quarter. This decline will not be felt immediately but will impact future earnings, according to the FDIC.

Despite the largely good news last quarter, ""industry revenue growth remains weak, reflecting narrow margins and modest loan growth,"" Gruenberg said.