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FDIC Reports Continued Improvements in Bank Health

""FDIC-insured"":http://www.fdic.gov/ banks continued to show improving health in the year's third quarter, ""the agency reported"":http://www2.fdic.gov/qbp/?source=govdelivery Tuesday.

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Commercial banks and savings institutions insured by FDIC reported aggregate net income of $37.6 billion in Q3, up $2.3 billion (or 6.6 percent) from a reported $35.2 billion in Q3 2011. Aggregate net income has increased on a year-over-year basis for 13 straight quarters.

In addition, 57.5 percent of all insured institutions reported annual improvements in their quarterly net income. The share of institutions reporting net losses in Q3 fell to 10.5 percent from 14.6 percent a year prior. The average return on assets--""a basic yardstick of profitability""--rose from 1.03 percent in Q3 2011 to 1.06 percent in Q3 2012.

Net operating revenue (net interest income plus total noninterest income) totaled $169.9 billion, an increase of $4.9 billion--or 3.0 percent--from last year, as gains from loan sales rose by $3.9 billion. Net interest income rose about $746 million (0.7 percent) year-over-year.

Total loan balances also increased for the fifth time in the last six quarters. Loan balances rose by $64.8 billion (0.9 percent) in Q3. That increase was primarily driven by gains in commercial and industrial loans (which rose by $31.8 billion or 2.2 percent). Residential mortgage loans [COLUMN_BREAK]

rose by $14.5 billion (0.8 percent), and auto loans grew by about $7.4 billion (2.4 percent).

""More than 55 percent of all banks reported loan growth,"" said FDIC chairman Martin Gruenberg. ""Small banks are also increasing their lending, including their loans to small businesses.""

Not all loan types saw growth, however. Home equity lines of credit declined $12.9 billion (2.2 percent), while real estate construction and development loans fell by $6.9 billion (3.2 percent).

Meanwhile, negative indicators continued to fall. Third-quarter loan loss provisions totaled $14.8 billion, 20.6 percent less than the $18.6 billion set aside for losses in Q3 2011. The number of banks on FDIC's ""Problem List"" declined for the sixth straight quarter, dropping from 732 to 694. The third quarter also marked the first time in three years that there have been fewer than 700 banks on the list.

Total assets of problem institutions declined from $282 billion to $262 billion, the agency reported.

As the number of problem institutions has fallen, so too has the number of bank failures. The third quarter saw 12 failures, the smallest number of quarterly failures since Q4 2008. As of December 4, 50 banks have collapsed in 2012, a substantial decline from 90 during the same period in 2011.

Out of the last nine quarters, eight have seen declines in the number of bank failures.

Also promising was an apparent improvement in asset quality. Insured banks and thrifts charged off $22.3 billion in uncollectible loans during the quarter, down $4.4 billion (16.5 percent) from last year. The amount of seriously delinquent loans and leases (90 days or more past due or in nonaccrual status) fell for the 10th consecutive quarter, and the percentage of loans and leases that were delinquent declined to its lowest level in more than three years.

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