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Banks/Savings Institutions Earn $34.5 Billion Second Quarter

The Federal Deposit Insurance Corporation (FDIC) reports that commercial banks and savings institutions reported aggregate net income of $34.5 billion in the second quarter of 2012, a $5.9 billion improvement from the $28.5 billion in profits the industry reported in the second quarter of 2011. This is the 12th consecutive quarter that earnings have registered a year-over-year increase. Lower provisions for loan losses and higher gains on sales of loans and other assets accounted for most of the year-over-year improvement in earnings. Also noteworthy was an increase in loan balances for the fourth time in the last five quarters.

Almost two-thirds of all institutions (62.7 percent) reported improvements in their quarterly net income from a year ago. Also, the share of institutions reporting net losses for the quarter fell to 10.9 percent from 15.7 percent a year earlier. The average return on assets (ROA), a basic yardstick of profitability, rose to 0.99 percent from 0.85 percenta year ago.

Total loan balances increased. Loan balances posted their fourth quarterly increase in the last five quarters, rising by $102 billion (1.4 percent). Loans to commercial and industrial borrowers increased by $48.9 billion (3.6 percent), while residential mortgages rose by $16.6 billion (0.9 percent) and credit card balances grew by $14.7 billion (2.3 percent). However, balances of real estate construction and development loans fell by $10.9 billion (4.8 percent), and home equity lines of credit declined by $10.2 billion (1.7 percent)

The Deposit Insurance Fund (DIF) balance continued to increase. The unaudited DIF balance - the net worth of the fund - rose to $22.7 billion at June 30 from $15.3 billion at the end of March. The increase included $4.0 billion previously set aside for debt guarantees under the FDIC's Temporary Liquidity Guarantee Program. Assessment revenue and fewer expected bank failures also continued to drive growth in the fund balance. The contingent loss reserve, which covers the costs of expected failures, fell from $5.3 billion to $4.0 billion during the quarter. Estimated insured deposits grew 0.7 percent in the second quarter.

The complete Quarterly Banking Profile is available at http://www2.fdic.gov/qbp

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