FDIC Banks Earn Big, But Still Lend Little
Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $2.8 billion in the third quarter of 2009, but loan balances declined by the largest percentage since quarterly reporting began in 1984. Quarterly earnings were more than three times the $879 million the industry earned a year earlier and represented an improvement over the industry's $4.3 billion net loss in the second quarter of 2009. More than 26 percent of all insured institutions reported a net loss in the latest quarter, up slightly from nearly 25 percent a year earlier.
"Today's report shows that, while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance," said FDIC Chairman Sheila Bair.
With regard to the decline in loan balances, Bair said, "There is no question that credit availability is an important issue for the economic recovery. We need to see banks making more loans to their business customers. This is especially true for small businesses that rely on FDIC-insured institutions to provide over 60 percent of the credit they use."
Provisions for loan losses totaled $62.5 billion in the quarter, an increase of $11.3 billion (22.2 percent) over the third quarter of 2008. Net interest income was $4.6 billion (4.8 percent) higher than a year earlier, noninterest income increased by $4 billion (6.8 percent), realized losses on securities and other assets were $3.8 billion lower and noninterest expenses declined by $1.6 billion (1.7 percent).
The FDIC noted that indicators of asset quality continued to deteriorate during the third quarter, however, the pace of deterioration slowed for the second consecutive quarter. Both the quarterly net charge-off rate and the percentage of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) rose to the highest levels in the 26 years that insured institutions have reported these data. Insured institutions charged off $50.8 billion in uncollectible loans during the quarter, up from $28.1 billion a year earlier, and noncurrent loans and leases increased by $34.7 billion during the third quarter. At the end of September, noncurrent loans and leases totaled $366.6 billion, or 4.94 percent of the industry's total loans and leases.