FDIC 2010 Third Quarter Banking Profile

Today, the FDIC released its latest quarterly banking profile, which highlighted an increase in earnings for FDIC-insured institutions. For the third quarter of 2010, commercial banks and savings institutions insured by the FDIC reported aggregate profits of $14.5 billion compared to only $2 billion in the year ago period.

However, the results did represent a decline from the previous quarter when aggregate profits measured $21.6 billion. The current quarter numbers were hindered by a $10.4 billion write down recorded by Bank of America.

Loan loss reserves fell for the first time since the fourth quarter of 2006. The industry’s total reserves declined by $9.6 billion or 3.8%. This was driven by reductions from large banks, while nearly 60% of all institutions actually increased loan loss reserves.

Improvement was noted for the Deposit Insurance Fund (DIF) balance, although it still remains at a deficit. The DIF improved from negative $15.2 billion to negative $8 billion for the third quarter, due to assessment revenues and a reduction in the contingent loss reserve.

FDIC Chairman Sheila Bair stated, “The industry continues making progress in recovering from the financial crisis. Credit performance has been improving, and we remain cautiously optimistic about the outlook.”

Despite the improvements, there were signs of continued weakness, particularly for smaller banks.

While nearly two thirds of institutions showed improvements in their net income from a year ago, 18.9% of institutions reported a net loss. Additionally, the number of banks on the Problem Bank List expanded by 31 to 860. The increase comes even as 41 banks failed during the previous quarter. A total of 127 banks have failed for the year to date.

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