FDIC Reports Profit of $35.3B, Problem Institutions Decline

FDIC-insured banks and savings institutions reported a total profit of $35.3 billion in the first quarter of 2012, a $6.6 billion increase from the $28.8 billion net income reported in the 2011 first quarter, according to the ""FDIC"":http://www.fdic.gov/.

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The increase marks the 11th consecutive quarter of year-over-year gains.

The FDIC also ""reported"":http://www2.fdic.gov/qbp/ number of ""problem"" institutions dropped to the smallest number since year-end 2009.

""Problem"" institutions declined from 813 to 772, with total assets of ""problem"" institutions shrinking from $319 billion to $292 billion.

Sixteen insured institutions failed during the first quarter, which is the smallest number of reported failures in a quarter since the fourth quarter of 2008, when there were 12 bank closings.

""The condition of the industry continues to gradually improve. Insured institutions have made steady progress in shedding bad loans, bolstering net worth, and increasing profitability,"" said FDIC Acting Chairman Martin J. Gruenberg.

However, loan balances dropped by $56.3 billion (0.8 percent) after three consecutive quarterly increases, news Gruenberg said to take in with caution before drawing conclusions since it's just from one quarter.

About 67.5 percent of all institutions reported improvements in their quarterly net income from a year ago, and less institutions reported net losses, which fell to 10.3 percent in the first quarter from 15.7 percent a year ago.

The average return on assets (ROA) rose to 1.02 percent from 0.86 percent a year ago.
Lower provisions for loan losses and higher noninterest income were said to attribute to the yearly improvements in earnings.

First-quarter loss provisions equaled $14.3 billion, decreasing from the $20.9 billion insured institutions set aside for losses a year ago.

The Deposit Insurance Fund (DIF) balance, which is the net worth of the fund, rose to $15.3 billion on March 31 from $11.8 billion at the end of 2011. Assessment revenue and fewer bank failures helped bolster the fund balance.

Closed-end 1-4 family residential real estate loans decreased by $19.2 billion, while home equity lines of credit dropped by $13.1 billion.
Balances in construction and development loans also decreased, shrinking by $11.7 billion. On the other hand, loans to commercial and industrial borrowers grew by $27.3 billion.