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FDIC Institutions See Record Earnings in Q1, Problem List Shrinks

Together, commercial banks and savings institutions insured by the FDIC earned record profits in the first quarter, while the number of ""problem"" banks continued to decline.


According to the ""FDIC"":http://www.fdic.gov/, net income for FDIC-insured institutions reached an an all-time high of $40.3 billion in Q1, up by 15.8 percent from last year. The increase marks the 15th straight quarter earnings improved year-over-year.

The agency also reported half of the 7.019 insured institutions pulled in higher profits compared to the year before, while 90 percent of institutions recorded positive net income for the quarter.

FDIC's list of ""problem"" banks was reduced for the eighth straight quarter, decreasing to 612. Two years ago, 888 banks were on the list.

At the same time, the FDIC saw just four of its institutions collapse in the first quarter, which is the smallest number since the second quarter of 2008 when two institutions failed.


So far his year, regulators closed 13 FDIC-insured institutions, down significantly from 24 during the same period in 2012.

""Today's report shows further progress in the recovery that has been underway in the banking industry for more than three years. We saw improvement in asset quality indicators over the quarter, a continued increase in the number of profitable institutions, and further declines in the number of problem banks and bank failures,"" said FDIC Chairman Martin J. Gruenberg. ""However, tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention.""

Meanwhile, noncurrent balances, which stood at $261.2 billion in Q1, shrank to the lowest level since 2008. According to the FDIC, the amount of loans and leases that were 90 days or more past due dropped by $15.7 billion, or 5.7 percent, in Q1. Residential loans drove the decrease, with noncurrent balances in that category falling by $8.7 billion, or 5 percent.

Overall, loan losses in the first quarter totaled $16 billion, the smallest quarterly total since Q3 2007, the FDIC reported. Residential loans saw the greatest improvement in charge-off levels, which fell by $2 billion, or 39.1 percent, compared to a year ago, while charge-offs for home equity lines fell by $976 million, or 33.4 percent.

Loan balances experienced a seasonal decline, falling by $36.8 billion, or 0.5 percent. The agency says the decline was partly due to a $35.9 billion drop in credit card balances. Furthermore, home equity lines were down $16 billion, and residential loans fell by $18.3 billion, or 1 percent. However, multifamily residential real estate loans rose $2.7 billion, or 1.2 percent.

About Author: Esther Cho


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