Banks reported an aggregate profit of $35.3 billion in the third quarter of 2011, an $11.5 billion improvement from the $23.8 billion in net income the industry reported in the third quarter of 2010. This is the ninth consecutive quarter that earnings registered a year-over-year increase.
And also for the seventh consecutive quarter the amount of nonresidential loans on bank books declined - this time, from $1.06 trillion in the second quarter to $1.055 trillion.
Real estate construction loan balances fell for a 14th consecutive quarter, declining by $20.3 billion (7.4%) from the previous quarter.
On the bright side, bank employment continues to expand. The number of full-time bank employees has grown for six consecutive quarters from a low of 2.027 million in March 2010 to 2.11 million at the end of September.
Residential mortgage loan balances have also increased by $23.7 billion, the largest quarterly increase since third quarter 2007.
Mortgage-backed securities holdings also grew by $54.4 billion (3.5%).
"We continue to see income growth that reflects improving asset quality and lower loss provisions," said Martin J. Gruenberg, FDIC acting chairman. "U.S. banks have come a long way from the depths of the financial crisis. Bank balance sheets are stronger in a number of ways, and the industry is generally profitable, but the recovery is by no means complete."
"Ongoing distress in real estate markets and slow growth in jobs and incomes continue to pose risks to credit quality," Gruenberg added. "The U.S. economic outlook is also clouded by uncertainties in the global economy and by volatility in financial markets. So even as the banking industry recovers, the FDIC remains vigilant for new economic challenges that could lie ahead."
As was the case in each of the last eight quarters, lower provisions for loan losses were responsible for most of the year-over-year improvement in earnings. Third-quarter loss provisions totaled $18.6 billion, almost 50% less than the $35.1 billion that insured institutions set aside for losses in the third quarter of 2010.
The number of institutions on the FDIC's "Problem List" fell for the second quarter in a row. The number of "problem" institutions declined from 865 to 844. This is the second time since the third quarter of 2006 that the number of "problem" banks has fallen.
Total assets of "problem" institutions declined from $372 billion to $339 billion. Twenty-six insured institutions failed during the third quarter, four more than in the previous quarter, but 15 fewer than in the third quarter of 2010. Through the first nine months of 2011, there were 74 insured institution failures, compared to 127 failures in the same period of 2010.
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