Also This Week: Improving Asset Quality Helps Drive $42.2 Bil. in Record Bank Profits
WNC, a national investor in real estate and community development initiatives, closed a $150.5 million institutional low-income housing tax credit (LIHTC) fund. The fund, named WNC Institutional Tax Credit Fund 38 LP, will acquire 24 properties nationally ina mix of family and senior properties, including 15 new construction projects and nine slated for rehabilitation.
The properties expected to comprise Fund 38 will deliver more than 2,100 units of affordable housing in 18 states, increasing the company’s acquisition portfolio to nearly 70,000 units nationwide.
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“This is the second largest fund in WNC’s 42-year history, as well as the second national multi-investor fund this fiscal year, representing more than $275 million,” said Michael Gaber, executive vice president and COO of WNC. “WNC Institutional Tax Credit Fund 38 welcomes four new banks to our LIHTC funds, along with six existing insurance company and bank investors to our latest fund.”
“There is a significant shortage of affordable housing options available to those individuals and families who cannot afford traditional housing,” Gaber added.
Improving Asset Quality Helps Drive $42.2 Billion in Record Bank Profits
Commercial banks and savings institutions reported aggregate net income of $42.2 billion in the second quarter of 2013, a $7.8 billion (22.6%) increase from the $34.4 billion in profits that the industry reported a year earlier. This is the 16th consecutive quarter that earnings have registered a year-over-year increase.
"The trends we have seen in recent quarters continued in the second quarter,” said FDIC Chairman Martin J. Gruenberg. “Asset quality continues to recover, loan balances are trending up, fewer institutions are unprofitable, the number of problem banks is down, and the number of failures is significantly below levels of a year ago.”
“However, industry revenue growth remains weak, reflecting narrow margins and modest loan growth,” Gruenberg added. “And the current interest rate environment creates an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention. Nonetheless, overall these results show a continuation of the recovery in the banking industry."
The average return on assets (ROA), a basic yardstick of profitability, rose to 1.17% from 0.99% a year ago. This is the highest quarterly ROA for the industry since the 1.22% posted in the second quarter of 2007.
Net loan and lease charge-offs totaled $14.2 billion, a $6.3 billion (30.7%) year-over-year decline. This is the smallest quarterly total since third quarter 2007. While charge-offs were down across all major loan categories, the overall decline was led by residential real estate loans. Charge-offs of home equity lines of credit were $1.1 billion (41.7%) below the level of a year ago, while charge-offs of other loans secured by 1-to-4 family residential properties were $1.4 billion (32.1%) lower.
Smaller reductions occurred in charge-offs of real estate construction and land loans (down $772 million, or 67%), real estate loans secured by nonfarm nonresidential properties (down $775 million, or 52.5%),
Noncurrent loan levels also showed improvement across all major loan categories. The amount of loans and leases that were 90 days or more past due or in nonaccrual status fell by $21.7 billion (8.3%) during the second quarter, marking the 13th consecutive quarter that noncurrent balances have declined.
Noncurrent real estate loans secured by nonfarm nonresidential properties fell by $2.5 billion (8.8%).
Total loans and leases increased by $73.8 billion (1%), as real estate loans secured by nonfarm nonresidential real estate properties rose by $11.1 billion (1%).
The number of FDIC-insured institutions declined to 6,940 at mid-year, from 7,019 at the end of the first quarter. During the second quarter, 62 insured institutions were merged into other institutions and 12 failed.
The number of institutions on the FDIC’s “Problem List” declined for a ninth consecutive quarter, from 612 to 553. Total assets of “problem” banks fell from $213.3 billion to $192.5 billion. Insured institutions reported 2,097,292 full-time equivalent employees in the second quarter, down 5,544 from the previous quarter, and 10,900 fewer than in second quarter 2012.
Capital Markets Round-Up
The Teachers’ Retirement System of Illinois approved a fiscal year 2014 tactical investment plan for its $4.6 billion real estate portfolio. The plan calls for $600 million in new real estate investments within the year.
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