FDIC-insured institutions push 3Q earnings to $40B

Federal Deposit Insurance Corp.-insured commercial banks and savings institutions reported aggregate third-quarter net income of $40.4 billion, a 5.1 percent increase from a year earlier.

The quarterly results for the 6,270 institutions were largely affected by a $3.2 billion decrease in noninterest expenses. Litigation expenses at large banks were down by $2.7 billion compared to a year earlier, according to a news release.

"Most performance indicators continued to show improvement," FDIC Chairman Martin Gruenberg said in the release. "Earnings were up from a year ago, loan portfolios grew, asset quality improved, the number of problem banks declined and only one insured institution failed.”

Third-quarter financial notes
    •    The FDIC’s problem list - indicating institutions with weak capital positions that may lead to failure - dropped to 203 from 228 a year earlier, representing the smallest number of problem banks in nearly seven years.
    •    Total loans and lease balances rose 1.1 percent during the quarter.
    •    Net operating revenue of $172 billion was nearly flat from last year.

While the banking industry moved forward in the third quarter, Gruenberg tempered the results by saying that growing interest rates and credit risks deserve attention.

"History tells us that it is during this phase of the credit cycle when lending decisions are made that could lead to future losses,” he said in the release. “Timely attention by banks to address these growing risks will benefit banks and contribute to the sustainability of the current economic expansion."