FDIC-insured banks report overall profit drop in 3Q

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. reported an aggregate third-quarter net income of $36 billion, a 3.9 percent decrease from $37.5 billion profits in the same quarter last year.

The decrease represents the first time in 17 quarters - since the second quarter of 2009 - FDIC-insured institutions have reported a drop in year-to-year combined profits, according to a news release.

The FDIC reports the year-to-year earnings decrease is largely attributed to $4 billion in litigation expenses recorded at one unnamed institution. Overall noninterest expenses grew 1.9 percent to $2 billion for the quarter ended Sept. 30.

Still, the overall view was largely positive in the third quarter, according to FDIC Chairman Martin Gruenberg. Half of the 6,891 insured institutions reported year-to-year earnings growth, while half recorded declines.

"Fewer institutions reported quarterly losses, lending grew at a modest pace, credit quality continued to improve, more banks came off the 'problem list,' and fewer banks failed," Gruenberg said in the release.

Third-quarter highlights of FDIC-insured banks:

• Loan balances rose 0.9 percent to $69.7 billion.
• Six institutions failed in the third quarter, down from 12 in the same time period last year. That brings this year's failure figure up to 23, compared to 50 as of Sept. 30, 2012.
• The average net interest margin — the difference between the average yield banks earn on loans and other investments and the average cost of funding those investments — was 3.26 percent, a drop from 3.42 percent a year ago. The average margin fell to its lowest level since the 3.2 percent reported in the fourth quarter of 2006, according to the release.