The banking industry is now “in a much better position to support the economy through expanded lending,” said FDIC acting chairman Martin J. Gruenberg.
Commercial banks and savings institutions insured by the FDIC reported an aggregate profit of $26.3 billion in the fourth quarter of 2011, a 23 percent jump from the $21.4 billion in net income the industry reported in the fourth quarter of 2010.
As has been the case in each of the past nine quarters, lower provisions for loan losses were responsible for most of the year-over-year improvement in earnings.
A majority of all institutions (63 percent) reported improvements in their quarterly net income from a year ago. Also, the share of institutions reporting net losses for the quarter fell to 18.9 percent from 27.1 percent a year earlier.
The average return on assets (ROA), a basic yardstick of profitability, rose to 0.76 percent from 0.64 percent a year ago.
“2011 represented the second full year of improving performance by the banking system,” Gruenberg said. “Banks reported higher positive aggregate earnings, the numbers of ‘problem’ banks and failures declined, and loan balances increased in the final three quarters of the year.”
The number of institutions on the FDIC’s “Problem List” fell for the third quarter in a row, declining from 844 to 813. This is the smallest number of “problem” banks since first quarter of 2010.
Total assets of “problem” institutions declined from $339 billion to $319 billion. Eighteen insured institutions failed during the fourth quarter. For all of 2011, there were 92 insured institution failures, compared with 157 failures in 2010.
The Deposit Insurance Fund (DIF) balance continued to increase. The net worth of the fund rose to $9.2 billion as of December 31, from $7.8 billion as of September 30.
Assessment revenue from institutions and fewer expected bank failures continued to drive growth in the fund balance.
The contingent loss reserve, which covers the costs of expected failures, fell from $7.2 billion to $6.5 billion during the quarter.
Estimated insured deposits grew 3.1 percent in the fourth quarter.