Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) continue to report healthy earnings overall, with aggregate net income of $40.2 billion in the second quarter of 2014, up $2.0 billion (5.3 percent) from a year earlier.
And lending has picked up to highs not seen since the financial crisis of 2007-2008.
Total loan and lease balances rose by $178.5 billion (2.3 percent) in the second quarter to $8.1 trillion. This is the largest quarterly increase since the fourth quarter of 2007.
Commercial and industrial loans increased by $49.9 billion (3.1 percent), residential mortgage loans rose by $22.7 billion (1.2 percent), credit card balances were up by $20.0 billion (3.0 percent), and auto loans grew by $10.9 billion (3.0 percent).
Over the past 12 months, loan and lease balances increased by 4.9 percent, the highest 12-month growth rate since before the financial crisis.
Nonetheless, the FDIC reported that the increase in earnings was mainly attributable to a $1.9 billion (22.4 percent) decline in loan-loss provisions and a $1.5 billion (1.4 percent) decline in noninterest expenses.
“We saw further improvement in the banking industry during the second quarter,” FDIC Chairman Martin J. Gruenberg said. “Net income was up, asset quality improved, loan balances grew at their fastest pace since 2007, and loan growth was broad-based across institutions and loan types. We also saw a large decline in the number of problem banks.”
But Gruenberg added that challenges remain for the banking industry.
“Industry revenue has been under pressure from narrow net interest margins and lower mortgage-related income,” the FDIC chairman said. “Institutions have been extending asset maturities, which is raising concerns about interest-rate risk. And banks have been increasing higher-risk loans to leveraged commercial borrowers. These issues are matters of ongoing supervisory attention. Nonetheless, on balance, results from the second quarter reflect a stronger banking industry and stronger community banks.”