Banks Post Record $42.2B in Profits; Problem Bank List Shrinks

FDIC-insured banks earned a record $42.2 billion in profits in the second quarter of this year, up 22.6 percent, or $7.8 billion, from $34.4 billion a year ago. The increase marks the 16th month-in-a-row earnings rose year-over-year.

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""FDIC"":http://www.fdic.gov/ credited a rise in noninterest income, lower noninterest expenses, and reduced loan loss expenses as the main driving forces behind the significant annual improvement.

Overall, 53.8 percent of the nearly 7,000 insured banks posted yearly increases in earnings.

As profits rose, the list of problem banks shrunk to 533 compared to 612 a year ago. The tally for problem banks is also down significantly from the record high of 888.

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Assets at problem banks were down to $192.5 billion in the second quarter compared to $213.3 billion a year ago.

Banks failed at a much slower rate this year, with 20 bank failures so far this year compared to 40 bank closings during the same period in 2012.

The FDIC report also showed reserves for loan losses were down on a quarterly basis for the 13th straight quarter. In the second quarter, total reserves decreased $6.4 billion, or 4.1 percent.

The FDIC also reported banks charged off $14.2 billion in uncollectible debt in the second quarter, down 30.7 percent from a year ago.

Loan balances overall rose by $73.8 billion, 1.8 percent, with commercial and industrial loan balances up by $30.4 billion, or 2 percent. However, loan balances for one-to-four unit residential properties decreased $22.1 billion, or 1.2 percent, while home equity loans fell by $9.8 billion, or 1.8 percent.

The balance for past due first lien mortgages fell by $13.3 billion, or 8.2 percent, while unpaid real estate construction and land loans decreased by $2.8 billion, or 19.1 percent.

FDIC's report also found banks employed 2,097,292 full-time workers in the second quarter, down 5,544 from the first quarter, and down 10,900 from a year ago.