On Tuesday, the FDIC released its Quarterly Banking Profile for the second quarter of 2010. At the press conference for the release, FDIC Chairman Sheila C. Bair stated that “[t]his is the best quarterly profit for the banking sector in almost three years” and that “[n]early two out of every three banks are reporting better year-over-year earnings.” While Chairman Bair acknowledged that “the industry still faces challenges” and “[e]arnings remain low by historical standards” she also noted that “the banking sector is gaining strength” and “[e]arnings have grown, and most asset quality indicators are moving in the right direction.”

Highlights in the Quarterly Banking Profile included:

  • FDIC-insured commercial banks and savings institutions reported aggregate profit of $21.6 billion in the second quarter, a substantial increase from the $4.4 billion loss reported for the corresponding quarter last year.
  • Net charge offs declined year-over-year for the first time since fourth quarter 2006.
  • Noncurrent loans and leases decreased by $19.6 billion during the quarter, the first quarterly decline since first quarter 2006.
  • Total loan-loss reserves decreased by $11.8 billion, marking the first decrease since fourth quarter 2006. However, this decrease mostly resulted from several large banks reducing their reserves, as almost two-thirds of all banks increased their reserves during the quarter.
  • There were 829 institutions on the FDIC’s “Problem List,” up from 775 in the first quarter. However, the total assets of “problem” institutions declined during the quarter from $431 billion to $403 billion.
  • Forty-five insured institutions failed during the second quarter.
  • The Deposit Insurance Fund continued to improve, increasing from negative $20.7 billion during the first quarter to negative $15.2 billion during the second quarter.
  • The FDIC’s liquid resources decreased from $63 billion to $44 billion at the end of the second quarter.