Commercial banks funded $106 billion of retail home mortgages in 2Q, a 21% decline from the prior period, according to new figures released by the Federal Deposit Insurance Corp.
Despite the slowdown in residential finance, the banking sector earned $28.8 billion in the second quarter thanks to lower provisions for loan losses. Net income was nearly 38% higher than a year earlier, registering the eighth straight quarter with year-over-year earnings growth.
Nearly 60% of all institutions had better quarterly earnings than a year earlier.
FDIC collected 2Q origination figures from 802 commercial and savings banks. These depositories have $1 billion or more in assets or they originated more than $10 million of residential loans in the quarter. (The FDIC figures do not include originations by federally chartered thrifts.)
The 802 institutions sold $292.3 billion of 1-4 family loans into the secondary market in the second quarter, down from $424.9 billion in the previous quarter.
New FDIC loan performance data shows that all insured banks and thrifts held $1.8 trillion in single-family loans on their balance sheets as of June 30 and 9.25% of the loans are non-current -- 90 days or more past due or considered uncollectible. A year ago the non-current rate was 9.8%.
"The recovery in industry profitability is based on improvements in the credit quality of banks' loan portfolios," said FDIC acting chairman Martin Gruenberg at a press conference Tuesday morning.
At the depths of the financial crisis, expenses for bad loans absorbed more than half of all bank revenues, Gruenberg pointed out. In the second quarter, provisions for loan losses represented only 11.5% of revenues.
The acting FDIC chairman also noted that the Deposit Insurance Fund is in the black again due to the decline in failing banks. With the fund receiving assessment income and by lowering its projections for future failures, the DIF registered its first positive balance since June 30, 2009. The balance stood at $3.9 billion at the end of the second quarter. The ratio of insurance reserves to insured deposits came in at 0.06%.
