Third-quarter net income for the U.S. banking industry dropped to its lowest level in four years, the FDIC reported. The total earnings for federally insured banks of $28.7 billion marks a 24.7% decline from the third quarter of 2006 and is the first time since the first quarter of 2003 that earnings dropped below $30 billion. The industry’s return on assets was 0.92%, the lowest since the fourth quarter of 1992.
The earnings decline was largely blamed on increases in loan-loss provisions and declines in noninterest income. Banks set aside $16.6 billion in loan-loss provisions in the quarter, the most since the second quarter of 1987 and a 122% increase from the prior-year period.
The complete Quarterly Banking Profile is available at www2.fdic.gov/qbp/index.asp.
Earnings at the nation’s thrifts fell 84% in the third quarter of 2007 from the prior-year period, according to a report by the Office of Thrift Supervision (OTS). The industry’s net income of $704 million was down from $4.29 billion in the third quarter of 2006. Return on assets was 0.18% in the quarter, down from 1.08% in the third quarter of 2006. The earnings decline was attributed primarily to sharp increases in loan-loss provisions and losses on sales of loans. Thrifts heavily engaged in originating mortgages for sale in secondary markets bore the brunt of the decline.
Troubled assets, which include noncurrent loans and repossessed assets, were 1.19% of assets at the end of the quarter, up from 0.95% in the second quarter of 2007 and 0.64% in the prior-year period. Loan-loss provisions increased to 0.92% of average assets in the third quarter, compared to 0.38% in the previous quarter and 0.22% a year ago.
Thrifts originated about 30% of all 1–4 family loans nationwide in the third quarter. The OTS supervised 831 thrifts at the end of the quarter with $1.57 trillion in assets.
The earnings report and links to thrift industry highlights, charts and selected indicators are available at www.ots.treas.gov.