NEW YORK (
) -- The U.S. banking industry earned $14.5 billion during the third quarter, declining from $21.6 billion the previous quarter but up from $2 billion the previous year, according to the
Federal Deposit Insurance Corp.
The agency said Tuesday that reduced provisions for loan loss reserves were the "key factor" in the year-over-year earnings improvement.
recently identified holding companies with high levels of reserve coverage that are likely to boost earnings over coming quarters.
The FDIC said that absent a "$10.1 billion quarterly net loss at one large institution that had a $10.4 billion charge for goodwill impairment," the industry's third-quarter earnings "would have would have represented a three-year high," and that 63% of banks and thrifts had reported year-over-year earnings improvement and that "fewer than one in five (18.9 percent) was unprofitable."
The bank with the $10.1 billion third-quarter loss from a goodwill impairment charge was
FIA Card Services, NA
, which is a subsidiary of
Bank of America
The bank with the largest year-over-year decline in loan loss provision during the third quarter was
Fifth Third Bank
of Cincinatti, Ohio, (held by
Fifth Third Bancorp
, which reported a provision of $455 million, declining from $2.1 billion in the third quarter of 2009. The bank's net income increased to $245 million during the third quarter from a net loss of $473.4 million a year earlier.
Chase Bank, USA
(a subsidiary of
reported a third-quarter provision for loan losses of $1.4 billion, declining from $2.5 billion a year earlier. The bank had the largest year-over-year increase in earnings, to $903.7 million during the third quarter, from a loss of $180.3 million a year earlier.
The bank with the third-largest year-over-year earnings improvement was
of Cleveland, which is a subsidiary of
. KeyBank reported third-quarter net income of $216.1 million, improving from a net loss of $344.9 million a year earlier. The bank's provision for loan loss reserves declined to $94.2 million from $678 million a year earlier. KeyCorp was featured among
Credit Quality Continues to Improve
The FDIC said that for the second straight quarter, net charge-offs - loan losses less recoveries - declined from the previous quarter and year-over year. Third-quarter net charge-offs totaled $42.9 billion compared to $49.1 billion the previous quarter and $50.9 billion during the third quarter of 2009. The annualized ratio of net charge-offs to total loans and leases for the third quarter was 2.32%, declining from 2.64% in the second quarter and 2.71% in the third quarter of 2009.
Overall asset quality improved from the previous quarter, as the ratio of noncurrent assets - including loans past due 90 days, nonaccrual loans and repossessed assets - to current assets was 3.25% as of September 30, declining from 3.31% in June, but still above the 3.07% noncurrent assets ratio in September 2009.
Balance Sheet Growth
The FDIC said that the third quarter brought "first real growth in industry assets since fourth quarter 2008," as interest-bearing assets increased by $154.8 billion, or 1.4%, from the previous quarter, as securities portfolios and trading assets grew. Loan balances declined for the eight-straight quarter, but only by 0.1% from the previous quarter.
Problem Banks Increase
The FDIC said its "Problem List" of troubled banks increased to 860 from 829 the previous quarter, despite 41 bank and thrift failures during the third quarter and 30 others being merged into other institutions. The agency doesn't disclose which institutions are on the Problem List.
has published a smaller
of institutions that were
per ordinary regulatory guidelines, as of September 30.
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.