The Federal Deposit Insurance Corporation's latest "Quarterly Banking Profile" says, "Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $28.8 billion in the second quarter of 2011, a $7.9 billion improvement from the $20.9 billion in net income the industry reported in the second quarter of 2010. This is the eighth consecutive quarter that earnings registered a year-over-year increase. As has been the case in each of the last seven quarters, lower provisions for loan losses were responsible for most of the year-over-year improvement in earnings." FDIC Acting Chairman Martin Gruenberg comments, "Banks have continued to make gradual but steady progress in recovering from the financial market turmoil and severe recession that unfolded from 2007 through 2009.... [T]his trend has expanded to include a growing proportion of insured institutions."
The FDIC writes, "Net operating revenue (net interest income plus total noninterest income) was lower than a year ago for the second quarter in a row, as net interest income declined by $1.9 billion (1.7 percent) and noninterest income fell by $1.1 billion (1.9 percent). The decline in net interest income was caused by lower asset yields at a number of the largest banks, reflecting growth in low-yielding balances at Federal Reserve banks. Net interest margins (NIMs) were lower than a year earlier at nine of the ten largest banks. Industry-wide, half of all banks (50.7 percent) had NIM declines, although only 39.4 percent reported declines in net interest income. The average NIM in the second quarter was 3.61 percent, down from 3.76 percent in second quarter 2010."
Under the section, "Large Noninterest-bearing Deposits Register Strong Growth," the FDIC quarterly says, "Total deposits increased by $163.1 billion (1.7 percent) in the second quarter. Deposits in domestic offices rose by $234.4 billion (2.9 percent), while foreign office deposits fell by $71.3 billion (4.4 percent). Noninterest-bearing domestic deposits increased by $165.6 billion (9.5 percent), and domestic deposits in accounts with balances greater than $250,000 rose by $279.6 billion (8.8 percent). Balances in large (greater than $250,000) noninterest-bearing transaction accounts that have temporary unlimited deposit insurance coverage through 2012 increased by $161.8 billion (15.4 percent). Most of the growth in large denomination deposits occurred at the largest banks."
It adds, "The 19 banks with assets greater than $100 billion reported an aggregate increase of $241.4 billion (12.6 percent) in domestic deposits with balances greater than $250,000 during the quarter. More than half of this increase ($127.7 billion) consisted of growth in large noninterest-bearing transaction accounts with unlimited deposit insurance coverage. All other insured institutions reported an aggregate increase of $35.1 billion (2.8 percent) in large-balance deposits. Time deposits declined for the 10th quarter in a row, falling by $41.3 billion (2.1 percent). Fed funds purchased and securities sold under repurchase agreements fell by $24.6 billion (4.6 percent). Advances from Federal Home Loan Banks declined by $16.9 billion (4.7 percent), and other secured borrowings fell by $30 billion (8.1 percent)."
The Quarterly adds, "Insured institutions had $1.9 trillion in domestic noninterest-bearing deposits on June 30, 2011, 64 percent ($1.2 trillion) of which was in noninterestbearing transaction accounts larger than $250,000. Of this total, $1.0 trillion exceeded the basic coverage limit of $250,000 per account, but was fully insured by the temporary unlimited coverage. Banks with under $10 billion in assets funded 3.6 percent of their assets with deposits receiving the temporary unlimited coverage, while these deposits funded 8.8 percent of assets at banks with more than $10 billion in assets. The total amount receiving temporary unlimited coverage increased by 17.2 percent ($153.8 billion) during the second quarter, following growth of 4.1 percent ($34.8 billion) during the first quarter."
A footnote explains, "The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), enacted on July 21, 2010, provides temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts from December 31, 2010, through December 31, 2012, regardless of the balance in the account and the ownership capacity of the funds. The unlimited coverage is available to all depositors, including consumers, businesses, and government entities. The coverage is separate from, and in addition to, the insurance coverage provided for a depositor's other accounts held at an FDIC-insured bank."
