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Nation's banks continue robust recovery as lending picks up

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U.S. banks' earnings rose 5.2 percent in the April-June quarter from a year earlier, as banks reduced their expenses and lending marked its fastest pace since 2007.

The data issued Wednesday by the Federal Deposit Insurance Corp. showed a robust picture as the banking industry continues to recover from the financial crisis that struck six years ago. The improving economy has brought greater demand for loans and stepped-up lending.

The FDIC reported that U.S. banks earned $40.2 billion in the second quarter of this year, up from $38.2 billion in the same period in 2013.

The number of banks on the FDIC's problem list fell to 354 in the second quarter, the lowest number in more than five years and down from 411 in the January-March period.

The FDIC said 57.5 percent of banks reported an increase in profit in the second quarter from a year earlier, and only 6.8 percent of banks were unprofitable — down from 8.4 percent a year earlier.

Banks reduced expenses by setting aside less in reserves to cover bad loans and making smaller payrolls, the report said.

FDIC Chairman Martin Gruenberg said the industry continued to improve in the latest quarter. However, he said, "challenges remain" for banks as their revenue is chipped away by lower income from mortgage business.

Total loan balances rose by $178.5 billion, or 2.3 percent, from the first quarter, led by increases in commercial and industrial loans, home mortgages, credit card lending and auto loans. The 2.3 percent increase was the biggest quarterly rise since the fourth quarter of 2007, about a year before the financial crisis struck.

Demand for loans has grown as the economy has improved, new jobs have been added over the past six months and business confidence has rebounded. Improved prospects for repayment of loans have prompted bankers to extend more credit.

"The improvement in loan balances has now been sustained over time," Gruenberg said, adding that the key will be for the trend to continue.

Community banks earned $4.9 billion in the second quarter, up 3.5 percent from a year earlier.

Banks with assets exceeding $10 billion continued to drive the bulk of the earnings growth in the May-June period. While they make up just 1.6 percent of U.S. banks, they accounted for about 82 percent of industry earnings.

Those banks include Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. Most of them have recovered with help from federal bailout money during the financial crisis and record-low borrowing rates.

Last year, the number of bank failures fell to 24. That is still more than normal. In a strong economy, an average of four or five banks close annually. But failures were down sharply from 51 in 2012, 92 in 2011 and 157 in 2010 — the most in one year since the height of the savings and loan crisis in 1992.

So far this year, 14 banks have failed. Twenty had been shuttered by this time last year.

The decline in bank failures has allowed the deposit insurance fund to strengthen. The fund, which turned from deficit to positive in the second quarter of 2011, had a $51.1 billion balance at the end of June, according to the FDIC. That compares with $48.9 billion as of March 31.

The FDIC, created during the Great Depression to ensure bank deposits, monitors and examines the financial condition of U.S. banks.

The agency guarantees bank deposits up to $250,000 per account. Apart from its deposit insurance fund, the FDIC also has tens of billions of dollars in reserves.
 

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  1. What became of this project? Anyone know?

  2. Scott, could you post an enlarged photo of the exterior of the building? This will be a great addition to Walnut Street. This area will only continue to develop with additions like this. Also, please give us more updates on the "Cultural Trail light" expansion. Also a great move for the city, as long as there is maintenance money set aside.

  3. Great story IBJ! Citizens don't have a real sense of the financial magnitude of supporting Indy's sports and tourism sector. The CIB was a brilliant idea for creating a highly integrated public-private partnership to support this sector from the economic activity it generates. Unfortunately, most folks think the benefits of that economic activity accrue directly to the City budget, and it doesn't. So though the CIB is facing lean times (covering its costs while maintaining minimally acceptable reserves), the City is operating with deficit - less tax revenue than expenses each year - with a very fragile reserve balance. That's why it's so challenging for the City to fund basic needs or new intitatives (e.g. pre-k education; new jail), and some credit rating agencies have downgraded Indy from it's past stellar AAA status. More reporting on City finances would be welcomed.

  4. Sure, I'll admit that it bugs me to see that the IBJ.COM censors it's blog posts almost as much as the D of I does when someone points out the falsehoods and fabrications. _____But I think it bothers me almost as much that Captain/Defender/Disciple get his yanked too. You see, those of us with a sense of integrity, humanity, compassion, and a need for fact based opinion WANT to see all of his screeds posted. It makes our point so much better than we can do it ourselves.

  5. We're conflating two very different topics. Voter fraud is a myth and excessive gun violence is all too real. I just hope rational gunowners decide to stop being shouted down by the, well, let's call them "less rational" ones.

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