by Calculated Risk on 8/28/2012 02:50:00 PM

The FDIC released the Quarterly Banking Profile for Q2 today.

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $34.5 billion in the second quarter of 2012, a $5.9 billion improvement from the $28.5 billion in profits the industry reported in the second quarter of 2011. This is the 12th consecutive quarter that earnings have registered a year-over-year increase. Lower provisions for loan losses and higher gains on sales of loans and other assets accounted for most of the year-over-year improvement in earnings. Also noteworthy was an increase in loan balances for the fourth time in the last five quarters.

The FDIC reported the number of problem banks declined:

The number of "problem" institutions fell for the fifth quarter in a row. The number of "problem" institutions declined from 772 to 732. This is the smallest number of "problem" banks since year-end 2009. Total assets of "problem" institutions declined from $292 billion to $282 billion. Fifteen insured institutions failed during the second quarter. This is the smallest number of failures in a quarter since the fourth quarter of 2008, when there were 12. Another nine banks have failed so far in the third quarter, bringing the total for the year to date to 40. At this point last year, there had been 68 failures.

Click on graph for larger image.

And the dollar value of Real Estate Owned (REOs, foreclosure houses) declined from $11.1 billion in Q1 to $9.5 billion in Q2. This is the lowest level of REOs since Q1 2008.

This graph shows the dollar value of Residential REO for FDIC insured institutions. Note: The FDIC reports the dollar value and not the total number of REOs.

The next graph is from Tom Lawler and shows the total REO for Fannie, Freddie, FHA, Private Label (PLS) and FDIC insured institutions. This isn't all the REO, as Lawler noted before, it "excludes non-FHA government REO (VA, USDA, etc.), credit unions, finance companies, non-FDIC-insured banks and thrifts", but it is probably over 90%.

Some comments from Tom Lawler:

On the SF REO front, the “carrying value” of 1-4 family REO properties of FDIC-insured institutions at the end of last quarter was $9.5302 billion, down from $11.0819 billion at the end of the first quarter and $12.0895 billion a year ago. The FDIC does not report (or even collect) data on the number of 1-4 family REO properties held by FDIC-insured institutions, which is annoying.

Assuming that the carrying value of SF REO properties held by FDIC-insured institutions is 50% higher than the average of Fannie and Freddie, here is a chart showing trends in the SF REO inventories of Fannie, Freddie, FHA, private-label securities (from Barclays Capital), and FDIC-insured institutions.

Combined REO inventories last quarter were down about 21% from a year ago, and were at the lowest level since 2007.