by Calculated Risk on 2/27/2013 03:39:00 PM

From economist Tom Lawler:

Yesterday the FDIC released its “Quarterly Banking Profile” for Q4/2012. Some of the “headline highlights” from the report, which reflects the activity at and performance of FDIC-insured financial institutions, were:

“Net Income Is More Than a Third Higher Than in Fourth Quarter 2011” despite the fact that “Banks See (Net Interest) Margins Erode,” as net income was “(bolstered by higher noninterest income and lower provisions for loan losses.” The jump in noninterest income was driven “primarily by higher gains on loan sales (up $2.4 billion, or 132.4 percent, over fourth quarter 2011), increased trading revenue (up $1.9 billion, or 75.3 percent), and reduced losses on sales of foreclosed property (down $1.2 billion, or 72 percent).” The higher gains on loans sales were driven by gains on sales of mortgages – partly reflecting higher origination volumes, but mainly reflecting extraordinarily large mortgage origination margins, which in turn partly reflected the unintended consequences of current government policy.

According to the report, the percent of loans and leases that were “noncurrent” last quarter fell to 3.60% -- the lowest rate since the end of 2008 – from 3.68% in the previous quarter and 4.19% in the fourth quarter of 2011. The % of loans secured by one-to-four family residential properties that were noncurrent last quarter was actually up from the fourth quarter of 2011, partly reflecting higher default rates on junior mortgage loans.

% of Loans & Leases Noncurrent, FDIC-Insured Financial Institutions
	2012:Q4	2012:Q3	2012:Q2	2012:Q1	2011:Q4
Total Loans & Leases	3.60%	3.86%	3.90%	4.11%	4.19%
Loans Secured by 1-4 Family Res. Mortgages	7.82%	8.07%	7.80%	7.84%	7.70%
Closed-End First Lien 1-4 Family Residential Mortgages	9.49%	9.88%	9.75%	9.87%	10.00%
Closed-End 2nd Lien 1-4 Family Residential Mortgages	5.09%	5.47%	3.86%	3.76%	3.50%
Home Equity Lines of Credit	2.88%	2.88%	2.62%	2.65%	1.83%
Other Loans & Leases	1.62%	1.84%	2.01%	2.28%	2.44%

Click on graph for larger image.

On the REO front, the report showed that the carrying value of one-to-four family REO properties at FDIC institutions declined to $8.3375 billion at the end of December, down from $8.7663 billion at then end of September and $11.6376 billion at the end of 2011.