Banks Making Money

Source: FDIC

In 2002: IV Q, FDIC-insured commercial banks and savings institutions reported net income of $25.6 billion, representing a 16% increase from the fourth quarter in 2001. This can be credited to a decrease in the credit loss expenses, which are reported to be lower than a year ago. In addition, lower interest rates helped institutions realize increased gains on sales of securities. Gains on asset sales and increased service charges lifted non-interest income, and strong growth in interest-earning assets boosted net interest income.

The institutions had a net income increase by $2.5 billion, a 3.7 percent increase from the previous year. Margin levels for smaller banks and thrifts were affected by short-term interest rates that were falling. This was mainly due because their liabilities are less interest-sensitive than their assets in the current low-rate environment.

Total assets increased slightly by $126.8 billion in the fourth quarter, to $8.4 trillion. To supplement this growth there was also an increase in loans by $103.3 billion, while securities grew by $43.2 billion.

Total loans for these institutions increased by $103.3 billion (2.1 percent), while securities grew by $43.2 billion (2.7 percent). Much of the strong growth occurred in areas such as real estate loans. The industries portfolio includes residential mortgage loans increased by $67.1 billion, while commercial real estate loans grew by $16.9 billion, and home equity loans were up by $16.8 billion. In addition, credit card loans increased by 3.4 percent, while other consumer loans rose by 1.9 percent. During 2002 the reported amount of long-term assets, with remaining maturities of 5 years or longer, increased from 20.9 percent to 21.2 percent during the quarter. This is the highest percentage reported by the banking industry.

The total deposit growth reaches a four year high in the fourth quarter of 2002. Total deposits increased by $176.8 billion during the fourth quarter, the largest quarterly increase since the fourth quarter of 1998. Insured institutions with demand deposits increasing by $25.2 billion, savings deposits grew by $78 billion.

Those institutions posing risk of failure declined during the fourth quarter. The number of institutions on the FDIC's "Problem List" declined from 146 to 136, and assets of "problem" institutions fell from $42 billion to $39 billion. The "Problem List" began 2002 with 114 institutions with combined assets of $40 billion. There were 28 new charters added, while there were 84 that were absorbed by mergers. There were only two-reported bank failures during this period. A total of 94 new charters were added in 2002, while 336 institutions were absorbed by mergers, and 11 institutions failed.

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