U.S. Banks Turn Profit

U.S. banks had a combined profit of $21.6 billion at the end of the second quarter, up from a loss of $4.4 billion during the same period last year, the Federal Deposit Insurance Corp. said.

Banks’ earnings were up because loan loss reserves dipped more than 40 percent, to a total of $40.3 billion.

It was the highest quarterly earnings total since the third quarter of 2007.

“This is the best quarterly profit for the banking sector in almost three years,” said FDIC chairman Sheila C. Bair. “Nearly two out of every three banks are reporting better year-over-year earnings. As long as economic conditions remain supportive, most institutions should maintain profitability and increase their capacity to lend.”

Loan-loss reserves declined for the first time since the fourth quarter of 2006, the FDIC said.

More than 62 percent of the banks increased their loan-loss reserves during the second quarter, the industry’s total reserves declined by $11.8 billion, or 4.5 percent, because many large banks reduced their loan-loss provisions.

Net interest income was $8.5 billion, or 8.6 percent higher than a year ago, and noninterest expenses were $1.5 billion, or 1.5 percent lower than a year prior, the FDIC said.

Average return on assets for banks in the U.S. was 0.65 percent, up from negative 0.13 percent a year earlier. ROA for all Arkansas banks was 0.75 percent at the end of the quarter.

Total net income for all banks doing business in Arkansas was $210 million through the second quarter.