Federal Deposit Insurance Corporation (FDIC) insured commercial banks and savings institutions posted an aggregate net income of $34.7 billion in the fourth quarter of 2012.  This was a $9.3 billion or a 36.9 percent improvement from profits reported in the fourth quarter of 2011.  FDIC reports that this is the 14^th consecutive quarter that those aggregate profits have increased on an annual basis.

Annual improvements in quarterly net income were reported by 60 percent of all institutions while only 14 percent reported net losses.  The average return on assets (ROA) rose to 0.97 percent from 0.73 percent a year ago.

Fourth quarter net operating revenue (net interest income plus total noninterest income) totaled $169 billion, an increase of $7.3 billion (4.5 percent) from a year earlier, as gains from loan sales rose by $2.4 billion and trading income increased by $1.9 billion. Net interest income was $2.7 billion (2.5 percent) lower than in the fourth quarter of 2011, as the average net interest margin fell to a five-year low.

The annual improvement in earnings was fueled by increased noninterest income and lower provisions for loan losses.  For the full year, industry earnings totaled $141.3 billion - a 19.3 percent improvement over 2011 and the second-highest ever reported by the industry after the $145.2 billion earned in 2006.

Loan performance continued to improve; noncurrent loans and leases fell for the 11^th consecutive quarter and were at the lowest percentage in four years.  The 30-89 day delinquency rate across all insured institutions was 0.70 percent for non-farm residential loans, 0.92 for home equity loans, 0.63 percent for multi-family residential loans, and 2.28 percent for "other" 1-4 family residential loans. Insured banks and thrifts charged off $18.6 billion in uncollectible loans in the quarter, a 27.4 percent annual improvement.

"The improving trend that began more than three years ago gained further ground in the fourth quarter," said FDIC Chairman Martin J. Gruenberg. "Balances of troubled loans declined, earnings rose from a year ago, and more institutions of all sizes showed improved performance."

Loan balances rose by $118.2 billion (1.6 percent) the sixth quarterly increase in seven quarters.  Loans secured by nonfarm nonresidential real estate properties grew by $14.6 billion (1.4 percent) but home equity lines of credit declined by $12.6 billion (2.2 percent), and real estate construction and development loans fell by $6.6 billion (3.1 percent).

The number of institutions on the FDIC's "Problem List" declined for a seventh consecutive quarter, from 694 to 651.   The number of problem banks reached a high of 888 at the end of the first quarter of 2011.