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Banks and Thrifts Report Record Earnings in Second Quarter
Strong demand for commercial and consumer loans boosts net interest income
Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported net income of $38.1 billion for the second quarter of 2006, surpassing the previous quarterly earnings record of $36.9 billion set in the first quarter. This is the fifth time in the last six quarters that industry earnings have set a new record. FDIC officials attributed the new quarterly record to strong commercial and consumer loan demand that sparked an increase in net interest income, which outweighed the effects of rising interest rates and narrower spreads between short- and long-term interest rates. The industry's second-quarter profits represent a 3.2 percent increase over first-quarter performance and a 10.9 percent improvement over the same period in 2005.
Preliminary financial results for the second quarter are contained in the FDIC's latest Quarterly Banking Profile, which was released today. Among the major findings:
The end of the second quarter also marked a period of more than two years without the failure of an FDIC-insured institution. The last failure occurred on June 25, 2004. This is the longest interval without an insured institution failure in the FDIC's 73-year history.
The FDIC also said that the deposit insurance fund reserve ratio remained unchanged in the second quarter as insured deposit growth slowed. The ratio of the FDIC's Deposit Insurance Fund (DIF) to its estimated insured deposits was 1.23 percent at the end of June, the same as at the end of March. Prior to the second quarter, the reserve ratio of the Fund (and the combined ratio of its predecessors, the Bank Insurance Fund and the Savings Association Insurance Fund) had declined for six consecutive quarters as insured deposits registered strong growth. During the second quarter, estimated insured deposits increased by only $37.4 billion (0.9 percent).
The complete report is available at http://www2.fdic.gov/qbp/index.asp on the FDIC Web site.
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Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 8,778 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information Center (877-275-3342 or 703-562-2200). PR-78-2006
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