FDIC-insured financial institutions reported aggregate net income of $34.5 billion in the second quarter of 2012, a $5.9 billion increase from a year ago, according to the FDIC Quarterly Banking Profle. This is the 12th consecutive quarter with a year-over-year increase. Nearly two-thirds of all institutions reported improvements in their quarterly net income from a year ago, and the average return on assets rose to 0.99 percent.

Total deposits increased by $61.6 billion, and deposits exceeding $250,000 in noninterest-bearing transaction accounts increased by $65.7 billion. The Deposit Insurance Fund balance rose to $22.7 billion, and the DIF’s contingent loss reserve declined from $5.3 billion to $4.0 billion.

Loan-loss provisions were down 26 percent from a year ago, charge-offs of uncollectible loans declined by 29.1 percent, and noncurrent loans and leases fell for the ninth consecutive quarter. Loan balances posted their fourth quarterly increase in the past five quarters on commercial-and-industrial, residential mortgage and credit card lending.

The number of “problem” institutions fell for the fifth quarter in a row, from 772 to 732. This is the smallest number since year-end 2009. The second-quarter tally of 15 failures was the lowest since the fourth quarter of 2008.

In related news, ICBA said that the increase in deposits insured by the FDIC’s Transaction Account Guarantee program shows the continued need for the program. Approximately $212 billion in deposits at banks with less than $15 billion in assets are insured by the TAG program, which is up $32.6 billion from a year ago.

In a national news release, ICBA said that extending the coverage beyond its Dec. 31 expiration would pose one less obstacle to the economic recovery. “Failing to extend TAG coverage will create yet another ‘fiscal cliff’ for thousands of businesses and municipalities that use these TAG accounts,” ICBA Executive Vice President and Chief Economist Paul Merski said. Read ICBA Release.

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