FDIC-insured bank mortgage issuance rising

Lending grew at banks and savings institutions insured by the Federal Deposit Insurance Corp. in the third quarter, keeping with what appears to be a moderate, but ongoing recovery in lending.

Residential mortgage lending alone increased by $14.5 billion in the third quarter, while auto loans grew by $7.4 billion, the FDIC said.

The FDIC noted that insured commercial banks and savings institutions posted an aggregate third-quarter profit of $37.6 billion, up 6.6% from $35.2 billion a year earlier and the 13th consecutive quarterly year-over-year increase.

The report shows a moderate thawing in lending with loan balances at FDIC-insured institutions growing for the fifth-quarter, reaching a total loan balance of $64.8 billion. While that’s up and good news for banks, it is a lower increase when compared to the $102 billion loan balance increase reported in the second quarter by the FDIC. 

At the same time, home equity lines of credit fell by $12.9 billion and real estate and construction lending fell by $6.9 billion, the FDIC said.

“More than 55% of all banks reported loan growth,” said Martin Gruenberg, chairman of the FDIC when commenting on 3Q. “Small banks are also increasing their lending, including their loans to small businesses.”

Gruenberg called it another “quarter of gradual but steady recovery for FDIC-insured institutions.” He suggested that the quality of assets backing loans and bank profitability are factors assisting the lending recovery.

The FDIC’s list of problem banks is now down to 694 troubled institutions, compared to 732 in the last report from the banking regulator. The number of bank failures also fell for the eighth time in nine quarters.

The number of total assets tied to problem institutions also declined to $262 billion in 3Q, compared to $282 billion, the FDIC said.

The FDIC’s Deposit Insurance Fund balance also grew reaching $25.2 billion at the end of September, up from $22.7 billion in June. Estimated insured deposits grew 2.3% in 3Q.

James Chessen, chief economist for the American Bankers Association, noted that loan growth continues to aid the recovery, but some uncertainty remains in regards to the broader economy.

“Strong business loan growth, aggressive cost controls and recaptured reserves have helped banks maintain earnings in a challenging environment,” he said. Chessen added that “extremely low rates and regulatory pressure on non-interest income will continue to challenge banks’ top line revenue growth.”

While Chessen was generally positive about the report, he added that “uncertainty surrounding the fiscal cliff is already slowing economic activity and businesses are hesitant to borrower. Decisions made in the month ahead will have a profound impact on our economic path and the outlook for all businesses – banks included.”

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