Bank Earnings Climb As Loans Dwindle

Commercial and savings banks insured by the Federal Deposit Insurance Corp. reported loan balances that declined by the greatest amount since 1984 in the third quarter.

Banks also reported net income of $2.8 billion in the third quarter, more than three times the $879 million the industry earned a year ago.

Total loans and leases declined by $210.4 billion, or 2.8 percent, during the quarter. Loans to commercial and industrial borrowers dropped by $89.1 billion, or 6.5 percent. Residential mortgage loan balances fell by $83.7 billion, or 4.2 percent.

The FDIC said that while earnings are up, the recession continues to dampen lending. "We need to see banks making more loans to their business customers," said Sheila Bair, FDIC chairman.

In the quarter, banks reported provisions for loan losses of $62.5 billion, a 22.2 percent increase over last year, and net interest income of $4.6 billion, a 4.8 percent increase.