As of June 2010, the Federal Deposit Insurance Corporation (FDIC) has reported that commercial banks and savings institutions under its protective wings have collected an aggregate profit of $21.6 billion, leading to an overall profit of $26 billion following the $4.4 billion net loss registered in the prior corresponding year.

The FDIC said that while the numbers reflected the biggest surge in quarterly earnings since September 2007, the improved performance still fall short of its historical norms yet only 20 percent of banks have reported of net loss by the June quarter, coming from the 29 percent posted in the same period last year while the quarter’s average return on assets (ROA) jumped to 0.65 percent from 0.13 percent from a year ago.

Following the Great Depression, the US Congress had legislated the birth of FDIC in 1933 to restore public confidence on the banking system and as of the current year, some 7,830 financial and savings institutions’ deposits were being insured by the federal corporation.

FDIC chairman Sheila Bair is upbeat on the industry’s latest results, stressing that the June numbers represented the best quarterly profit in three years with about 70 percent of banks reporting improvements on their year-on-year earnings.

Bair conceded that the industry is still encountering rough roads though in general terms, the banking sector is slowly regaining its traction as shown by the earnings growth posted by many institutions and so long as “economic conditions remain supportive most institutions should maintain profitability and increase their capacity to lend.”

The FDIC said that this year’s gains were anchored on reduced provisions for loan losses, posting an improvement of $27.1 billion or 40.2 percent lower from last year while net income soared by 8.6 percent to $8.5 billion and non-interest expenses were slashed by up to 1.5 percent to $1.5 billion.

The federal corporation added that improvements were seen in asset-quality trends as loans and leases that were 90 days due dipped fort he first time since 2006 while net charge-offs by insured banks and thrifts retreated by 0.4 percent to $214, reporting only of $49 billion in uncollectible loans in the June quarter.

The FDIC said that overall loans and leases in the same quarter fell by 1.4 percent to $107.5 billion though at the same time, the industry’s total assets shrunk by 1.0 percent to $136.2 billion.

Also, loan-loss reserves saw marked improvements since the last quarter of 2006 as the industry’s total reserves dipped by 4.5 percent to $11.8 billion while its ratio of reserves to total loans and leases slid to 3.40 percent in June, prompting Bair to caution that “all banks should continue to exercise caution and maintain strong reserves,” considering the economic uncertainties.

The FDIC said that the industry’s coverage ratio of reserves to noncurrent loans went up in two consecutive quarters, notching 65.1 percent from 64.9 percent but the list of its problem institutions ballooned from 775 to 829, with assets decline of $403 billion.

The federal corporation reported too that 45 insured institutions succumbed to financial pressures in the June quarter but the Deposit Insurance Fund (DIF) balance improved from negative $20.7 billion to negative $15.2 billion, with the reserve slipping from $40.7 billion to $27.5 billion during the same period.

On the other hand, the FDIC said that the industry’s liquid resources remained stable as cash and marketable securities stood at $44 billion by the end of June, declining a bit from the $63 billion posted in the first quarter mainly due to three Puerto Rican bank failures on April 30.

Bair expressed confidence that FDIC’s current resources would be able to meet the expected demand spikes for cash this year and to resolve any bank failures that would occur as she noted that by the end of the June quarter, the industry’s total insured deposits have been reduced by 0.7 percent or up to $39 billion.