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Local Edition SECONDARY MARKET return on assets—"a basic yardstick of profitability"—rose from 1.03 percent in Q 3 2011 to 1.06 percent in Q 3 2012. Net operating revenue (net interest income plus total noninterest income) totaled $169.9 billion, an increase of $4.9 billion—or 3 percent—from 2011, as gains from loan sales rose by $3.9 billion. Net interest income rose about $746 million (0.7 percent) year-over-year. Total loan balances also increased for the fifth time in the last six quarters. Loan balances rose by $64.8 billion (0.9 percent) in Q 3 2012. That increase was primarily driven by gains in Meanwhile, negative indicators continued to fall. Thirdquarter 2012 loan loss provisions totaled $14.8 billion, 20.6 percent less than the $18.6 billion set aside for losses in Q 3 2011. The number of banks on FDIC's "Problem List" declined for the sixth straight quarter, dropping from 732 to 694. The third quarter also marked the first time in three years that there were fewer than 700 banks on the list. Total assets of problem institutions declined from $282 billion to $262 billion, the agency reported. As the number of problem institutions has fallen, so too has The M Report | 79 se c on da r y m a r k e t District of Columbia // FDIC-insured banks continued to show improving health in 2012's third quarter, the agency reported. Commercial banks and savings institutions insured by FDIC reported aggregate net income of $37.6 billion in Q 3 2012, up $2.3 billion (or 6.6 percent) The number of banks on FDIC's "Problem List" declined for the sixth straight quarter, dropping from 732 to 694. the number of bank failures. Last year's third quarter saw 12 failures, the smallest number of quarterly failures since Q 4 2008. As of December 4, 50 banks collapsed in 2012, a substantial decline from 90 during the same period in 2011. Out of the last nine quarters, eight have seen declines in the number of bank failures. Also promising was an apparent improvement in asset quality. Insured banks and thrifts charged off $22.3 billion in uncollectible loans during the Q 3 2012, down $4.4 billion (16.5 percent) from the prior year. The amount of seriously delinquent loans and leases (90 days or more past due or in nonaccrual status) fell for the 10th consecutive quarter, and the percentage of loans and leases that were delinquent declined to its lowest level in more than three years. Martin J. Gruenberg, the FDIC's newly appointed chairman of the board, noted, "More than 55 percent of all banks reported loan growth. Small banks are also increasing their lending, including their loans to small businesses." Announced as chairman in November, Gruenberg has served on the FDIC's board of directors since August 2005, operating as the acting chairman from November 2005 to June 2006 and from July 2011 to the present. Prior to joining the board, he served as senior counsel to Sen. Paul Sarbanes (D-Maryland) on the staff of the Senate Committee on Banking, Housing, and Urban Affairs. He also worked as staff director of the Banking Committee's Subcommittee on International Finance and Monetary Policy. Gurenberg was appointed alongside Thomas M. Hoenig, who was named the FDIC's new vice chairman. Most recently, Hoenig served as the president of the Federal Reserve Bank of Kansas City and was a member of the Federal Reserve System's Federal Open Market Committee from 1991 to 2011. During his 38year tenure at the Fed, he held a number of leadership roles, serving as the president of the Kansas City Fed starting in 1991. A na ly t ic s As the federal organization welcomed new board leadership, the FDIC announced positive findings among the nation's financial institutions. commercial and industrial loans (which rose by $31.8 billion, or 2.2 percent). Residential mortgage loans rose by $14.5 billion (0.8 percent), and auto loans grew by about $7.4 billion (2.4 percent). Not all loan types saw growth, however. Home equity lines of credit declined $12.9 billion (2.2 percent), while real estate construction and development loans fell by $6.9 billion (3.2 percent). s e r v ic i ng Get Well: FDIC Reports Improving Health for Banks from a reported $35.2 billion in Q 3 2011. Aggregate net income has increased on a year-over-year basis for 13 straight quarters. In addition, 57.5 percent of all insured institutions reported annual improvements in their quarterly net income. The share of institutions reporting net losses in last year's third quarter fell to 10.5 percent from 14.6 percent a year prior. The average Or ig i nat ion He has fought to cut government spending and reduce debt. With a stated goal of fostering "the deepest, most liquid, competitive, efficient, innovative, and transparent capital markets the world has ever known," Hensarling outlined a few broad goals as he stepped into his new role. "[W]e must end the phenomenon of 'too big to fail' and reinstate market discipline," he said. "We must also reduce taxpayer risk in the marketplace and cut the sheer weight, volume, complexity, and uncertainty of the federal red tape burden that makes capital more expensive and less valuable," he continued. Doing so will bolster a free enterprise system, which Hensarling says is "the best housing and jobs program known to man." In addition to previously holding the vice chairman position on the House Financial Services Committee, Hensarling has also headed up the House Republican Conference as chairman and was co-chairman of the Joint Select Committee on Deficit Reduction. Hensarling co-authored the "Spending, Deficit, and Debt Control Act," which was praised by several conservative groups. He also proposed the "Spending Limit Amendment," which intended to curb government spending to no more than 20 percent of the economy.