U.S. banks ended 2012 with their best profits since 2006 and fewer failures than at any time since the financial crisis struck in 2008, according to the banks and the Federal Deposit Insurance Corp.
"Our earnings [in 2012] were probably the best we ever had. We made more money last year than ever before," Tim Sissler, president and CEO of Reliance Bank, said. "We had a very good year but we are very conservative on how we approach things and do business."
In the July-September quarter, the industry's earnings reached $37.6 billion, up from $35.3 billion a year earlier. It was the best showing since the July-September quarter of 2006, long before the financial meltdown. By contrast, at the depth of the Great Recession in the last quarter of 2008, the industry lost $32 billion.
Mirror photo by Gary M. Baranec
Assistant Manager Sue Fahr advises a customer Wednesday at the Pleasant Valley Boulevard branch of First Commonwealth Bank.
Some big banks have also cautioned that their earnings are up mainly because they've shed jobs, bad loans and weak businesses rather than because of an improved economy. They include JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. All managed to recover from the financial crisis in part because of federal aid.
Small and midsized banks have taken longer to rebound. They held risky commercial real estate loans used to develop malls, industrial sites and apartment buildings. Many such loans weren't repaid. But as the economy has strengthened, fewer such loans have soured, and many small and medium-size banks have recovered.
M&T Bank Corp., based in Buffalo, N.Y., saw net income soar in the third quarter. M&T attributed its gain to reduced loan losses and higher mortgage revenue. The bank, which has branches throughout central Pennsylvania, repaid the remaining $381 million of the $600 million in bailout aid it had received during the crisis.
Indiana, Pa.-based First Commonwealth Bank and Hermitage-based First National Bank of Pennsylvania also had very good years.
First Commonwealth Bank's earnings through the first three quarters of 2012 were up 57 percent.
"We had good loan growth, our credit costs improved, more people paid us back, those were two key factors. Loan growth and credit quality improved and bolstered profits," said president and CEO Mike Price. "We saw a nice uptick in small business lending and more quality commercial real estate projects."
First National Bank has also seen substantial growth.
Through the first nine months of 2012, FNB's operating net income increased 31 percent over the same period in 2011 as a result of improved profitability and the benefit of the acquisition of Parkvale Financial completed on Jan. 1, 2012, CEO Vincent J. Delie Jr. said.
"First National Bank's growth is a result of the investments we've made internally, in people and in technology. We've developed an extremely experienced team of professionals by providing focused training to our existing employees and by hiring some of the best people in the market to further expand our expertise," Delie said. "We've invested in technology to complement an already deep product set, adding new convenience services such as mobile banking, mobile deposit and an enhanced bill pay service."
Banks are lending a bit more freely. The value of loans to consumers rose 3.2 percent in the 12 months that ended Sept. 30 compared with the previous 12 months, according to FDIC data.
Fewer banks are considered at risk of failure. In July through September, the number of banks on the FDIC's confidential "problem list" fell for a sixth straight quarter. These banks numbered 694 as of Sept. 30 - about 9.6 percent of all federally insured banks. At its peak in the first quarter of 2011, the number of troubled banks was 888, or 11.7 percent of all federally insured institutions.
Bank failures have also declined. In 2009, 140 failed. In 2010, more banks failed - 157 - than in any year since the savings and loan crisis of the early 1990s. In 2011, regulators closed 92. This year, the number of failures trickled to 51, including two in eastern Pennsylvania.
The Associated Press contributed to this story.