The Federal Deposit Insurance Corp. released its Quarterly Banking Profile for the period ending September 30, 2009.

Total assets of insured institutions fell 0.4%, or $54.3 billion, marking the third consecutive quarterly decrease. The decline followed a $237.9 billion decrease in industry assets in the second quarter and a $303.2 billion drop in the first quarter.

The decline in assets was led by falling loan balances. Total loan and lease balances declined by $210.4 billion, or 2.8%, during the quarter. This is the largest percentage decline in loan balances in any quarter since insured institutions began reporting quarterly results in 1984.

C&I loans fell by $89.1 billion, or 6.5%, residential mortgage loan balances declined by $83.7 billion, or 4.2%, and real estate C&D loans dropped by $43.6 billion (8.1%).

Rising loan-loss provisions continued to dominate industry results, but growth in operating revenues, combined with appreciation in securities values, helped the industry post an aggregate net profit. Insured institutions earned $2.8 billion in net income in the third quarter of 2009, more than three times the $879 million they earned a year earlier and an improvement over the $4.3 billion net loss posted in the second quarter of 2009.

Growth in net interest income, lower realized losses on securities and other assets, higher noninterest income, and lower noninterest expenses, all contributed to the year-over-year increase in net income.

Only 43% of all institutions reported higher quarterly earnings compared to a year ago, but this is the highest proportion reporting improved earnings in the past six quarters. More than one in four institutions (26.4%) was unprofitable in the third quarter, up slightly from 24.6% a year ago.

Meanwhile, provisions for loan and lease losses totaled $62.5 billion, marking the fourth consecutive quarter that industry provisions have exceeded $60 billion. The third quarter total was $11.3 billion (22.2%) higher than a year earlier, but it was $4.8 billion (7.1%) less than the amount that insured institutions set aside in the second quarter.

Net charge-offs also continued to rise, registering a year-over-year increase for an 11th consecutive quarter. Insured institutions charged off $50.8 billion (net) in the quarter, an increase of $22.6 billion (80.5 percent) compared to the third quarter of 2008. Net charge-offs were higher, year-over-year, at 60 percent of insured institutions.

The annualized net charge-off rate rose to 2.71%, from 1.43% a year earlier and 2.56% in the second quarter. This is the highest annualized net charge-off rate in any quarter since insured institutions began reporting quarterly income and expenses in 1984, and it marks the third time in the past four quarters that the net charge-off rate has reached a new high. The year-over-year increase in charge-offs was led by loans to commercial and industrial (C&I) borrowers, but all major loan categories had sizable increases in charge-offs.

Net charge-offs of C&I loans were $4.6 billion (117.5%) higher than a year ago. Chargeoffs of credit card loans were $4.4 billion (78.2%) higher, residential mortgage charge-offs were up by $3.7 billion (63.4%), charge-offs of real estate construction and development (C&D) loans rose by $3.1 billion (68.1%), and charge-offs of home equity lines of credit were $2.2 billion (78.4 percent) higher.

Click here to view the entire report at the FDIC website.