The FDIC reported that insured commercial banks and savings institutions aggregate net income of $45.6 billion in Q3/16 was up $5.2 billion (12.9%) from a year earlier. The increase in earnings was mainly attributable to a $10 billion (9.2%) increase in net interest income and a $1.2 billion (1.9%) rise in noninterest income.

One-time accounting and expense items at three institutions had an impact on the growth in income. Banks increased their loan-loss provisions by $2.9 billion (34%) from a year earlier.

Of the 5,980 insured institutions reporting third quarter financial results, 60.8% reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the third quarter fell to 4.6% from 5.2% a year earlier. That was the lowest percentage since Q3/97.

“Revenue and net income rose from a year ago, loan balances increased, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” said FDIC Chairman Martin J. Gruenberg. “Community banks also reported solid results for the quarter with strong income, revenue, and loan growth.

“Nevertheless, the banking industry continues to operate in a challenging environment,” he said. “Low interest rates for an extended period have led some institutions to reach for yield, which has increased their exposure to interest-rate risk, liquidity risk, and credit risk. Current oil and gas prices continue to affect borrowers that depend on the energy sector and have had an adverse effect on asset quality. These challenges will only intensify as interest rates normalize.

“Banks must manage risks prudently to ensure that growth is on a long-run, sustainable path,” Gruenberg said.