Bank earnings decrease for first time since 2009

Hurt by litigation expense, lower mortgage activity and lower values on asset sales, commercial banks and savings institutions nationwide reported net income of $36 billion in the third quarter of 2013, a decrease of 3.9 percent from the $37.5 billion banks reported in the same period last year.

This is the first time since the second quarter of 2009 that bank earnings have decreased, according to the Federal Deposit Insurance Corp.

The decline was attributed to a $4 billion increase in litigation expenses at “one institution,” according to the FDIC. The specific bank was not named, and many of the country’s large banks have been involved in litigation in recent months, but after Chase Bank was hit with a record $13 million fine for its sale of troubled mortgages, the bank wrote down a loss of $400 million for the third quarter.

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The bank’s legal costs in the third quarter were $7.2 billion after taxes, according to media reports.

The FDIC does not comment on individual open institutions.

Lower revenue from reduced mortgage activity and lower gains on asset sales also contributed to the reduction in earnings, according to the FDIC.

But asset quality indicators continued to improve, with banks charging off $11.7 billion in uncollectible loans in the third quarter, down by $10.5 billion, or 47.4 percent, from the same quarter last year.

Higher interest rates caused a sharp drop in mortgage activity, with mortgage originations down 30.1 percent to $136.8 billion from the second quarter.