Let's start with the report itself:
Lower provisions for loan losses, reflecting an improving trend in asset quality, lifted fourth-quarter net income of FDIC-insured commercial banks and savings institutions. Fourth-quarter earnings totaled $26.3 billion, an increase of $4.9 billion (23.1 percent) compared with the same period of 2010. The year-over-year improvement in profits comprised a majority of insured institutions. Almost two out of every three banks (63.2 percent) reported higher quarterly net income than a year ago, and only 18.9 percent were unprofitable, compared with 27.1 percent in fourth quarter 2010. The average return on assets (ROA) rose to 0.76 percent, from 0.64 percent a year earlier.
The chart above shows that overall new income dropped sharply in 2008 and 2009, but that banks have returned to profitability since then. Also of importance is this has been going on for two years, giving the banks time to heal from the excesses of the early 2000s.
Net charge-offs totaled $25.4 billion in the fourth quarter, a decline of $17.1 billion (40.2 percent) from a year ago. The fourth-quarter total represents the lowest level for quarterly charge-offs since first quarter 2008. This is the sixth consecutive quarter in which charge-offs have posted a year-over-year decline. Improvements occurred across all major loan types. The largest declines were in credit cards (down $5.4 billion, or 42.2 percent), real estate construction and land development loans (down $3.3 billion, or 62.4 percent), residential mortgage loans (down $2.4 billion, or 31.8 percent) and loans to commercial and industrial (C&I) borrowers (down $2 billion, or 43.5 percent).