It also indicates that banks, too, are innovating and adapting to a changing marketplace. Let's now look at profitability. In the time since the FDIC was created in 1933, banking has never before achieved this level of profitability. These strong earnings are widespread in the industry, with 70 percent of banks reporting ROAs above one percent in the second quarter of this year. Standing alone, however, profitability, too, gives us an incomplete assessment of banking's condition and its prospects.
Banking enjoys a pool of capital that is deep and wide.
As of the end of the second quarter, the industry's equity capital represented 8.3 percent of total industry assets, the highest level registered since 1941. Second, asset quality. Banking's extraordinary turnaround from the most recent national recession and its record profitability has been supported both by improvements in the quality of existing loans, and by income from new lending. The sharp drop-off in troubled loans has allowed banks to increase their reserve coverage ratios while reducing their loss provisions. In the early 1990s, loan growth rebounded, helping banks to boost their net interest income even as net interest margins gradually narrowed from the historic highs reached in the early 1990s.