FDIC: Noninterest Income Drives Rebound in Bank Earnings

FDIC-insured banks and savings institutions earned $39.8 billion in the first quarter, up 6.9 percent from the industry’s earnings a year before, the FDIC said today. Earnings improved as net operating revenue increased, driven by 4.6 percent growth in noninterest income — in particular trading revenue and noninterest income from single-family mortgages — and a 1.5 percent increase in net interest income.

Community banks earned $4.9 billion during the first quarter, up 16.4 percent from the same period in 2014, and nearly 63 percent of community banks saw improved earnings. Net interest income — which accounted for nearly four-fifths of community bank net operating revenue — rose 6.5 percent, while noninterest income increased 17.7 percent year-on-year. Noninterest expenses rose by 5.9 percent for community banks.

“The banking industry has settled into steady growth bolstered by a continued improvement in the quality of bank portfolios and strong levels of capital,” said ABA Chief Economist James Chessen. “Today’s report is another indication that banks are in a great position to continue making the loans that drive our economy forward.”

The average industry-wide return on assets edged up to 1.02 percent from 1.01 percent. Asset quality continued to improve; charge-offs were $9 billion in the first quarter, down 13.2 percent from a year earlier, and noncurrent loan balances fell for the 20th straight quarter. The number of institutions on the problem bank list dropped for the 16th consecutive quarter from 291 to 253, and the Deposit Insurance Fund balance rose to $65.3 billion during the quarter.