FDIC-insured banks and savings institutions earned $25.5 billion in the fourth quarter, down 40.9 percent from the industry’s earnings a year before, the FDIC said today. The year-over-year decline was attributed to one-time effects of the new tax reform law, including the re-evaluation of deferred tax assets and repatriation of income from foreign subsidiaries, the agency said. For 2017, the industry’s net income fell 3.5 percent to $164.8 billion. Absent the effects of tax reform, the FDIC estimated that quarterly net income would have been $42.2 billion, and full-year net income would have been $183.1 billion.
Community banks earned $4.1 billion during the fourth quarter, down 14.2 percent from the same period last year. Community institutions also reported a 7.2 percent increase in net operating revenue, a 9.4 percent increase in net interest income and a decline in noninterest income of 0.6 percent.
“Despite one-time adjustments to net income due to the new tax law, the underlying strength of the industry is undeniable,” said ABA Chief Economist Jim Chessen, noting that loan growth increased across nearly every category as business expanded and consumer confidence increased. Total loan and lease balances increased 1.7 percent during the quarter, with credit card balances increasing 8.8 percent, commercial and industrial loans increasing 1.2 percent and residential mortgage loans increasing 1.1 percent. Year-over-year, loan and lease balances were up 4.5 percent. Net charge-offs increased 8.6 percent from a year ago, while the amount of loans that were 90 or more days past due increased 1.3 percent in the fourth quarter.
The industry’s net interest income totaled $129.5 billion in the fourth quarter, up 8.5 percent from a year ago. The average net interest margin was 3.31 percent, also up from last year. “With nearly $2 trillion in capital, banks remain the safest place to put your money — as demonstrated by a solid 4 percent growth in new deposits,” Chessen said. “Interest rate risk is always top of mind for banks, particularly with the Fed likely to take action again in March to raise rates.”
Meanwhile, the number of institutions on the problem bank list fell to 95—the fewest since 2008—and one de novo bank was added in the fourth quarter. The Deposit Insurance Fund balance rose $2.2 billion during the quarter to total $92.7 as of year-end.