FDIC’S Quarterly Banking Profile: Bank Performance Remains Strong in Q1

FDIC-insured banks and savings associations earned $60.7 billion in the first quarter of 2019, an increase of $4.9 billion from the industry’s earnings a year before, the FDIC said today in its Quarterly Banking Profile. The agency attributed the growth to higher net interest income, which reflected a modest growth in interest-earning assets and wider net interest margins.

“The FDIC’s first quarter report shows the banking industry is healthy and poised to continue driving a robust U.S. economy,” said ABA Chief Economist James Chessen. “America’s banks continued to maintain record high capital levels, abundant reserves and sustained deposit growth to support increased loan demand. Bank capital is approaching $2.1 trillion as capital-to-asset ratios have strengthened across the board, and asset quality continues to improve with declines in past-due accounts.”

Net interest income was up 6% year-on-year, totaling $139.3 billion. The average net interest margin was 3.42%, up 10 basis points from a year ago as average asset yields grew more rapidly than funding costs. Noninterest income fell by $2 billion year-on-year due in part to lower servicing fees. Average return on assets was 1.35% for the quarter.

Total loans outstanding increased over the year, growing by $395 billion, or 4.1%. Loan balances dipped slightly from the previous quarter as consumer loans declined due to seasonal factors. Loan growth was strongest in commercial and industrial lending, which increased 7.6% from the first quarter of 2018. Total deposits continued to grow, increased 2.9 percent over the year. However, noninterest-bearing deposits were down 6.6% from the year prior as consumers increasingly sought out higher-yield products. Bank capital reached a record high, apprroaching $2.1 trillion, while asset quality remained strong. Net charge-offs ticked up 5.5% from a year ago. Meanwhile, the noncurrent loan balance rate (which reflects loans 90 days or more past due) remained unchanged at 0.99%.

Community banks earned $6.5 billion during the first quarter, up 10.1% from the same period last year. The agency also reported a 6.4% increase in net interest income for this cohort, driven largely by improvements in loan interest income. Community bank noninterest income was down 1.9% to total $4.3 billion.

The number of institutions on the problem bank list at the end of the first quarter fell to 59, one new bank was chartered and no banks failed.