FDIC: Bank Earnings Grow 4.1% Year-on-Year

FDIC-insured banks and savings institutions earned $62.6 billion in the second quarter, a 4.1% increase from the industry’s earnings a year before, the FDIC said today. “The FDIC’s second quarter report shows that the banking industry remains healthy and continues to support ongoing economic growth,” said American Bankers Association Chief Economist James Chessen.

Community banks earned $6.8 billion during the second quarter, up 8.1% percent from the same period last year. Their increase in net interest income also outpaced the overall industry pace at 5.1%, as did their loan growth rate. Community banks’ loan and lease balance rose by 6.3% year-over-year, compared to 4.5% for all banks. “Banks saw the strongest year-over-year loan growth since the first quarter of 2018, led by the commercial and industrial sector,” commented Chessen.

The agency attributed the profit growth to gains in realized securities and a 3.7% rise in net interest income, although the year-over-year increase in net interest income was the slowest since 2015. Meanwhile, noninterest income declined by 2.7% from the previous year—driven primarily by falling fees for servicing and investment banking at larger banks. Community bank noninterest income rose 4.7%. Noninterest expense rose across the industry, driven by higher salaries and benefits. Average return on assets rose by a single basis point to 1.38%, and average net interest margin also rose by one basis point to 3.39% percent. Deposit balances rose by 0.8%.

Net charge-offs rose 9.3 percent from a year ago, a faster pace than the previous quarter, while the number of loans that were 90 or more days past due declined by 4.8 percent from the first quarter. Meanwhile, the number of institutions on the problem bank list fell to 56. Five de novo banks were added in the first quarter. The Deposit Insurance Fund balance rose by $2.6 billion during the quarter to total $107.4 billion.