FDIC: Overall Bank Earnings Decline, Community Bank Earnings Up

FDIC-insured banks and savings institutions earned $55.2 billion in the fourth quarter of 2019, a 6.9% decrease from the industry’s earnings a year before, the FDIC said in its Quarterly Banking Profile released today. The decline was attributed to lower net interest income and higher expenses. Noninterest income rose 2.5% from the previous year, driven by higher trading revenues.

“The FDIC’s report shows that our nation’s banks remain healthy and well capitalized as they continue to support a strong U.S. economy,” said American Bankers Association Chief Economist James Chessen. “While business lending moderated in the fourth quarter amid policy and trade uncertainty, overall bank lending grew by more than $360 billion over the course of 2019, with loans up in nearly every category including business, consumer and real estate.”

Community banks earned $6.4 billion during the fourth quarter, up 4.4% from the same period last year. Net interest income ticked up 2.1% as a result of strong annual loan growth; loan and lease balances were up 5.5% year-on-year, led by growth in nonfarm nonresidential loans, one-to-four family loans, and construction and development loans. The loan growth rate slowed to 1%, down from 1.3% in the third quarter. The average community bank net interest margin fell 15 basis points to 3.62%.

Overall, banks’ noninterest expense was up 3.2% from the year prior, driven by higher salary and employee benefits. Average return on assets fell from 1.35% to 1.29% year-on-year, and average net interest margin fell 20 basis points from a year ago to 3.28%, as funding costs outpaced asset yields. Deposit balances increased by 1.8% from the third quarter.

Net charge-offs rose 10.4% from a year ago, while the rate of loans that were 90 or more days past due remained relatively stable at 0.91%. Meanwhile, the number of institutions on the problem bank list fell from 55 to 51. Three de novo banks were added in the fourth quarter.