FDIC-insured banks and savings institutions earned $76.8 billion in the first quarter of 2021, a 315.3% increase from a year ago, the FDIC reported today in its Quarterly Banking Profile. That increase was driven by an aggregate negative provision expense of $14.5 billion.
The average net interest margin fell by 57 basis points year-on-year in the first quarter to 2.56%, a record low. As a result, net interest income fell 5.6% year-on-year to total $129.7 billion, the sixth consecutive quarter that net interest income declined. Despite the decline in net interest income, 64.4% of banks reported higher net interest income compared with a year ago. Average return on assets was 1.38%, up one percentage point from a year ago and up 28 basis points from fourth quarter 2020. Community banks reported a 77.5% increase in fourth quarter net income year-on-year, the FDIC said.
“Today’s FDIC report shows that banks of all sizes continue to serve as a source of strength for economic recovery from the COVID-19 recession. In addition to helping businesses and consumers navigate evolving conditions, banks continued to demonstrate their own resiliency,” noted American Bankers Association Senior Economist Rob Strand.
He added that “consumer and business financial health turned out better than expected in the quarter, as stimulus payments and other government assistance helped Americans meet their financial obligations. As a result, banks were able to recapture loan loss reserves, yielding the first-ever recorded quarter of overall negative provisioning.”
Compared with the same quarter last year, total loan and lease balances declined 1.2% to $136.3 billion, the first year-over-year contraction in loan and lease volume since the third quarter of 2011. The total net charge-off rate declined by 20 basis points year-on-year to 0.34%, and the noncurrent loan rate declined five basis point to 1.14% from the previous quarter. During the first quarter, three new banks were added and no banks failed. The number of banks on the FDIC’s problem bank list declined by one from the prior quarter to 55.