FDIC-insured banks and savings institutions earned $70.4 billion in the second quarter of 2021, a 281% increase from a year before at the height of the COVID-19 pandemic, the FDIC reported today in its Quarterly Banking Profile. Continued economic growth, improved credit conditions and banks adjusting expectations for potential credit losses drove the increase, the FDIC said. The average net interest margin fell by 31 basis points year-on-year in the first quarter to 2.50%, the lowest level on record. As a result, net interest income fell 1.7% or $2.2 billion year-on-year.
Despite the decline in net interest income, 64.1% of banks reported higher net interest income compared with a year ago. Average return on assets was 1.24%, up from 0.36% in the second quarter of 2020. Community banks reported net income of $8.3 billion, a 29% increase in the second quarter year-on-year, the FDIC said.
Compared with the same quarter last year, total loan and lease balances increased 0.3%, the first quarterly increase in loan volume since the second quarter of 2020.
“Today’s FDIC report on the condition of America’s banks in the second quarter provides encouraging news on the availability of credit. Total bank lending rose slightly following three quarterly declines as the financial health of consumers and businesses strengthened. The recovery was broad-based, with growth in most loan categories. Consumer loans led the growth, with a 4.1% increase in credit card lines and a 3.8% rise in auto loans,” noted ABA Chief Economist Sayee Srinivasan.
He added that “deposits continued to flow into banks of all sizes as individuals and businesses continue to seek the safety of FDIC-insured bank accounts. Bank deposits are now 29% higher than in 2019.”
The total net charge-off rate declined by 30 basis points year-on-year to a record low of 0.27%, and the noncurrent loan rate declined 12 basis point to 1.01% from the previous quarter. During the second quarter, three new banks were added, 28 institutions merged with other FDIC-insured institutions and no banks failed. The number of banks on the FDIC’s problem bank list declined by four from the prior quarter to 51.