WASHINGTON–The nation’s 5,177 commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation reported aggregate net income of $55.2 billion in fourth quarter 2019, a decline of $4.1 billion (6.9%) from a year ago.
Community banks' quarterly net income improved 4.4% from a year ago.
The decline in net income was led by lower net interest income and higher expenses. The results were released as part of the FDIC’s most recent Quarterly Banking Profile.
Among the data points released for bank performance:
- Full-Year 2019 Net Income Declined 1.5% to $233.1 Billion: The banking industry reported full-year 2019 net income of $233.1 billion, down $3.6 billion (1.5%) from 2018, the FDIC said. The decline in net income was primarily due to slower growth in net interest income and higher loan-loss provisions. Lower noninterest income also contributed to the trend. The average return on assets declined from 1.35% in 2018 to 1.29% in 2019.
- Quarterly Net Income Declined 6.9% from Fourth Quarter 2018: The 5,177 FDIC-insured institutions reported aggregate net income of $55.2 billion in fourth quarter 2019, a decline of $4.1 billion (6.9%) from a year earlier. The quarterly decline in net income was led by lower net interest income coupled with higher noninterest expenses. The decline was broad-based, as nearly half (45.6%) of all institutions reported annual declines in net income, the FDIC said. The share of unprofitable institutions remained stable from a year ago at 7.2%. The average return on assets ratio declined from 1.33% in fourth quarter 2018 to 1.20% in fourth quarter 2019.
- Net Interest Margin Declined from a Year Ago to 3.28%: The average net interest margin declined by 20 basis points from a year ago to 3.28%. Net interest income fell by $3.4 billion (2.4%) from a year ago. This was the first annual decline since third quarter 2013. Lower yields on earning assets drove the reduction in net interest income, the FDIC said.
- Community Banks' Quarterly Net Income Improved 4.4% from a Year Ago: The 4,750 FDIC-insured community banks reported quarterly net income of $6.4 billion, up $270.3 million from a year ago. More than half of all community banks (53.9%) reported net income growth. Net interest income increased by 2.1% because of strong annual loan growth (up 5.5%). The average community bank net interest margin fell by 15 basis points to 3.62%, according to the FDIC.
- Total Loan and Lease Balances Increased from the Previous Quarter and a Year Ago: Total loan and lease balances increased by $99.5 billion (1%) from the previous quarter. Growth among major loan categories was led by consumer loans, which includes credit cards (up $31.3 billion, or 1.8%) and residential mortgage loans (up $22 billion, or 1%). Over the past year, total loan and lease balances rose by 4.6%, slightly above the 4.5% annual growth rate reported last quarter, the FDIC said. Commercial and industrial loans registered the largest dollar increase from a year ago (up $131.9 billion, or 6.3%).
- The Number of Banks on the "Problem Bank List" Remained Low: The number of problem banks fell from 55 to 51 during the fourth quarter, the lowest number of problem banks since fourth quarter 2006. Total assets of problem banks declined from $48.8 billion in the third quarter to $46.2 billion, according to the agency.
- Asset Quality Indicators Remained Stable: The average noncurrent loan rate remained relatively stable from the previous quarter. Noncurrent balances declined for all major loan categories, except for credit card loans, which increased by $1.3 billion (10.3%). Net charge-offs rose by $1.3 billion (10.4%) from a year ago, and the average net charge-off rate rose by four basis points to 0.54%. Asset quality metrics for community banks remained relatively steady; the noncurrent rate fell by 3 basis points to 0.75%, and the net charge-off rate rose by 3 basis points to 0.18%.
- The Deposit Insurance Fund's Reserve Ratio Stood at 1.41%: The Deposit Insurance Fund (DIF) balance totaled $110.3 billion in the fourth quarter, up $1.4 billion from the end of last quarter. The quarterly increase was led by assessment income and interest earned on investment securities held by the DIF. The reserve ratio remained unchanged from the previous quarter at 1.41%.
- Mergers and New Bank Openings Continued in the Fourth Quarter: During the fourth quarter, three new banks opened, 77 institutions were absorbed by mergers, and three banks failed.