WASHINGTON–FDIC-insured banks reported aggregate net income of $62.6 billion in the second quarter of 2019, an increase of $2.5 billion (4.1%) from a year earlier, according to data released by the FDIC.
The agency said the improvement in net income among the more than 5,300 banks it insures is attributable to a $4.9 billion (3.7%) increase in net interest income. The results were released as part of the FDIC's latest Quarterly Banking Profile.
"The banking industry reported another positive quarter," said FDIC Chairman Jelena McWilliams in a statement. "Quarterly net income expanded due to higher net interest income, loan growth increased, asset quality indicators showed modest improvement, and the number of ‘problem banks' continued to decline. Community banks also reported another positive quarter. Net income at community banks benefited from higher net operating revenue, and the annual rate of loan growth at community banks was stronger than the overall industry."
"With the recent lowering of short-term interest rates and inversion of the yield curve in the second quarter, new challenges for banks in lending and funding may emerge,” McWilliams continued. “Therefore, banks need to maintain rigorous underwriting standards and prudent risk management in order to support lending through the economic cycle."
The Data by Category
Among the specific data points released by the FDIC:
- Net Income Increases 4.1% from Second Quarter 2018: Aggregate net income for the 5,302 FDIC-insured institutions rose by $2.5 billion (4.1%) from a year earlier, led by higher net interest income. Almost 60% of all institutions reported a year-over-year increase in net income and less than 4% of institutions were unprofitable. The average return on assets remained stable at 1.38%.
- Community Banks' Net Income Increases 8.1% from Second Quarter 2018: The 4,873 FDIC-insured community banks reported net income of $6.9 billion in second quarter 2019, up $522.7 million from a year earlier. Growth in net interest income (up 5.1% to $19.3 billion) and noninterest income (up 4.8% to $4.7 billion), as well as gains on securities sales (up 654.8% to $233 million) drove the annual increase in profitability. Combined growth in these areas offset increases in noninterest expense (up 5.6% to $15.3 billion) and provision expense (up 2.2% to $672.7 million).
- Net Interest Income Increases 3.7% from Second Quarter 2018: Net interest income rose by $4.9 billion (3.7%) from a year earlier to $139 billion in second quarter 2019. Slightly more than three out of four banks (75.1%) reported a year-over-year increase in net interest income. The average net interest margin remained stable from a year earlier at 3.39%.
- Total Loan and Lease Balances Increase from the Previous Quarter and a Year Earlier: Total loan and lease balances rose by $152.2 billion (1.5%) from first quarter 2019. Growth among major loan categories was led by consumer loans, which includes credit cards, (up $42.2 billion, or 2.5%) and residential mortgage loans (up $38.3 billion, or 1.8%). Over the past 12 months, total loan and lease balances rose by 4.5%, a slight increase from the 4.1% annual growth rate reported last quarter. Commercial and industrial loans registered the largest dollar increase from a year earlier (up $142.7 billion, or 6.9%).
- Asset Quality Indicators Improve Modestly: The amount of loans that were noncurrent (i.e., 90 days or more past due or in nonaccrual status) fell by $4.9 billion (4.8%) during the second quarter. Noncurrent balances declined for all major loan categories, especially for residential mortgages (down $2.1 billion, or 5%) and credit card balances (down $1.1 billion, or 8.7%). The average noncurrent loan rate declined by 6 basis points from the previous quarter to 0.93%. Net charge-offs increased by $1.1 billion (9.3%) from a year ago, and the average net charge-off rate rose to 0.50%.
- The Number of Banks on the "Problem Bank List" Declines to 56: The number of problem banks fell from 59 to 56 during the second quarter, the lowest number of problem banks since first quarter 2007. Total assets of problem banks increased from $46.7 billion in the first quarter to $48.5 billion.
- The Deposit Insurance Fund's Reserve Ratio Rises to 1.40%: The Deposit Insurance Fund (DIF) balance increased by $2.6 billion from the previous quarter to $107.4 billion. The quarterly increase was mainly driven by assessment income, but unrealized gains on securities held by the DIF and a reduction in losses from past failures made considerable contributions. The reserve ratio increased by 4 basis points from the previous quarter to 1.40%.
- Changes in the Number of Banks Reflect Mergers and New Bank Openings: During the second quarter, five new banks opened, 60 institutions were absorbed through merger transactions, and one institution failed.