WASHINGTON–FDIC insured commercial banks and savings institutions reported aggregate net income of $47.9 billion in the third quarter of 2017, up $2.4 billion (5.2%) from a year earlier.
The increase in earnings was mainly attributable to an $8.8-billion (7.4%) increase in net interest income, according to the FDIC’s latest Quarterly Banking Profile. The report found the average net interest margin rose to 3.30%, from 3.18% a year earlier, the highest average net interest margin for the industry since the fourth quarter of 2012.
Of the 5,737 insured institutions reporting third quarter financial results, 67.3% reported year-over-year growth in quarterly earnings. The FDIC said the proportion of banks that were unprofitable in the third quarter fell to 3.9% from 4.6% a year earlier.
“Third quarter results for the banking industry were largely positive,” said FDIC chairman Martin Gruenberg. “Revenue and net income were higher at most banks, net interest margin improvement was widespread, and the number of unprofitable banks and ‘problem banks’ continued to fall. Community banks also reported another solid quarter of revenue, net income, and loan growth.”
Gruenberg added, however, “While the quarterly results were largely favorable, the industry continued to see a gradual slowdown in the annual rate of loan growth. In addition, the operating environment for banks remains challenging. An extended period of low interest rates and an increasingly competitive lending environment have led some institutions to reach for yield. This has led to heightened exposure to interest-rate risk, liquidity risk, and credit risk. These risks must be managed prudently for the industry to continue to grow on a long-run, sustainable path.”
Among the highlights in the FDIC’s Q3 data:
- Quarterly earnings were $2.4 billion (5.2%) higher than in the third quarter of 2016 due to relatively strong growth in net interest income and limited growth in operating expenses. The average return on assets rose to 1.12%, from 1.10% in the third quarter of 2016. More than two-thirds of all banks — 67.3% — reported higher quarterly earnings than a year earlier, the FDIC said. The percentage of banks reporting net losses for the quarter fell to 3.9%, from 4.6% in the third quarter of 2016.
- Net interest income totaled $127.5 billion, an increase of $8.8 billion (7.4%) from a year earlier. More than 80% of all banks reported higher net interest income than in the prior year. The average net interest margin rose to 3.30%, from 3.18% a year earlier. This is the highest average net interest margin for the industry since the fourth quarter of 2012, according to the FDIC. Total noninterest income was $639 million (1%) lower than a year earlier.
- The 5,294 insured institutions identified as community banks reported $6 billion in net income in the third quarter, up $513 million from the prior year. Net operating revenue was $1.5 billion (6.7%) higher, as net interest income was up $1.7 billion (9.7%). Noninterest income declined $174.2 million (3.4%). Loan-loss provisions increased $39.8 million (5.5%), while noninterest expenses were $631.7 million (4.3%) higher, the FDIC said.
- Loan and lease balances increased 1% during the three months ended Sept. 30. All major loan categories registered growth during the third quarter. Residential mortgage loans increased $20.5 billion (1%) from the prior quarter, credit card balances rose $15.7 billion (2%), and loans to finance nonfarm nonresidential real estate grew $12.1 billion (0.8%). For the 12 months ended Sept. 30, loan and lease balances rose $321.6 billion (3.5%).