WASHINGTON—Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $39.8 billion in the first quarter of 2015, up $2.6 billion (6.9%) from a year earlier.
The FDIC said the increase in earnings was mainly attributable to a $4.3-billion rise in net operating revenue (net interest income plus total noninterest income). The financial results for the first quarter of 2015 are included in the FDIC's latest Quarterly Banking Profile released today.
According to the FDIC, of the 6,419 insured institutions in the first quarter of 2015, nearly two-thirds (62.7%) reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable during the first quarter fell to 5.6% from 7.4% a year earlier.
Among the highlights in the first quarter report:
- Net Operating Revenue of $168.4 Billion Is 2.6% Higher Than a Year Ago. Stronger loan growth helped lift revenue at most banks, as net interest income rose $1.5 billion (1.5%) compared to the first quarter of 2014. Noninterest income was $2.8 billion (4.6%) higher as trading income increased $1.5 billion (23.9%) and income from the sale, securitization, and servicing of 1-4 family residential real estate loans rose $545 million (15.6%).
- Quarterly Earnings at Community Banks Rise 16%. The 5,946 insured institutions identified as community banks reported $4.9 billion in net income in the first quarter, an increase of 16% from the first quarter of 2014. Net operating revenue of $21.5 billion at community banks was $1.7 billion (8.7%) higher than a year earlier, according to FDIC.
- Asset Quality Indicators Show Further Improvement. Net loan losses declined year-over-year for the 19th consecutive quarter, while noncurrent loan balances declined for a 20th consecutive quarter. Quarterly net charge-offs were $1.4 billion (13.2%) lower than a year earlier. The annualized net charge-off rate fell to 0.43% from 0.52% a year ago and was the lowest quarterly rate since the third quarter of 2006. The amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) declined $9.7 billion (6%) in the first quarter of 2015.
- Net Interest Margins Remain Under Pressure. The average net interest margin (the difference between the average yield on banks' interest-earning investments and the average interest expense of funding those investments) declined to 3.02% in the first quarter from 3.12% in the fourth quarter of 2014 and 3.16% in first quarter 2014. Asset yields fell more rapidly than funding costs as higher-yielding assets matured and were replaced by lower-yielding investments in an environment of low interest rates. Average margins at community banks of 3.55% in the first quarter were down from 3.63% in the fourth quarter of 2014 and 3.57% in first quarter 2014.
- Loan Growth Edges Up: Total loan and lease balances increased $52.5 billion (0.6%) during the first three months of 2015. For the 12 months ended March 31, loans and leases increased $431.2 billion (5.4%), the biggest increase since mid-2008. At community banks, loan balances rose 1.3% during the first quarter of 2015 and increased 9.1% during the past 12 months, FDIC said.
- "Problem List" Continues to Shrink. The number of banks on the FDIC's Problem List fell from 291 to 253 during the first quarter. This is the smallest number of banks on the Problem List in six years. The number of problem banks was down 72% from the peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $86.7 billion to $60.3 billion during the first quarter.
- Deposit Insurance Fund (DIF) Rises $2.5 Billion to $65.3 Billion. The DIF increased from $62.8 billion to $65.3 billion in the first quarter, largely driven by $2.2 billion in assessment income. The DIF reserve ratio rose to 1.03% from 1.01% during the quarter.