Community banks report big profits

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $60.2 billion in the second quarter of 2018, up $12.1 billion (25.1 percent) from a year ago. The improvement in earnings was attributable to higher net interest income and a lower effective tax rate. Financial results for the second quarter of 2018 are included in the FDIC’s latest Quarterly Banking Profile released today.

Of the 5,542 insured institutions reporting second quarter financial results, more than 70 percent reported year-over-year growth in quarterly earnings. The percent of unprofitable banks in the second quarter declined to 3.8 percent from 4.3 percent a year ago.

“The banking industry once again reported positive results for the quarter,” McWilliams said. “Net income rose through higher net interest income as well as noninterest income. Loan growth was experienced in all major loan portfolios, while loan performance continues to improve. Lastly the number of “problem banks” continued to fall. Community banks also reported a solid quarter with loan growth and a net interest margin that exceed the overall industry.”

“It is worth noting that the current economic expansion is the second longest on record, and the nation’s banks are stronger as a result. The competition to attract loan customers will be intense, and it will remain important for banks to maintain their underwriting discipline and credit standards.”

Industry Net Income Rose 25.1 Percent over the Past 12 Months, Led by Higher Net Operating Revenue and a Lower Effective Tax Rate: Quarterly net income totaled $60.2 billion for the second quarter, up $12.1 billion (25.1 percent) from a year ago. Higher net interest income and noninterest income, coupled with a lower effective tax rate, contributed to the increase in industry’s net income. The average return on assets increased to 1.37 percent, up from 1.13 percent in the second quarter of 2017.

Community Bank Net Income Increased 21.1 Percent from Second Quarter 2017: In the second quarter, 5,111 insured institutions identified as community banks reported $6.5 billion in net income, an increase of $1.1 billion (21.1 percent) from a year earlier. Higher net operating revenue and a lower effective tax rate boosted second-quarter net income. Net operating revenue rose by $1.8 billion (8 percent) from the second quarter of 2017, led by higher net interest income (up $1.6 billion, or 9 percent) and noninterest income (up $201.9 million, or 4.5 percent). Loan-loss provisions declined by $193.5 million (22.5 percent), while noninterest expenses were $934.2 million (6.6 percent) higher.

Read the full report here.