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The FDIC recently released its latest Quarterly Banking Profile for Q3 with positive results. The results include all FDIC-insured institutions. The profile is described by the FDIC as a “report card on industry status and performance.” The report looks at balance, loan performance, quarterly income, annual income, ratios by asset size, loans to small businesses and small farms, and ratios for community and non-community banks.
While we saw nonrecurring events at three large banks causing a 7.3% decline in quarterly net income, the results were favorable across the board. The industry still saw loan growth and the list of banks on the “problem bank list” remained low. Overall, over 60% of banks reported increases in net income and only 4.1% were unprofitable.
Community banks, however, were ahead of the curve, surpassing the rest of the industry in Q3. The net income at community banks improved “due to higher net operating revenue, and the annual rate of loan growth at community banks exceeded the overall industry,” says the FDIC. Community Banks’ net income increased 7.2% from Q3 of 2018. Net interest income overall only increased 1.2%, the lowest growth seen since Q4 of 2014.
Community banks also reported a higher average net interest margin than the industry overall. The FDIC reports, “large institutions previously benefited more than community banks from rising short-term interest rates, as large institutions have a greater share of assets that reprice quickly. With the recent reduction in short-term interest rates, we are seeing a reversal of this trend.”
Pretax return on assets was up to 1.51%, the highest quarterly pretax return on assets from community banks since Q3 of 2006. Other growth factors for community banks were net interest income, non-interest income, and gains on securities sales.
Loan growth rose slightly from 4.5% to 4.6%, mostly from commercial and industrial loans, consumer loans, and residential mortgages. Community banks saw an even larger increase of 6% in loan growth.
You can view the full report, press conference, and past reports here.
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