FDIC Quarterly Banking Profile 2Q2019 – Summary The FDIC has released their “Quarterly Banking Profile: Second Quarter 2019” report (1), which provides for a comprehensive summary of the most current financial results for the banking industry. The FDIC’s Quarterly release analyzes the economic and banking trends at the national and regional levels. Following is our summary of the reported data which is pertinent to Commercial Portfolios and Risk Management, as well as illustrating Community Bank performance indicators where available.
Net Income
Commercial and Savings Bank institutions insured by the FDIC performed well in 2Q2019, with an aggregate net income of $62.6 billion, and an increase of $2.5 billion, or 4.1% year-over-year (YoY) increase. The improvement in quarterly net income has been primarily attributed to higher net interest income and an increase and an increase in realized securities gain. The gain attributed from a increase in loan-loss provisions and non-interest expense. Approximately 60% of commercial and savings institutions reported and increase in net income YoY. The percentage of unprofitable banks in 2Q2018 declined to 4%. Community Banks reported net income of $6.9 billion in 2Q2019, which led to an increase of $522.2 million (8.1%) YoY. This growth was offset by the growth in net income (5.1%), non-interest income (4.7%), and gains on securities sales (656.7%) drove the annual increase in net income, which was partially offset by increase in non-interest expense (5.6%) and modest increase in provision expense. At the end of the 2Q2019 there was 4,874 community banks of the amount fifty-four merged, one community bank opened, as one community bank failed during 2Q2019.
Net Interest Income
Due to the slowest YoY growth rate, net interest income rose by $139 billion, up to $4.9 billion (3.7%) YoY. Majority of all banks reported an increase in net interest income (75.1%) from 2Q2019. Net interest Margin or difference between the interest income produced by banks or other financial institutions was 3.39% during this quarter and shown growth from 3.38% Margin in 2Q2018 and is both below recent high of 3.48% in 4Q2018. Community banks in the 2Q2019 rose $24 billion in net operating revenue, up to $1.2 billion from a year ago owing to growth in net interest income (5.1%) and non-interest income (4.7%). In 2Q2019, the interest income increases on non 1-4 family real estate loans (13.3%), commercial and industrial(C&I) loans (17.1%), and 1-4 family mortgage loans drove the increases in net interest income from a year ago. More than half of Community banks (56.8%) reported an increase in non-interest income from 2Q2018.
Loan-Loss Provisions
In 2Q2019 bank set aside $12.8 billion in loan- loss provisions during the quarter. During 2Q2019 loan- loss provisions had an increase of $1.1 billion (9.3%) since 2Q2018. With loan- loss provisions 36.1% of banks reported a YoY increase. A percentage of net operating revenue increased from 5.80% in 2Q2018 to 6.25%.
Loan Balances
Total Loan and Lease Balances rose by $152.2 billion (1.5%) higher compared with the previous quarter.
The growth in major loan categories registered quarterly; that was discussed are:
- Consumer loans, which rose by $42.2 billion (2.5%)
- Residential Mortgage loans, which increased by $38.3 billion (1.8%)
During the past 12 months ended, total loan and lease balance rose by $443 billion (4.5%), a modest increase from the 4.1% annual grow rate reported last quarter. Largest Dollar increase from a year ago
- Commercial and Industrial Loans, which increased by $142.8 billion (6.9%)
Reported year-over-year increases, led by:
Loan and Lease rose by $96.5 billion (6.3%)
- Commercial and Industrial Loans, which rose by $17.3 billion (8.5%),
- Construction and Development Loans, which rose by $9.4 billion (9%).
Net Charge Off Rate
Banks charged off $12.8 billion in uncollectable loans during the quarter, an increase $1.1 billion (9.3%) from a year ago. The one of the largest contributing factors in this increase is within with the commercial and industrial loan segment as this loan type had the largest annual dollar increase, $368.9 million (25.2%). Another increase was primarily driven by credit card balances which is $669.4 million (8.3%). The average net charge-off rate increased from 0.48% to 0.50% YoY. Net charge-off rates remain low also occurred in community banks. Specific to Community Banks’s the net charge-off rate loans increased $69 billion (19.3%) and in 2Q2018 was $20.6 million (5.1%). The net charge-off rate for C&I loans registered increase 7 basis points to 0.25% during this quarter.
Five New Banks Added to “Problem Bank List” in Second Quarter 2019
Commercial banks and savings institutions decline from 5,362 to 5,303 during the 2Q2019. During 2Q2019, 60 institutions were absorbed by mergers, and one bank failed. At the end of the second quarter the FDIC’s “Problem Bank List” declined from 50 to 56, which is the lowest number since first quarter of 2007.
