FDIC Quarterly Banking Profile 4Q2019 – Summary

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The FDIC has released their “Quarterly Banking Profile: Fourth 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 observed that in 4Q2019, with an aggregate net income of $55.2B, and a decrease of $4.1B, or 6.9% year-over-year (YoY) decrease. The annual decline has primarily attributed from lower net income and higher non interest expense. The percentage of unprofitable banks 4Q2019 remain stable from a year ago at 7.2%. Community Banks reflected an increase in the fourth quarter net income of $207.3 million (4.4%) from a year ago to $6.4B. Community Banks reported higher net operating revenue and greater realized gains on securities of 53.9% and have reported an annual increase in earnings.


Net Interest Income

Year–over-year, Net Income declined by $3.4B (a decrease of 2.4%), marking this the first annual decline since the 3Q2013. Many Banks responded to low interest-rate environment by growing long- term assets, but these assets generated lower yields and contributed to the NIM decline. Community Banks increased in net interest income was attributable to the growth in earning assets. The average quarterly NIM declined 3.62% as the average yield on earning assets declined and the average cost of funding earning assets increased. Approximately 70% community banks reported lower NIM year-over-year.


Loan Balances (Insured Institution Performance)

Total Loan and Lease Balances increased by $117.9B (1.1%) from 3Q2019.

The major loan categories registered quarterly increases; that was discussed are:

  • Consumer loans increased to $58.2B (3.3%)
  • Non farm, Nonresidential Loans increased to $21.6B (1.4%)
  • Residential Mortgages increased to $19.1B (0.9%)

During the 12 months ended December 31, total loan and lease balances rose by $366.3B (3.6%), slightly below the annual growth rate reported in 3Q2019. The slowdown in the annual growth of total loan and leases wed led by C&I portfolio, which expanded at its slowest rate since 2010 of 1.9%.


More than 70% Percent of Banks Report Annual Loan Growth (Community Banks Performance)

Community Banks loan and lease balance increased $81.8B (5.5%) Banks Report Annual Loan Growth the following categories:

  • Nonfarm nonresidential loans rose by 32.2B (7.3%)
  • 1-4 family loans rose by $12.7B (3.3%)
  • Construction and development loans rose by $8.1B (7.7%)

All major categories grew in 2019 and 72.3% of Community Banks recorded annual growth. Community Banks continued to report strong annual growth in unfunded commitments. The total of unfunded commitments increased $22.6B (7.8%), marking the third consecutive quarter of growth greater than 7% Most Banks (59.1%) reported quarterly loan growth, the rate slow down 1% form 1.3% in 3Q2019.

  • The Stronger growth primarily came from the following categories:
  • Nonfarm nonresidential loan rose by $9.8B (2.1%)
  • Commercial and Industrial loans rose by $3.9B (1.9%)
  • Multifamily loans rose by $1.6B (1.6%)

Multifamily Loan was partially offset by a modest decline in;

  • 1-4 family loans down by $0.7B (o.2%),
  • Seasonal decline in Agricultural production down by $1.2B (2.3%)

The total unfunded commitments grew by $4B (1.3%), this was led by C&I unfunded commitments of $2.2B (2.2%).


Loan-Loss Provisions

In 4Q2019 banks set aside $14.8B in loan-loss provisions, and an increase of $779 million (5.5%) from over a year ago. Year-over-year, more than one third (38%) of all banks reported increases in loan-loss provisions. This increase was derived from mostly larger institutions. Net operating revenue increased to 7.3% during 4Q2019, this is the highest it has been since 4Q2012.


Net Charge off Rate

From 4Q2018 there has been an increase in net charge-offs of $1.3B (10.4%), totaling $13.9B during the 4Q2019. The Largest contributing factor to the year-over-year increase was the commercial and industrial loan portfolio of $591.2 million or 34.3%. The credit card portfolio was another driver of this increase of $409.9 million or 5.0%. The average net charge-off rate increase from 0.32% in 4Q2018 to 4Q2019 0.42%. An increase in net charge-off rates also occurred in the community banks. Specific to Community Bank’s the net charge-off rate for loans increased 3 basis points to 0.18% The net charge-off rate for C&I and consumer loans is the primary reason for this increase. In 4Q2019 C& I loan net charge-off rate increased 14 basis point to 0.52%, and the consumer loan increased 12 basis point to 1.10%.


Non current Loan Rate

Non accrual status, or 90 days or more past due remained relatively stable declined $46,4 million (0.05%) lower than 3Q2019. Approximately half of the banks (51.2%) reported a decline in non current loan balances. All major loan categories are declining from the previous quarter. The credit card portfolio is the only category that has increased by $1.3 million (10.3%).


New Banks

Commercial banks and Saving institutions declined from 5,258 to 5177 during 4Q2019. In 4Q2019 three new banks were added, 77 institutions were absorbed by mergers, and three banks failed. The year of 2019, 13 new banks were added, 226 institutions were absorbed by mergers, and four banks failed. The FDIC’s “Problem Bank List” fell from 55 at the end of 3Q2019 to 31 at 4Q2019. Aggregate total of assets of problem bank declined from $48.8B in 3Q2019 to $46.2B in 4Q2019. FDIC reports that Community Banks in 4Q2019 declined by 77 to 4750. Within Community Banks there was 72 mergers and consolidations, four voluntary closure, and three failures. Two community banks did whoever open during 4Q2019. In 2019, Community banks ended off the year with a decline of 230 banks, four banks failed, and 12 new institutions opened.


(1) Federal Deposit Insurance Corporation