FDIC: Insured Banks Set Q2 Net Income Record

The FDIC reported that commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $43.0 billion in the second quarter of 2015, up $2.9 billion (7.3%) from a year earlier and the highest quarterly income on record.

The FDIC said the increase in earnings was mainly attributable to a $3.6 billion rise in net operating revenue (net interest income plus total noninterest income). Financial results for the second quarter of 2015 are included in the FDIC’s latest Quarterly Banking Profile released today.

Of the 6,348 insured institutions in the second quarter of 2015, more than half (58.7%) reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable during the second quarter fell from 6.8% a year earlier to 5.6%, the lowest since the first quarter of 2005.

“Bankers generally reported another quarter of higher earnings, improved asset quality, and increased lending,” Gruenberg said. “There were fewer problem banks, and only one bank failed during the second quarter.
“However,” he continued, “the low interest-rate environment remains a challenge. Many institutions have responded by acquiring higher-yielding, longer-term assets, but this has left banks more vulnerable to rising interest rates and that is a matter of ongoing supervisory attention.”

Highlights from the Second Quarter 2015 Quarterly Banking Profile

  • Net operating revenue of $172.9 billion is 2.1% higher than a year ago,
  • Loan growth helped lift revenue at most banks, as net interest income rose $2.4 billion (2.3%) compared to the second quarter of 2014.
  • Noninterest income was $1.2 billion (1.9%) higher as servicing income increased $1.8 billion (63.9%) and trading income fell $904 million (14.1%).
  • Net loan losses declined year-over-year for the 20th consecutive quarter, while noncurrent loan balances declined for a 21st consecutive quarter. Quarterly net charge-offs were $1.1 billion (11.2%) lower than a year earlier. The annualized net charge-off rate fell to 0.42% from 0.50% 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 $8.3 billion (5.4%) in the second quarter of 2015.
  • 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) rose to 3.06% in the second quarter from 3.02% in the first quarter, but remained below the 3.15% average in second quarter 2014. Average margins at community banks of 3.57% in the second quarter were up from 3.54% in the first quarter, but down from 3.61% in second quarter 2014.
  • Total loan and lease balances increased $185 billion (2.2 percent) during the second quarter. For the 12 months ended June 30, loans and leases increased $437.8 billion (5.4%). At community banks, loan balances rose 2.7% during the second quarter of 2015 and increased 8.8% during the past 12 months.

Access the full release from the FDIC here.

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