Commercial banks and savings institutions insured by the FDIC reported aggregate net income of $25.5 billion in Q4/17 was down $17.7 billion (40.9%) from a year ago. The decline in net income is primarily due to one-time income tax effects from the new tax law, including the revaluation of deferred tax assets and repatriation of income from foreign subsidiaries.

“One-time charges resulting from the new tax law resulted in banks reporting lower net income in the fourth quarter and full-year 2017,” FDIC Chairman Martin J. Gruenberg said. “Despite the decline in net income, the banking industry continued to show steady improvement. Loan balances grew, net interest margins increased, asset quality remained stable, and the number of ‘problem banks’ continued to fall.”

Gruenberg continued: “Community banks also were affected by one-time tax charges. However, their net interest income increased, net interest margins improved, and their loan growth outpaced that of the overall industry.”

“The operating environment for banks, however, remains challenging. An extended period of low interest rates and an increasingly competitive lending environment have led some institutions to reach for yield. This has led to heightened exposure to interest-rate risk, liquidity risk, and credit risk. These risks must be managed prudently for the industry to continue to grow on a long-run, sustainable path.”