The FDIC said insured commercial banks and savings institutions reported aggregate net income of $39.8 billion in Q1/15, up $2.6 billion (6.9%) from a year earlier. The FDIC said the increase in earnings was mainly attributable to a $4.3 billion rise in net operating revenue (net interest income plus total noninterest income). Noninterest income was $2.8 billion (4.6%) higher as trading income increased $1.5 billion (23.9%).

In a special asset size distribution report on U.S. banks with assets greater than $10 billion (94), the FDIC notes that the yield on earning assets and net interest margin in Q1/15 was 3.12% and 2.83%, respectively, down from 3.32% and 3.00% in Q1/14. The cost of funding earnings assets in Q1/15 was .29% compared to .32% in the same quarter last year.

Of the 6,419 insured institutions in the first quarter of 2015, nearly two-thirds (62.7%) reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable during the first quarter fell to 5.6% from 7.4% a year earlier.

“The banking industry continued to show gradual but steady improvement during the quarter,” FDIC chairman Martin J. Gruenberg said. “Revenue, earnings, and loan balances were up; asset quality continued to improve; and the number of banks on the ‘Problem List’ declined to the lowest level in more than six years. Nearly two-thirds of banks reported higher earnings than a year ago.

“Community banks reported improved performance during the quarter that outpaced the overall industry,” he said. “Their earnings were up significantly from a year ago, and their loan growth was appreciably higher than the rest of the industry.”

Chairman Gruenberg concluded: “The current interest-rate environment remains challenging for banks. Revenue growth remains subdued, and net interest margins have continued to decline. Many institutions have responded by reaching for yield, which is a matter of ongoing supervisory attention.”

Highlights from the Q1/15 Quarterly Banking Profile:

• 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) declined to 3.02% in Q1/15 from 3.12% in Q4/14 and 3.16% in Q1/14.
• Asset yields fell more rapidly than funding costs as higher-yielding assets matured and were replaced by lower-yielding investments in an environment of low interest rates.
• Stronger loan growth helped lift revenue at most banks, as net interest income rose $1.5 billion (1.5%) compared to Q1/14.
• The 5,946 insured institutions identified as community banks reported $4.9 billion in net income in the first quarter, an increase of 16% from the first quarter of 2014.
• Quarterly net charge-offs were $1.4 billion (13.2%) lower than a year earlier. The annualized net charge-off rate fell to 0.43% from 0.52% a year ago and was the lowest quarterly rate since the third quarter of 2006.
• Net operating revenue of $21.5 billion at community banks was $1.7 billion (8.7%) higher than a year earlier.

To view the full FDIC report, click here.

To view the full FDIC Report with asset size distribution detail, click here.