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FDIC QUARTERLY A
2019 Volume 13, Number 2
Federal Deposit Insurance Corporation
Quarterly Banking Profile: First Quarter 2019
Highlights: ■ Quarterly Net Income Increases 8.7 Percent From
First Quarter 2018 to $60.7 Billion
■ Net Interest Margin Improves to 3.42 Percent as the Increase in Asset Yield Outpaces the Rise in Funding Cost
■ Community Bank Net Income Increases 10.1 Percent Year Over Year
■ Insured Deposits Grow by 2.3 Percent
■ DIF Reserve Ratio Is Unchanged at 1.36 Percent
The FDIC Quarterly is published by the Division of Insurance and Research of the Federal Deposit Insurance Corporation and contains a comprehensive summary of the most current financial results for the banking industry. Feature articles appearing in the FDIC Quarterly range from timely analysis of economic and banking trends at the national and regional level that may affect the risk exposure of FDIC-insured institutions to research on issues affecting the banking system and the development of regulatory policy.
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Chairman Jelena McWilliams
Director, Division of Insurance and Research Diane Ellis
Executive Editor George French
Managing Editors Rosalind Bennett Alan Deaton Patrick Mitchell Shayna M. Olesiuk Philip A. Shively
Editors Clayton Boyce Kathy Zeidler
Publication Manager Lynne Montgomery
Media Inquiries (202) 898-6993
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FDIC QUARTERLY i
2019 FDIC QUARTERLY V o l u m e 1 3 • N u m b e r 2
Some of the information used in the preparation of this publication was obtained from publicly available sources that are considered reliable. However, the use of this information does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation. Articles may be reprinted or abstracted if the publication and author(s) are credited. Please provide the FDIC’s Division of Insurance and Research with a copy of any publications containing reprinted material.
Quarterly Banking Profile: First Quarter 2019 FDIC-insured institutions reported aggregate net income of $60.7 billion in the first quarter of 2019, up $4.9 billion (8.7 percent) from a year earlier. The increase in net income was mainly attributable to a $7.9 billion (6 percent) increase in net interest income. The average return on assets increased to 1.35 percent, up from 1.28 percent a year earlier. Almost two-thirds of all institutions reported annual increases in net income and less than 4 percent of institutions were unprofitable. See page 1.
Community Bank Performance Community banks—which represent 92 percent of insured institutions—reported net income of $6.5 billion in the first quarter, up $595 million (10.1 percent) from a year earlier. The increase was driven by higher net interest income (up $1.1 billion, or 6.4 percent), higher realized gains on securities (up $111 million, or 207 percent), and lower provision expense (down $138 million, or 17.3 percent). Lower noninterest income (down $84 million, or 1.9 percent) and higher noninterest expense (up $584 million, or 4 percent) partially offset improvements to net income. See page 15.
Insurance Fund Indicators The Deposit Insurance Fund (DIF) balance increased by $2.3 billion during the quarter to $104.9 billion on March 31, driven by assessment income, interest earned, and unrealized gains on securities. The DIF’s reserve ratio (the fund balance as a percent of estimated insured deposits) was 1.36 percent on March 31, 2019, unchanged from December 31, 2018, and up from 1.30 percent on March 31, 2018. See page 23.
2019 FDIC QUARTERLY
QUARTERLY BANKING PROFILE First Quarter 2019
FDIC QUARTERLY 1
INSURED INSTITUTION PERFORMANCE
Quarterly Net Income Increases 8.7 Percent From First Quarter 2018 to $60.7 Billion Net Interest Margin Improves to 3.42 Percent as the Increase in Asset Yield Outpaces the Rise in Funding Cost Loan Balances Drop Slightly From the Previous Quarter but Increase 4.1 Percent From a Year Ago Noncurrent and Net Charge-Off Rates Remain Stable The Number of Banks on the FDIC’s “Problem Bank List” Declines to 59
Net Income Increases 8.7 Percent From First Quarter 2018 to $60.7 Billion
The aggregate net income for the 5,362 FDIC-insured commercial banks and savings institu- tions totaled $60.7 billion in first quarter 2019, an increase of $4.9 billion (8.7 percent) from a year ago. The improvement in net income was led by higher net interest income, which reflected a modest growth in interest-earning assets and wider net interest margins (NIM). Almost two out of every three banks (62.3 percent) reported year-over-year increases in net income, and less than 4 percent of banks reported net losses for the quarter. The average return on assets rose to 1.35 percent, an improvement from the 1.28 percent a year earlier.
Net Interest Income Expands 6 Percent From a Year Ago
Net interest income of $139.3 billion rose by $7.9 billion (6 percent) from 12 months ago, as more than three out of every four banks (79.2 percent) reported year-over-year increases. NIM for the banking industry increased by 10 basis points from a year ago to 3.42 percent, as average asset yields (up 49 basis points) increased by more than average funding costs (up 39 basis points). The largest institutions (banks with assets greater than $250 billion) reported the largest annual increase in NIM (up 11 basis points), almost twice the rate of all other institution size groups.
Loan-Loss Provisions Rise Almost 12 Percent From First Quarter 2018
Banks allocated $13.9 billion in loan-loss provisions in the first quarter, an increase of $1.5 billion (11.8 percent) from a year earlier. Slightly more than one-third of all banks (35.2 percent) reported annual increases in loan-loss provisions. A large portion of the annual increase was concentrated among the largest banks.
Securities and Other Gains/Losses, Net Net Operating Income
Quarterly Net Income All FDIC-Insured Institutions $ Billions
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Quarterly Noninterest Income Quarterly Net Interest Income
Quarterly Net Operating Revenue All FDIC-Insured Institutions
0 20 40 60 80
100 120 140 160 180 200 220
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2019 • Volume 1 3 • Number 2
2 FDIC QUARTERLY
Noninterest Income Declines 2.9 Percent From a Year Ago
Noninterest income declined by $2 billion (2.9 percent) from a year ago, due to lower servic- ing fees, which fell by $2.1 billion (58.3 percent), and all other noninterest income, which declined by $1.1 billion (3.6 percent). Despite the overall decline in noninterest income, trading revenue rose by $2.5 billion (32.8 percent). Slightly more than half of all banks (52.6 percent) reported annual declines in noninterest income.
Noninterest Expense Declines From First Quarter 2018
Noninterest expense fell by $427.1 million (0.4 percent) from a year earlier. The increase in salary and employee benefits (up $1.1 billion, or 2 percent) was offset by a decline in all other noninterest expense (down $1.4 billion, or 3 percent). The average assets per employee increased from $8.4 million in first quarter 2018 to $8.8 million.
Net Charge-Offs Increase 5.5 Percent From 12 Months Ago
During the first quarter, banks charged off $12.7 billion in uncollectable loans, an increase of $667.9 million (5.5 percent) from first quarter 2018. Credit card balances reported the largest year-over-year dollar increase in net charge-offs, increasing by $543.4 million (6.6 percent). The average net charge-off rate remained unchanged from a year ago (0.50 percent). For eight out of the past ten quarters, the net charge-off rate for credit cards increased, reaching 3.97 percent for the current quarter.
Noncurrent Loan Rate Remains Below 1 Percent
Noncurrent loan balances (90 days or more past due or in nonaccrual status) increased by $461.6 million (0.5 percent) from the previous quarter. Less than half of all banks (41.2 percent) reported increases in noncurrent loan balances. The quarterly increase was in commercial and industrial loan balances, which rose by $3.3 billion (22.8 percent), the largest quarterly dollar increase since first quarter 2016. The banking industry continued to reduce noncurrent loans for residential mortgages, which declined by $2.2 billion (5 percent) from the previous quarter. The average noncurrent rate remained unchanged from the pre