Q1 Net Income Of FDIC Banks Drops 70%

Net income fell nearly 70 percent in the first quarter for the commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation, according to the FDIC’s quarterly banking profile released Tuesday.

The 5,116 banks totaled $18.5 billion in net income in the quarter, a drop of $42.2 billion from a year ago.

“The banking industry has been a source of strength for the economy in the first quarter despite unexpected shocks,” FDIC Chairman Jelena McWilliams said. “Although bank earnings were negatively affected by increases in loan loss provisions, banks effectively supported individuals and businesses during this downturn through lending and other critical financial services.”

Other highlights from the report include:

Net Interest: The average net interest margin declined 29 basis points from a year ago to 3.13 percent. Net interest income declined by $2 billion (1.4 percent) from a year ago, with falling yields on earning assets contributing to the decline.

Community Banks: The 4,681 FDIC-insured community banks reported quarterly net income of $4.8 billion, representing a decline of $1.3 billion, or 20.9 percent. Provision expenses grew to $1.8 billion—three times the amount reported in first quarter 2019, hampering community bank profitability despite an increase in net operating revenue. 

Loan Balances: Total loan and lease balances increased by $442.9 billion (4.2 percent) from the previous quarter.

Noncurrent Loans: Loans that were 90 days or more past due increased by $7 billion (7.3 percent) from the previous quarter.

Reserve Ratio: The Deposit Insurance Fund balance totaled $113.2 billion in the first quarter, an increase of $2.9 billion from the previous quarter. The quarterly increase was led by unrealized gains on available-for-sale securities and assessment income. The reserve ratio declined 2 basis points from fourth quarter 2019 to 1.39 percent, due to the growth in estimated insured deposits.

Problem Banks: The number of problem banks increased from 51 to 54 during the first quarter, the first quarterly increase since 2011. However, the number of problem banks remains near historic lows. Total assets of problem banks declined from $46.2 billion in the fourth quarter to $44.5 billion.

“Notwithstanding these disruptions, at the end of the first quarter, bank capital and liquidity levels remain strong, asset quality metrics are stable, and the number of ‘problem banks’ remains near historic lows,” McWilliams said.