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FDIC sees higher net interest margins, higher profits for banks in Q1

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FDIC sees higher net interest margins, higher profits for banks in Q1

Net income continued to build for Federal Deposit Insurance Corp.-covered institutions in the first quarter of 2019, the regulator said in its latest quarterly banking profile.

The FDIC said the aggregate net income of 5,362 financial institutions rose to $60.7 billion in the three-month period, an 8.7% increase from the year-ago quarter. The improvement in net income was primarily driven by higher net interest income. According to the report, almost two out of every three banks reported year-over-year increases in net income, and fewer than 4% of banks reported net losses in the quarter.

The institutions' net interest income rose 6% from a year ago to $139.3 billion, with 79.2% of banks reporting an improvement in the figure. Net interest margin expanded to 3.42% from 3.32% in the year-ago quarter. Banks with assets greater than $250 billion reported the largest annual increase in net interest margin at almost twice the rate of all other institution size groups.

On an annualized basis, loan and lease balances fell to 4.1% from the previous quarter's 4.4% annual growth rate.

FDIC Chair Jelena McWilliams encouraged banks in a news release to "maintain prudent risk management in order to support lending through this economic cycle."

Noncurrent loans increased by $461.6 million, or 0.5%, compared to the previous quarter, with less than half of all banks reporting increases in noncurrent loan balances.

Meanwhile, the country's 4,930 community banks saw a 10.1% increase in net income over the past year, hitting $6.5 billion, up from about $5.90 billion in the year-ago quarter.

Overall, the number of "problem banks" fell to 59 from 60 in the previous quarter, the lowest number since the first quarter of 2007. Total assets of those banks declined to $46.7 billion from $48.5 billion. No banks failed during the quarter, while merger activity led to 43 institutions being absorbed, the FDIC said. One new charter also opened.

The FDIC's deposit insurance fund also increased by $2.3 billion during the quarter, bringing the total amount to $104.9 billion. The deposit insurance fund reserve ratio remained at 1.36%.