trending Market Intelligence /marketintelligence/en/news-insights/trending/SEeuEFA-5DG4aYtDAJOZqQ2 content esgSubNav
In This List

Community banks' net income soars in Q2, FDIC quarterly report says

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Community banks' net income soars in Q2, FDIC quarterly report says

Net income continued to tick up for Federal Deposit Insurance Corp.-covered institutions in the second quarter, with community banks seeing the biggest gains, the regulator said in its latest quarterly banking profile.

The FDIC said the country's 4,874 community banks experienced an 8.1% increase in net income over the past year, hitting $6.9 billion in the second quarter, up from about $6.38 billion in the second quarter of 2018.

The aggregate net income of all 5,303 financial institutions covered by the FDIC rose to $62.6 billion in the three-month period, a 4.1% increase from the year-ago quarter.

The improvement in overall net income was primarily driven by higher net interest income and an increase in realized securities gains. According to the report, nearly 60% of all banks reported year-over-year increases in net income, and less than 4% of banks were unprofitable during the quarter.

The institutions' net interest income rose 3.7% from a year ago to $139.0 billion, with 75.1% of banks reporting an improvement in the figure from the year-ago quarter. Net interest margin ticked up to 3.39% from 3.38% in the second quarter of 2018.

On an annualized basis, loan and lease balances grew 4.5% from the previous quarter's 4.1% annual growth rate.

FDIC Chair Jelena McWilliams cautioned that with recent short-term interest rate cuts and the inversion of the yield curve in the second quarter, "challenges for banks in lending and funding may emerge."

"Therefore, banks need to maintain rigorous underwriting standards and prudent risk management in order to support lending through the economic cycle," McWilliams said.

Noncurrent loans decreased by $4.9 billion, or 4.8%, compared to the previous quarter, with roughly half of all banks reporting declines in noncurrent loan balances.

Overall, the number of "problem banks" fell to 56 in the second quarter from 59, the lowest number since the first quarter of 2007. Total assets of those banks increased to $48.5 billion from $46.7 billion. One bank failed during the quarter, while merger activity led to 60 institutions being absorbed, the FDIC said.

The FDIC's deposit insurance fund also increased by $2.6 billion during the quarter, bringing the total amount to $107.4 billion. The deposit insurance fund reserve ratio rose to 1.40%.