Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported net income of $48.3 billion in the second quarter of 2017, up $4.7 billion (10.7 percent) from a year earlier.
The increase in earnings was mainly attributable to a $10.3 billion (9.1 percent) increase in net interest income and a $654 million (1 percent) increase in noninterest income.
“This was another positive quarter for the banking industry,” FDIC Chairman Martin Gruenberg said. “Revenue and net income growth were both strong, profitability reached a post-crisis high, and net interest margins improved. While the quarterly results were largely positive, the operating environment for banks remains challenging.”
Of the 5,787 insured institutions reporting second quarter financial results, 63.4 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the first quarter fell to 4.1 percent from 4.6 percent a year earlier.
Community bank also had a strong quarter with a $444.5 million (8.5 percent) increase in net income. Net operating revenue was $1.5 billion (6.9 percent) higher, as net interest income was up $1.5 billion (8.9 percent). Noninterest income registered a small ($2.3 million, 0.05 percent) decline from a year ago. Loan-loss provisions increased $185 million (26 percent), while noninterest expenses were $616.2 million (4.3 percent) higher.
“Community banks also reported another solid quarter of revenue, net income, and loan growth,” Gruenberg said. “However, as the economy enters the ninth year of an expansion characterized by modest growth, the annual rate of loan growth continued to slow for a third consecutive quarter. The industry must manage interest-rate risk, liquidity risk, and credit risk carefully to remain on a long-run, sustainable growth path.”
The report also found that the average return on assets rose to 1.14 Percent – the highest in 10 years. More than half of all banks – 55.5 percent – reported year-over-year increases in their ROAs.
In addition, the number of “problem banks” fell from 112 to 105 during the second quarter. This is the smallest number of problem banks since March 31, 2008, and is nearly 90 percent less than the post-crisis peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $23.7 billion to $17.2 billion during the second quarter.