Commercial banks saw net income rise in the third quarter compared to the third quarter of 2016, led by a sharp increase in income for community banks, according to the Federal Deposit Insurance Corporation’s (FDIC) quarterly banking profile.
Banks earned $47.9 billion in the third quarter, up $2.4 billion, or 5.2 percent, from the previous year. The jump was mostly attributable to an $8.8 billion (7.4 percent) increase in net interest income.
Of the 5,737 FDIC-insured banks, 67.3 percent reported year-over-year growth, while just 3.9 percent were unprofitable. Among the different segments, community banks saw earnings increase the most, 9.4 percent.
“Third quarter results for the banking industry were largely positive,” Martin Gruenberg, FDIC chairman, said. “Revenue and net income were higher at most banks, net interest margin improvement was widespread, and the number of unprofitable banks and ‘problem banks’ continued to fall. Community banks also reported another solid quarter of revenue, net income, and loan growth.”
Gruenberg added that the operating environment for banks remains challenging.
“An extended period of low interest rates and an increasingly competitive lending environment have led some institutions to reach for yield,” Gruenberg said. “This has led to heightened exposure to interest-rate risk, liquidity risk, and credit risk. These risks must be managed prudently for the industry to continue to grow on a long-run, sustainable path.”