U.S. banks insured by the Federal Deposit Insurance Corporation (FDIC) saw net income increase 11.4 percent in the second quarter, according to the FDIC’s Quarterly Banking Profile.
The 4,539 commercial banks and savings institutions insured by the FDIC reported aggregate net income of $71.5 billion in Q2, up 11.4 percent from the prior quarter.
A key factor in the net income gains was the overall decline in noninterest expenses, which dropped 2.4 percent. Expenses fell in part due to an estimated $4 billion reduction in reported expenses related to the FDIC special assessment.
The expense reductions, coupled with a 1.5 percent jump in higher noninterest income and higher gains on the sale of securities, drove the increase in net income.
Specifically, banks saw $10 billion in gains on equity security transactions by large banks, and the sale of an institution’s insurance division that resulted in an after-tax $4.9 billion gain. These increases were partially offset by several large banks selling bond portfolios at a loss and a $2.7 billion increase in provision expense.
Community banks, which account for 4,104 of the 4,539 banks, saw net income rise 1,1 percent to $6.4 billion in the second quarter. Higher net interest income, up 2.7 percent, and higher noninterest income, up 5.0 percent, more than offset a 2.1 percent increase in noninterest expense and an 18.2 percent jump in provision expenses.
Among other highlights, the overall banking industry reported an aggregate return-on-assets ratio (ROA) of 1.20 percent, up 12 basis points from first quarter 2024 but down one basis point from second quarter of 2023. Community bank ROA increased one basis point from last quarter to 1.14 percent.
Also, the industry’s net interest margin (NIM) declined one basis point to 3.16 percent in the second quarter as the growth in funding costs slightly exceeded the growth in earning-asset yields. The second quarter NIM was nine basis points below the pre-pandemic average.
However, the NIM increased quarter over quarter for all size groups except for the largest banks with assets over $250 billion. Large banks reported a four basis-point decline in the NIM, while community bank NIM increased seven basis points quarter over quarter to 3.30 percent.
Here are some other statistics from Q2:
• The net charge-off rate for banks increased three basis points to 0.68 percent from the prior quarter and was 20 basis points higher than the year-ago quarter.
• Total loan and lease balances increased $125.8 billion, or 1.0 percent, from the previous quarter, and 2.0 percent from the same quarter in the prior year.
• Domestic deposits decreased $197.7 billion, or 1.1 percent, from first quarter 2024, well below the pre-pandemic average second-quarter growth rate of 0.2 percent.
• The Deposit Insurance Fund (DIF) balance increased $3.9 billion to $129.2 billion, while the reserve ratio increased four basis points to 1.21 percent.
• The total number of FDIC-insured institutions declined by 29 during the quarter to 4,539. Three banks were sold to credit unions and 26 merged with other banks.