Dive Brief:
- The country's 5,177 federally insured banks generated $233.1 billion in net income last year, down 1.5% from the previous year, the Federal Deposit Insurance Corp. (FDIC) reported this week.
- Net interest margin also declined from a year ago, to 3.3%.
- 51 institutions were listed on the FDIC's problem bank list, down from 55.
Dive Insight:
"The banking industry remains strong, despite declines in full-year and quarterly net income," FDIC chair Jelena McWilliams said. "Loan balances continue to rise, asset quality indicators are stable, and the number of 'problem banks' remains low."
The performance of community banks — those with assets of up to $10 billion, generally — continues to be particularly strong, the FDIC data show.
For the last quarter of 2019, their net income increased $270.3 million, up 4.4% from last year, to $6.4 billion. Almost 54% had net income growth, driven in part by a 2.1% increase in net interest income because of strong loan growth, which was up 5.5%.
"Net income at community banks improved because of higher net operating revenue," McWilliams said. "The annual loan growth rate at community banks exceeded the overall industry."
FDIC recognizes 4,750 institutions as community banks.
For all banks, net interest margin declined by an average 20 basis points from a year ago, to 3.28%. This was the first annual decline since the third quarter of 2013. Lower yields on earning assets drove the reduction, the FDIC said.
Overall, asset quality indicators remain stable, FDIC said. Noncurrent balances declined for all major loan categories except for credit card loans, which increased by $1.3 billion, or 10.3%. Net charge-offs rose by $1.3 billion (10.4%) from a year ago, and the average net charge-off rate rose by 4 basis points to 0.54%.
McWilliams called on banks to build on their relatively stable performance by dampening risk taking. "In the current economic environment, the FDIC encourages banks to maintain careful underwriting standards and prudent risk management," she said.