Banks see mixed results in first quarter

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation reported aggregate net income of $39.1 billion in the first quarter of 2016, down $765 million (1.9%) from a year earlier, according to an FDIC news release.

The decline in earnings was mainly attributable to a $4.2 billion increase in provisions for loan losses and a $2.2 billion decline in noninterest income, according to the release. The increase in loan-loss provisions is primarily due to rising levels of troubled loans to commercial and industrial borrowers, particularly in the energy sector. The decline in noninterest income reflects weakness in trading income at a few large banks, and lower income from asset servicing.

The first quarter financial results were included in the FDIC’s latest Quarterly Banking Profile released June 1.

Of the 6,122 insured institutions reporting first quarter financial results, 61.4% reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the first quarter fell from 5.7% a year earlier to 5%, the lowest level since the first quarter of 1998, according to the release.

“The banking industry reported mixed results for the first quarter,” FDIC Chairman Martin J. Gruenberg said in the release. “By many measures, the industry had a positive quarter. However, noncurrent loans to the oil and gas industry rose sharply and net interest margins remained low by historical standards.

“The mixed first quarter results reflect an evolving economic environment,” he added in the release. “Revenue increased from a year earlier and loan balances expanded at the highest 12-month rate since 2008. However, a prolonged period of low interest rates has narrowed margins and caused some institutions to reach for yield. More recently, low energy prices have led to a sharp increase in noncurrent loans to oil and gas producers. We will continue to monitor closely the evolving environment in which the U.S. banking industry is operating.”

On the positive side, the 5,664 insured institutions identified as community banks reported $5.2 billion in net income in the first quarter, an increase of 7.4% from the first quarter of 2015. Net operating revenue of $22.2 billion at community banks was $1.4 billion (6.9%) higher than a year earlier, according to the release.

Loan growth helped lift revenue at most banks. Net interest income rose $6.7 billion (6.4%) compared with the first quarter of 2015. Noninterest income was $2.2 billion (3.4%) lower, as trading income fell $1.9 billion (24.9%) and servicing declined by $736 million (46%).

Total provisions for loan and lease losses were $12.5 billion in the first quarter, up $4.2 billion (49.7%) from the first quarter of 2015. Slightly more than one-third of all banks — 35.6% — reported year-over-year increases in loan-loss provisions, the release stated.

The amount of loans and leases that were noncurrent — 90 days or more past due or in nonaccrual status — rose $3.3 billion (2.4%) during the first three months of 2016. Noncurrent loans to commercial and industrial borrowers increased $9.3 billion (65.1%) during the quarter, primarily as a result of weakness in loans to the energy sector, the release stated.

Total loan and lease balances increased $99.7 billion (1.1%) during the first quarter. For the 12-month period ending March 31, loans and leases increased $577.1 billion (6.9%), which is the largest 12-month growth rate since mid-2007 to mid-2008. At community banks, loan balances rose 1.5% during the first quarter and increased 8.9% during the past 12 months, according to the release.

The number of banks on the FDIC’s problem list fell from 183 to 165 during the first quarter. This is the smallest number of problem banks in more than seven years and is down dramatically from the peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $46.8 billion to $30.9 billion during the first quarter. One bank failed during the first quarter.

To learn more about the FDIC report, visit

By |2019-11-25T08:19:43-06:00July 11th, 2016|Financial Services|0 Comments

Leave A Comment