Press Release: FDIC-Insured Institutions Reported Net Income of $71.5 Billion
PRESS RELEASE | SEPTEMBER 5, 2024
FDIC-INSURED
INSTITUTIONS REPORTED NET INCOME OF $71.5 BILLION
Net Income
Increased From the Prior Quarter, Driven By Lower Noninterest Expense
and One-Time Gains
Community Bank Net Income Increased Quarter
Over Quarter
The Net Interest Margin Declined Slightly, Driven
by the Largest Banks
Domestic Deposits Decreased From the Prior
Quarter
Asset Quality Metrics Remained Generally Favorable,
Though Charge-Offs Increased
Loan Balances Increased Modestly
From the Prior Quarter and a Year Ago
The Deposit Insurance
Fund Reserve Ratio Increased Four Basis Points to 1.21
Percent
_______________________________
“The banking
industry continued to show resilience in the second quarter. Net
income increased and asset quality metrics remained generally
favorable. However, the banking industry still faces significant
downside risks from uncertainty in the economic outlook, market
interest rates, and geopolitical events. In addition, weakness in
certain loan portfolios, particularly office properties, credit cards,
and multifamily loans, continues to warrant monitoring.”
— FDIC
Chairman Martin J.
Gruenberg
_______________________________
WASHINGTON—
Reports from 4,539 commercial banks and savings institutions insured
by the Federal Deposit Insurance Corporation (FDIC) reported aggregate
net income of $71.5 billion in second quarter 2024, an increase of
$7.3 billion (11.4 percent) from the prior quarter. A decline in
noninterest expense and one-time gains on equity security transactions
contributed to the quarterly increase. These and other financial
results for second quarter 2024 are included in the FDIC’s latest
Quarterly Banking Profile released today.
The Industry’s Net
Income Increased From the Prior Quarter, Driven By Lower Noninterest
Expense and One-Time Gains: Second quarter net income for the 4,539
FDIC-insured commercial banks and savings institutions increased $7.3
billion (11.4 percent) from the prior quarter to $71.5 billion. A
decline in noninterest expense (down $3.6 billion, or 2.4 percent)
along with higher noninterest income (up $1.2 billion, or 1.5 percent)
and higher gains on the sale of securities (up $937 million) were the
primary factors driving the increase in net income. Higher provision
expenses offset some of the increase in net income.
The
quarterly increase in net income was largely driven by nonrecurring
items including an estimated $4 billion reduction in reported expense
related to the FDIC special assessment, approximately $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.[1] These increases were partially offset by several
large banks selling bond portfolios at a loss and a $2.7 billion
increase in provision expense.
The banking industry reported an
aggregate return-on-assets ratio (ROA) of 1.20 percent in second
quarter 2024, up 12 basis points from first quarter 2024 but down one
basis point from first quarter 2023.
Community Bank Net Income
Increased Quarter Over Quarter: Quarterly net income for the 4,104
community banks insured by the FDIC was $6.4 billion in the second
quarter, an increase of $72.6 million (1.1 percent) from first quarter
2024. Higher net interest income (up $546.4 million, or 2.7 percent)
and higher noninterest income (up $253.9 million, or 5.0 percent) more
than offset higher noninterest expense (up $365.7 million, or 2.1
percent) and higher provision expenses (up $140.5 million, or 18.2
percent). The community bank pretax ROA increased one basis point
from last quarter to 1.14 percent.
The Net Interest Margin
Declined Slightly, Driven by the Largest Banks: 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 industry’s second quarter NIM was
nine basis points below the pre-pandemic average NIM after falling
below that level last quarter.[2] The NIM increased quarter over
quarter for all size groups except for the largest banks, those with
assets over $250 billion, who in aggregate reported a four basis-point
decline in the NIM. The community bank NIM of 3.30 percent increased
seven basis points quarter over quarter, reversing a five-quarter
declining trend, but was still 33 basis points lower than the pre-
pandemic average.
Asset Quality Metrics Remained Generally
Favorable, Though Charge-Offs Increased: Noncurrent loans, or loans
that are 90 days or more past due or in nonaccrual status, remained
unchanged from the prior quarter at 0.91 percent of total loans and
well below the pre-pandemic average of 1.28 percent. Despite the
stability in overall noncurrent loans, the noncurrent rate for non-
owner occupied commercial real estate loans of 1.77 percent was at its
highest level since third quarter 2013, driven by office portfolios at
the largest banks. However, these banks tend to have lower
concentrations of such loans in relation to total assets and capital
than smaller institutions, mitigating the overall risk.
The
industry’s net charge-off rate increased three basis points to 0.68
percent from the prior quarter and was 20 basis points higher than the
year-ago quarter. This ratio was also 20 basis points above the pre-
pandemic average and remained the highest quarterly rate reported by
the industry since second quarter 2013. The credit card net charge-
off rate was 4.82 percent in the second quarter, up 13 basis points
quarter over quarter and the highest rate reported since third quarter
2011.
Loan Balances Increased Modestly From the Prior Quarter
and a Year Ago: Total loan and lease balances increased $125.8 billion
(1.0 percent) from the previous quarter. The increase was driven by
higher loans to nondepository financial institutions (NDFIs) (up $76.0
billion, or 9.6 percent) and consumer loans (up $25.8 billion, or 1.2
percent). Much of the growth in NDFI lending appears to be due to
reclassification from other existing loan categories. The majority of
banks (75.1 percent) reported quarterly loan growth, and all major
loan categories except construction and development loans showed
quarter-over-quarter growth.
Total loan and lease balances
increased by $244.5 billion (2.0 percent) from the prior year. The
annual increase was also led by loans to NDFIs (up $77.5 billion, or
9.8 percent), likely due to reclassifications in the second quarter,
as well as credit card loans (up $77.0 billion, or 7.5 percent) and
adjustable rate 1-4 family residential mortgage loans (up $69.3
billion, or 7.5 percent). A large majority of banks (82.9 percent)
reported annual loan growth.
Community banks reported a 1.7
percent increase in loan and lease balances from the previous quarter
and a 6.3 percent increase from the prior year. Growth in nonfarm,
nonresidential CRE loans and 1-4 family residential mortgage loans
drove both the quarterly and annual increases in loan and lease
balances. Loan growth was broad based across community banks with
over three quarters of such banks reporting higher loan balances from
the prior quarter.
Domestic Deposits Decreased From the Prior
Quarter: Domestic deposits decreased $197.7 billion (1.1 percent)
from first quarter 2024, well below the pre-pandemic average second-
quarter growth of 0.2 percent. Both savings and transaction deposits
declined from the prior quarter, with growth in small time deposits
partially offsetting the declines. Brokered deposits decreased for
the second straight quarter, down $10.1 billion (0.8 percent) from the
prior quarter. Banks with over $250 billion in assets drove the
quarterly decline in deposits.
Estimated insured deposits
decreased $96.0 billion (0.9 percent) and estimated uninsured domestic
deposits decreased $50.4 billion (0.7 percent) during the quarter.
Banks with assets greater than $250 billion reported lower uninsured
deposits in the second quarter, while banks with assets less than $250
billion reported higher uninsured deposit levels.
The Deposit
Insurance Fund Reserve Ratio Increased Four Basis Points to 1.21
Percent: In the second quarter, the Deposit Insurance Fund (DIF)
balance increased $3.9 billion to $129.2 billion. The reserve ratio
increased four basis points during the quarter to 1.21
percent.
The Total Number of Insured Institutions Declined:
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
institutions merged with other banks during the quarter. One bank
failed in the second quarter but did not file a call report in the
first quarter, and no banks opened.
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ATTACHMENTS:
Quarterly Banking Profile Home Page
(includes previous reports and press conference webcast
videos)
Charts and Data
Chairman Gruenberg’s Press
Statement
MEDIA CONTACT: Julianne
[email protected]
FDIC:
PR-76-2024
[1] Estimated losses attributable to the protection
of uninsured depositors pursuant to the systemic risk determination
for Silicon Valley Bank and Signature Bank, and that will be recovered
through the FDIC special assessment, were $19.2 billion as of June 30,
2024, unchanged from March 31, 2024. The industry reported
approximately $4 billion in additional expense for the special
assessment in first quarter 2024, and no expense in the second
quarter.
[2] The “pre-pandemic average” refers to the period of
first quarter 2015 through fourth quarter 2019 and is used
consistently throughout this press release.
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