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FDIC-Insured Banks Earn $39.8 Billion for Q1 2015

fdicThe Federal Deposit Insurance Corporation (FDIC) reported in a recent press release that FDIC-insured commercial banks and saving institutions aggregate net income was $39.8 billion for Q1 2015, a 6.9 percent or $2.6 billion increase from the previous year.

"On balance, results from the first quarter reflect an improving banking industry with stronger community banks,” said Martin J. Gruenberg, FDIC chairman.

The $4.3 billion rise in net operating revenue (net interest income plus total noninterest income), is mainly responsible for the earnings increase, the company said. The FDIC listed their financial results for the first quarter in their latest Quarterly Banking Profile.

Of the 6,419 FDIC-insured institutions, 62.7 percent reported year-over-year growth in quarterly earnings for Q1 2015, the company reported. Banks that experienced no profit during Q1 dropped to 5.6 percent from 7.4 percent a year earlier.

According to the report, stronger loan growth helped raise revenue at most banks, increasing net operating revenue by 2.6 percent to $168.4 Billion compared to last year. Meanwhile, net interest income rose $1.5 billion or 1.5 percent compared to Q1 2014. Noninterest income came in at $2.8 billion, as trading income increased $1.5 billion. Income from the sale, securitization, and servicing of 1-4 family residential real estate loans rose 15.6 percent to $545 million.

The report also noted, quarterly earnings at community banks increased by 16 Percent. The 5,946 community banks reported $4.9 billion in net income for Q1, an increase of 16 percent from last year. Net operating revenue saw an increase of $1.7 billion to $21.5 billion at community banks.

"Community banks reported improved performance during the quarter that outpaced the overall industry,” Gruenberg said. "Their earnings were up significantly from a year ago, and their loan growth was appreciably higher than the rest of the industry."

Asset quality indicators showed further improvement with net loan losses dropping year-over-year for the 19th consecutive quarter, while noncurrent loan balances declined for a 20th consecutive quarter, the report says. Net interest margins remained under pressure, declining to 3.02 percent in Q1.

"The banking industry continued to show gradual but steady improvement during the quarter,” Gruenberg said. "Revenue, earnings, and loan balances were up; asset quality continued to improve; and the number of banks on the 'Problem List' declined to the lowest level in more than six years. Nearly two-thirds of banks reported higher earnings than a year ago.”

Asset yields dropped quicker than funding costs as higher-yielding assets matured and were replaced by lower-yielding investments in a low interest rate environment.

"The current interest-rate environment remains challenging for banks. Revenue growth remains subdued, and net interest margins have continued to decline,” Gruenberg concluded. “Many institutions have responded by reaching for yield, which is a matter of ongoing supervisory attention."

View the full report: FDIC.gov

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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