FDIC: Community banks’ income grows during third quarter

Community banks’ revenue and income growth outpaced the rest of the industry nationwide, and loan portfolios at community banks grew at a faster rate than at larger institutions, according to the FDIC’s latest Quarterly Banking Profile released Tuesday.

The 5,812 insured institutions identified as community banks reported $5.2 billion in net income in the third quarter, an increase of 7.5 percent from third quarter 2014. Net operating revenue of $22.4 billion at community banks was $1.6 billion, or 7.5 percent higher than a year earlier, according to the report.

Overall, commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. reported aggregate net income of $40.4 billion in third quarter 2015, up $1.9 billion, or 5.1 percent compared with the previous year.

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The increase in earnings mainly was attributable to a $3.2 billion decline in noninterest expenses, as itemized litigation expenses at large banks were $2.7 billion lower than a year ago.

Of the 6,270 insured institutions, 59 reported year-over-year growth in third-quarter earnings. The proportion of banks that were unprofitable during the third quarter fell to 5 percent, down from 6.6 percent a year earlier and the lowest since the first quarter of 2005.

“Most performance indicators continued to show improvement,” Martin Gruenberg, the FDIC’s chairman, said in a prepared statement. “Earnings were up from a year ago, loan portfolios grew, asset quality improved, the number of problem banks declined, and only one insured institution failed.

“While the banking industry had another positive quarter, there are signs of growing interest-rate risk and credit risk that warrant attention,” he said. “History tells us that it is during this phase of the credit cycle when lending decisions are made that could lead to future losses. Timely attention by banks to address these growing risks will benefit banks and contribute to the sustainability of the current economic expansion.”

Total loan and lease balances increased $95.3 billion, or 1.1 percent, during the third quarter. For the 12 months ended Sept. 30, loans and leases increased $482.2 billion, or 5.9 percent. This is the largest 12-month growth rate since mid-2007 to mid-2008. At community banks, loan balances rose 1.9 percent during the third quarter of 2015 and increased 8.5 percent during the past 12 months.

The number of banks on the FDIC’s Problem List fell from 228 to 203 during the third quarter. This is the smallest number of problem banks in nearly seven years and is down dramatically from the peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $56.5 billion to $51.1 billion during the third quarter.