Banking & Finance  August 30, 2016

FDIC-insured banks report 2Q net income of $43.6B

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. reported aggregate net income of $43.6 billion in the second quarter of 2016, up $584 million, or 1.4 percent, from a year earlier, according to the FDIC’s Quarterly Banking Profile released Tuesday.

The increase in earnings was mainly attributable to a $5.2 billion, or 4.8 percent, increase in net interest income and a $981 million decline in expenses for litigation reserves at a few large banks.

Banks increased their loan-loss provisions by $3.6 billion, or 44.2 percent, compared with a year ago, partly in response to increasing levels of troubled loans to commercial and industrial borrowers, particularly in the energy sector.

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Of the 6,058 insured institutions reporting second-quarter financial results, 60.1 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the second quarter fell to 4.5 percent from 5.8 percent a year earlier, the lowest percentage since the first quarter of 1998.

FDIC chairman Martin J. Gruenberg said in the report that community banks reported strong net income, revenue and loan growth.

The 5,602 insured institutions identified as community banks reported a $41.2 billion increase in total loans and leases during the second quarter. During the past 12 months, loans and leases at community banks were up $122.8 billion, or 9.1 percent. Net operating revenue of $22.8 billion at community banks was $1.5 billion, or 7.1 percent, higher than a year earlier.

“However, challenges continue,” he said. “Revenue growth remains sluggish as a prolonged period of low interest rates has put downward pressure on net interest margins. This has led some institutions to reach for yield, increasing their exposure to interest-rate risk.

“More recently, persistent stress in the energy sector has resulted in asset quality deterioration at banks that lend to oil and gas producers. We likely have not yet seen the full impact of low energy prices on the banking industry, particularly for consumer and commercial and industrial loans in energy-producing regions of the country.”

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. reported aggregate net income of $43.6 billion in the second quarter of 2016, up $584 million, or 1.4 percent, from a year earlier, according to the FDIC’s Quarterly Banking Profile released Tuesday.

The increase in earnings was mainly attributable to a $5.2 billion, or 4.8 percent, increase in net interest income and a $981 million decline in expenses for litigation reserves at a few large banks.

Banks increased their loan-loss provisions by $3.6 billion, or 44.2 percent, compared with a year ago, partly in response to increasing levels of troubled…

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