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Analysis

FDIC Quarterly

Last Updated: December 16, 2021

The FDIC Quarterly provides a comprehensive summary of the most current financial results for the banking industry, along with feature articles. These articles range from timely analysis of economic and banking trends at the national and regional level that may affect the risk exposure of FDIC-insured institutions to research on issues affecting the banking system and the development of regulatory policy. The FDIC Quarterly brings together data and analysis that were previously available through three retired publications -- the FDIC Outlook, the FDIC Banking Review, and the FYI: An Update on Emerging Issues in Banking. Past issues of these publications are archived under their original publication names.

FDIC Quarterly, 2021, Volume 15, Number 4 - PDF (PDF Help)

Quarterly Banking Profile: Third Quarter 2021
FDIC-insured institutions reported aggregate net income of $69.5 billion in third quarter 2021, an increase of $18.4 billion (35.9 percent) from the same quarter a year ago, primarily due to a $19.7 billion decline in provision expense. Two-thirds of all banks (66.5 percent) reported annual improvements in quarterly net income. The share of profitable institutions increased slightly year over year to 95.9 percent. However, net income declined $875.5 million (1.2 percent) from second quarter 2021, driven by an increase in provision expense from second quarter 2021 (up $5.5 billion to negative $5.2 billion). The banking industry reported an aggregate return on average assets ratio of 1.21 percent, up 24 basis points from a year ago but down 3 basis points from second quarter 2021.

Community Bank Performance
Community banks—which represent 91 percent of insured institutions—reported net income of $8.6 billion in the third quarter, up $1.4 billion (19.6 percent) from third quarter 2020. Nearly two-thirds of all community banks (65.8 percent) reported higher net income from the year-ago quarter. The pretax return on assets ratio increased 14 basis points from the year-ago quarter to 1.56 percent.

Insurance Fund Indicators
The Deposit Insurance Fund (DIF) balance totaled $121.9 billion at the end of third quarter 2021, an increase of $1.4 billion from the previous quarter. Assessment income of $1.7 billion drove the fund balance increase. Interest earned on investments, negative provisions for insurance losses, and other miscellaneous income also added to the fund balance. Operating expenses and unrealized losses on available-for-sale securities partially offset the increase in the fund balance. The DIF reserve ratio was 1.27 percent on September 30, 2021, unchanged from the previous quarter and 3 basis points lower than the previous year.

Featured Articles:

Commercial Real Estate: Resilience, Recovery, and Risks Ahead - PDF
Commercial real estate (CRE) lending is important to the banking industry, which holds $2.7 trillion in CRE loans. In the pandemic, CRE conditions in several property types came under stress. The pandemic challenged the brick-and-mortar retail, hotel, and office sectors, while multifamily largely held up and the industrial sector benefitted from increased demand. Market conditions improved with economic recovery in 2021, but some of the changes the CRE industry experienced in the pandemic may be long-lasting. The issues facing CRE will be important considerations for a large share of the banking industry. Initially the pandemic threatened to significantly challenge banks’ CRE loan quality, but loan delinquency rates remained low through third quarter 2021 against the backdrop of economic rebound, stimulus support, and loan forbearance. This article analyzes conditions across major CRE property types and discusses FDIC-insured institutions’ exposure to CRE loans, credit quality, and potential challenges ahead.

Implications of Record Deposit Inflows for Banks During the Pandemic - PDF
In 2020, the pandemic disrupted the global economy, creating stress and uncertainties for consumers and businesses. The U.S. government responded with assistance programs that, combined with increased personal savings, contributed to a record inflow of deposits to banks. The deposit inflows created historically high bank liquidity and many banks shifted their balance sheet composition to shorter-term, lower-yielding and non-yielding assets. The shift in asset composition and a prolonged period of low interest rates caused the net interest margin to decline to its lowest level on record. The loan-to-deposit ratio reached record lows in 2020 and 2021, while the cash-to-deposit ratio rose to 1.6 times the pre-pandemic level and almost three times the previous trough in 2006. Benefits of higher liquidity include reduced dependence on less stable sources of funding and an ability to respond to unforeseen deposit account withdrawals. However, higher liquidity can also challenge bank earnings, depending on loan demand and the shape of the yield curve.

Past Issues