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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

FDIC Quarterly Banking Profile

COMMUNITY BANK PERFORMANCE
FOURTH QUARTER 2015

Notes to Users

Community banks are identified based on criteria defined in the FDIC’s Community Banking Study. When comparing community bank performance across quarters, prior-quarter dollar amounts are based on community banks designated in the current quarter, adjusted for mergers. In contrast, prior-quarter performance ratios are based on community banks designated during the prior quarter.

  • Earnings Rise 4 Percent to $5.1 Billion From Fourth Quarter 2014
  • Net Operating Revenue Increases, Outpacing Growth at Noncommunity Banks
  • Community Banks Benefit From Strong Balance Sheet Growth
  • Noncurrent Rate Declines for 23 Consecutive Quarters
  • Full-Year Earnings Grow From Higher Net Operating Revenue
  • Earnings Improve for More Than Half (57 Percent) of Community Banks
    Community banks reported earnings of $5.1 billion during the fourth quarter 2015, up $198.7 million (4 percent) from the year-earlier quarter. Earnings improved on higher net interest income and noninterest income, but were offset in part by higher loan-loss provisions and noninterest expense. For the 5,735 community banks in fourth quarter 2015, close to 57 percent reported an improvement in earnings from the year before. The pretax return on assets (ROA) was 1.23 percent, down 8 basis points from the previous quarter, but 6 basis points above fourth quarter 2014. Unprofitable community banks totaled 9.6 percent during the latest quarter—down from 10.2 percent a year earlier—the lowest fourth-quarter rate since 1996. There were 77 fewer community banks at the end of the quarter, with two bank failures.

    Net Interest Margin Falls While Net Interest Income Increases Almost 7 Percent
    Net operating revenue of $22.6 billion increased $1.6 billion (7.4 percent) from 12 months ago, led by higher net interest income (up $1.1 billion, or 6.5 percent) and noninterest income (up $489.5 million, or 10.8 percent). With nearly 70 percent of community banks increasing net interest income from the year earlier, the annual rate at community banks surpassed that of noncommunity banks (4.3 percent). Higher interest income in other real estate loans (up $620 million, or 8.5 percent) lifted net interest income from fourth quarter 2014.1 Average net interest margin (NIM) of 3.6 percent was down 3 basis points from the year before, as average asset yields fell more rapidly than the average funding costs. Community banks posted NIM 55 basis points above the average for noncommuntiy banks (3.05 percent). Long-term assets represented 33.7 percent of total assets for community banks during the fourth quarter, down from 34 percent in the previous year.2 For the past five of six consecutive quarters, community banks decreased their share of long-term assets. However, the share of long-term assets at community banks exceeded the 25.5 percent held by noncommunity banks.

    Noninterest Expense Increases From Fourth Quarter 2014
    Noninterest expense totaled $15.5 billion for the latest quarter, up $829 million (5.7 percent) from 12 months earlier. Almost two out of every three community banks (64 percent) increased noninterest expense from fourth quarter 2014. While noninterest expense increased at community banks, it declined for noncommunity banks (down $2.4 billion, or 2.6 percent). The 12-month increase in noninterest expense for community banks was led by higher salary and employee benefits (up $571.5 million, or 7.2 percent). Full-time employees at community banks increased 11,958 (2.8 percent) from the year before, while declining 3,976 (0.2 percent) for noncommunity banks. Average assets per employee at community banks totaled $4.8 million in the latest quarter, up from $4.7 the year before.

    Full-Year Earnings Rise 9.7 Percent to $20.4 Billion
    Full-year 2015 earnings of $20.4 billion, increased $1.8 billion (9.7 percent) from 2014. Increased revenues from net interest income (up $3.9 billion, or 6.2 percent) and noninterest income (up $2.3 billion, or 13.3 percent) were offset in part by higher loan-loss provisions (up $42.8 million, or 1.8 percent) and noninterest expense (up $3.4 billion, or 6.1 percent). Almost two out of every three community banks (63 percent) reported higher earnings from 2014. Pretax ROA totaled 1.27 percent for 2015, an improvement over 1.19 percent in 2014. Annual pretax ROA was above 1 percent for the past four consecutive years.

    Loan Balances at Community Banks Continue to Increase
    Loans and leases represented 67.8 percent of total assets at community banks during fourth quarter 2015, the highest since fourth quarter 2009. Total assets of $2.1 trillion increased $39.8 billion (1.9 percent) from the third quarter, while loan and lease balances grew $34.4 billion (2.5 percent). Close to 70 percent of community banks increased their loan and lease balances from third quarter 2015. The quarterly increase in loan and lease balances was led by nonfarm nonresidential loans (up $10.4 billion, or 2.6 percent), commercial and industrial loans (up $5.5 billion, or 2.9 percent), 1-to-4 family residential mortgages (up $4.9 billion, or 1.3 percent), multifamily residential mortgages (up $4.8 billion, or 5.5 percent), and construction and development loans (up $4.3 billion, or 4.8 percent). The annual growth rate in loan and lease balances (8.6 percent) was driven by nonfarm nonresidential loans (up $34.4 billion, or 8.9 percent), and 1-to-4 family residential mortgages (up $20.5 billion, or 5.8 percent). Unused loan commitments of $271 billion increased $13.2 billion (5.1 percent) from the year before, with unused commercial real estate loan commitments—including construction and development—growing $12.9 billion (20.3 percent).

    Small Loans to Businesses Increase Quarterly and Annually
    With more than half (56 percent) of community banks increasing their small loans to businesses from third quarter 2015, small loans to business rose $2.3 billion (0.8 percent) to $299.7 billion.3 The quarterly increase in small business loans at community banks was led by commercial and industrial loans (up 1.1 billion, or 1.2 percent) and nonfarm nonresidential loans (up $876.6 million, or 0.6 percent). The 12-month increase in small loans to businesses at community banks (up $8.7 billion, or 3 percent) exceeded that of noncommunity banks (up $6.1 billion, or 1.6 percent). The year-over-year increase at community banks was driven by commercial and industrial loans (up $3.5 billion, or 3.9 percent), and nonfarm nonresidential loans (up $3.1 billion, or 2.2 percent). Meanwhile, nonfarm nonresidential loans at noncommunity banks declined (down $6.8 billion, or 4.7 percent).4 Community banks continued to hold 44 percent of all small loans to businesses.

    Asset Quality for Commercial and Industrial Loans Declines Modestly
    Noncurrent loan and lease balances totaled $15.8 billion in fourth quarter, down $2.4 billion (13.3 percent) from the year before. More than half (57 percent) of community banks reduced their noncurrent loan and lease balances from fourth quarter 2014. The noncurrent rate was 1.1 percent during fourth quarter 2015, the lowest since third quarter 2007. The rate remained down 7 basis points from the previous quarter, and 26 basis points from a year-earlier quarter. The noncurrent rate for community banks was 55 basis points below that at noncommunity banks (1.65 percent). All major loan categories at community banks, except for commercial and industrial loans, had lower noncurrent rates from the previous quarter and the year before. The noncurrent rate for commercial and industrial loans (1.1 percent) increased for a second consecutive quarter, after improving for 21 consecutive quarters. The quarterly net charge-off rate (0.19 percent) increased (up 5 basis points) from third quarter 2015, led by higher quarterly net charge-off rates among all major loan categories. Commercial and industrial loans posted the largest quarterly increase (up 14 basis points). The quarterly net charge-off rate for community banks was down 7 basis points from the previous year.

    Chart 1. Contributors to the Year-Over-Year Change in Income

    Chart 2. Net Interest Margin

    Chart 3. Change in Loan Balances and Unused Commitments

    Chart 4. Noncurrent Loan Rates for FDIC-Insured Community Banks

    TABLE I-B. Selected Indicators, FDIC-Insured Community Banks

    TABLE II-B. Aggregate Condition and Income Data, FDIC-Insured Community Banks

  • Nominal
  • Merger-Adjusted
  • TABLE III-B. Aggregate Condition and Income Data by Geographic Region, FDIC-Insured Community Banks

    TABLE IV-B. Fourth Quarter 2015, FDIC-Insured Community Banks

    TABLE V-B. Full Year 2015, FDIC-Insured Community Banks

    TABLE VI-B. Loan Performance, FDIC-Insured Community Banks


    Footnotes:

    1 Other real estate loans include construction and development, farmland, multifamily, and nonfarm nonresidential.

    2 Long-term assets are loans and debt securities with remaining maturities or repricing intervals of over five years.

    3 Small loans to businesses consist of loans to commercial borrowers up to $1 million and farm loans up to $500,000.

    4 Nonfarm nonresidential loans up to $1 million accounted for 37 percent of all small loans to businesses held by noncommunity banks during the fourth quarter 2015.

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