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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
FIRST QUARTER 2016

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.

  • Net Income Improves More Than 7 Percent From First Quarter 2015
  • Revenue Increase Led by $1.3 Billion Growth in Net Interest Income
  • Percent of Unprofitable Community Banks Declines to the Lowest Level Since 1998
  • Net Interest Margin of 3.56 Percent Increases From the Year Before
  • Asset Quality Improves for All Major Loan Categories From the Previous Year, but Declines for Commercial and Industrial Loans
  • Net Income Grows at Community Banks but Declines at Noncommunity Banks
    Aggregate net income of 5,664 FDIC-insured community banks totaled $5.2 billion during first quarter 2016, up $353.6 million (7.4 percent) from the year-earlier quarter. Improved revenue from net interest income and noninterest income was offset in part by higher loan-loss provisions and noninterest expense. Net income at noncommunity banks was down $942.4 million (2.7 percent), led by a few large noncommunity banks. Over the past 12 months, almost 62 percent of community banks improved their net income, while 5.1 percent were unprofitable during the quarter. Pretax return on assets was 1.28 percent, up 3 basis points from the same 2015 quarter, but 14 basis points below the rate of noncommunity banks (1.42 percent). There were 71 fewer community banks than in fourth quarter 2015, with one bank failure.

    Net Interest Margin and Net Interest Income Increase From the Previous Year
    Community banks reported net interest income of $17.5 billion during first quarter 2016, up $1.3 billion (8.2 percent) from first quarter 2015. With nearly 78 percent of them increasing their net interest income, the annual rate at community banks exceeded that of noncommunity banks (7.2 percent). The yearly increase in net interest income for community banks was led by non 1-to-4 family real estate loan income (up $747.6 million, or 10.5 percent).1 Net interest margin (NIM) of 3.56 percent for the quarter was up 2 basis points from the year earlier, as asset yields increased (up 2 basis points) and funding costs remained unchanged. NIM at community banks was 53 basis points above that of noncommunity banks.

    Noninterest Income Increases 2.1 Percent From the Previous Year
    Noninterest income totaled $4.7 billion, up $97.6 million (2.1 percent) from a year earlier. While noninterest income improved at community banks, it declined for noncommunity banks (down $1.9 billion, or 3.2 percent) due to lower trading revenue (down $1.9 billion, or 24.9 percent). More than half (55 percent) of community banks increased their noninterest income from first quarter 2015. The year-over-year increase was led by net gains on sale of other assets (up $47 million, or 82.3 percent) and service charges on deposit accounts (up $30.3 million, or 3.3 percent).

    Noninterest Expense as Percent of Net Operating Revenue Declines
    Noninterest expense at community banks was $819.9 million (5.8 percent) higher than in first quarter 2015. The annual increase was from higher salary and employee benefits (up $539.9 million, or 6.8 percent). Almost three out of four community banks (71 percent) increased noninterest expense from the year before. Full-time employees at community banks totaled 434,761 for the first quarter, up 12,221 (2.9 percent) from the same 2015 quarter. Noninterest expense represented 67.6 percent of net operating revenue, down from 68.8 percent in first quarter 2015, the lowest level since third quarter 2007. Average assets per employee were $4.9 million, up from $4.7 million in first quarter 2015.

    Loan and Lease Balances Increase From the Previous Quarter and the Year Before
    Total assets at community banks were $29.1 billion (1.4 percent) higher than in the previous quarter, as loan and lease balances grew $21.3 billion (1.5 percent). All major loan categories increased from fourth quarter 2015, led by nonfarm nonresidential loans (up $8.5 billion, or 2.1 percent), multifamily residential mortgages (up $4.1 billion, or 4.5 percent), commercial and industrial loans (up $2.9 billion, or 1.5 percent), and 1-to-4 family residential mortgages (up $2.8 billion, or 0.8 percent). Close to 60 percent of community banks posted a quarter-over-quarter increase in their loan and lease balance. The 12-month growth rate in loan and lease balances was 8.9 percent, exceeding the rate of noncommunity banks (6.6 percent). With close to 80 percent of community banks increasing their year-over-year loan and lease balances, the annual growth was led by nonfarm nonresidential loans (up $36.3 billion, or 9.4 percent), 1-to-4 family residential mortgages (up $17.8 billion, or 5 percent), commercial and industrial loans (up $15.6 billion, or 8.6 percent), and multifamily residential mortgages (up $15.3 billion, or 19.1 percent). Unused loan commitments totaled $278.4 billion in the quarter, up $11.3 billion from first quarter 2015, with commercial real estate, including construction and development, increasing $14.5 billion (22.7 percent).

    Small Loans to Businesses Increase From First Quarter 2015
    Small loans to businesses of $297.7 billion in the first quarter were $725.8 million (0.2 percent) higher than fourth quarter 2015. Almost half (47 percent) of community banks increased their small loans to businesses during the quarter. While the quarterly growth was led by commercial and industrial loans (up $1.3 billion, or 1.4 percent) and nonfarm nonresidential loans (up $944.8 million, or 0.7 percent), agricultural production loans declined $1.6 billion (5.4 percent). The annual increase in small loans to businesses at community banks (up $10.8 billion, or 3.8 percent) surpassed that of noncommunity banks (up $7.2 billion, or 1.9 percent). The 12-month growth in small loans to businesses at community banks was led by commercial and industrial loans (up $4.3 billion, or 4.9 percent) and nonfarm nonresidential loans (up $3.3 billion, or 2.3 percent). Meanwhile, nonfarm nonresidential loans for noncommunity banks declined (down $6.1 billion, or 4.1 percent). Community banks continued to hold 44 percent of small loans to businesses.

    Community Banks Lower Their Noncurrent Loan and Lease Balances
    Community banks reported noncurrent loan and lease balances of $16 billion for the quarter, down $1.7 billion (9.8 percent) from the year before. More than half (55 percent) of community banks reduced their noncurrent loan and lease balances from first quarter 2015. The coverage ratio—reserves for loan losses to noncurrent loans—was 116.19 percent, up from 104.71 percent a year earlier. The coverage ratio was above 100 percent for the past six consecutive quarters. Reserves for loan losses totaled $18.5 billion at the end of the quarter. For the first quarter, loan-loss provisions of $620.5 million were offset in part by $349 million in net charge-offs.

    Asset Quality for Commercial and Industrial Loans Declines From the Previous Year
    The noncurrent rate of 1.1 percent was 22 basis points lower than a year earlier, as all major loan categories, except for commercial and industrial loans, had lower noncurrent rates. The commercial and industrial noncurrent rate (1.2 percent) increased for a third consecutive quarter. The rate was 10 basis points above the previous quarter, and 13 basis points above first quarter 2015. The commercial and industrial noncurrent rate for noncommunity banks (1.24 percent) was 4 basis points above the rate for community banks. The net charge-off rate for community banks was 0.1 percent for the quarter, the lowest rate since first quarter 2006. All major loan categories, except for commercial and industrial loans (up 6 basis points), had lower net charge-off rates from the year before.

    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. First Quarter 2016, 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 Non 1-to-4 family real estate loan income includes construction and development, farmland, multifamily, and nonfarm nonresidential.

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