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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 2017

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 previous quarter.

  • Community Bank Net Income Rises 10.4 Percent From a Year Ago
  • Net Interest Income and Noninterest Income Increase
  • Net Interest Margin of 3.54 Percent Down Slightly From a Year Ago
  • Loan Balances Increase 7.7 Percent Over the Past 12 Months
  • Asset Quality Improves, Except for Commercial and Industrial Loans
  • Net Income Improves at More Than Half of Community Banks From a Year Ago
    Net income for the 5,401 community banks in first quarter 2017 totaled $5.6 billion, an increase of $522.9 million (10.4 percent) from the first quarter of 2016. Higher net interest income and noninterest income drove the increase in quarterly net income, but were offset in part by higher loan-loss provisions and noninterest expense. More than half of community banks (56 percent) reported higher net income compared to a year ago. The pretax return on assets increased to 1.33 percent, up 14 basis points from the previous quarter and 6 basis points from the year before. Three community banks failed during the quarter, and one de novo community bank was added.

    Net Interest Income Increases 7.1 Percent From the Previous Year
    Net interest income of $18.1 billion rose by $1.2 billion (7.1 percent) from a year ago. More than two out of three community banks (69 percent) reported higher net interest income from a year ago. The year-over-year increase can be attributed to non 1-to-4 family real estate loans (up $761.8 million, or 10 percent).1 The average net interest margin (NIM) declined slightly from 3.56 percent in first quarter 2016 to 3.54 percent, as asset yields remained flat and funding costs increased 2 basis points. NIM at community banks was 41 basis points higher than noncommunity banks and 35 basis points above the industry overall. However, the difference is the smallest since the second quarter of 2013.

    Noninterest Income Grows 6.8 Percent Year Over Year to $4.8 Billion
    Noninterest income of $4.8 billion was $304.3 million (6.8 percent) higher than a year ago and almost twice the growth rate of noncommunity banks (3.7 percent). A majority of community banks (57 percent) reported higher noninterest income compared to a year earlier. Improvement in noninterest income was led by higher other noninterest income (up $157.5 million, or 9 percent) and servicing fees (up $88.1 million, or 50.6 percent).2

    Noninterest Expense Up 5 Percent From a Year Ago
    Community banks reported noninterest expense of $15.1 billion in the first quarter, a $721.9 million (5 percent) increase from a year earlier. The annual increase in noninterest expense was led by higher salary and employee benefits (up $537.3 million, or 6.6 percent). Full-time equivalent employees totaled 428,632 in the first quarter, up 10,841 (2.6 percent) from the first quarter of 2016. Average assets per employee of $5.2 million in the first quarter were up 5.6 percent from a year ago.

    Loan Balances Rise at Community Banks in the First Quarter
    Loan balances totaled $1.5 trillion in the first quarter, up $16.7 billion (1.1 percent) from the fourth quarter of 2016. At March 31, loan balances represented 69.1 percent of total assets, the highest proportion for a first quarter since 2009. In contrast to community banks, loan balances declined for noncommunity banks (down $24.7 billion, or 0.3 percent). More than half (57 percent) of community banks increased their loan balances from the previous quarter. The quarterly increase was led by nonfarm nonresidential loans (up $10.4 billion, or 2.4 percent), multifamily residential loans (up $3.6 billion, or 3.3 percent), commercial and industrial loans (up $2.1 billion, or 1.1 percent), construction and development loans (up $1.7 billion, or 1.7 percent), and 1-to-4 family residential mortgages (up $1.6 billion, or 0.4 percent).

    Annual Loan Growth Rate at Community Banks Outpaces Noncommunity Banks
    Loan balances rose by $109.9 billion (7.7 percent) over the past 12 months, more than twice the 3.3 percent growth at noncommunity banks. Just over 75 percent of community banks increased their loan balances from a year ago. The 12-month increase was driven by nonfarm nonresidential loans (up $43.9 billion, or 10.8 percent), 1-to-4 family residential mortgages (up $16.5 billion, or 4.3 percent), multifamily residential loans (up $14.2 billion, or 14.5 percent), commercial and industrial loans (up $13.4 billion, or 7.1 percent), and construction and development loans (up $11.3 billion, or 12.4 percent). Unused loan commitments of $292.7 billion in the first quarter grew by $24.2 billion (9 percent) from the year before. Unused commercial real estate loan commitments—including construction and development—increased by $9.5 billion (12.6 percent) from a year ago.

    Noncurrent Loan Balances Decline Slightly
    Just over half of community banks (52 percent) reported a decline in noncurrent loan balances from the previous quarter. In aggregate, noncurrent loan balances fell by $37.5 million (0.2 percent) during the quarter. The noncurrent rate decline by 1 basis point during the quarter to 1 percent, and was 41 basis points below the noncommunity bank noncurrent rate. Among community banks, all major loan categories except for commercial and industrial loans saw an improvement in their noncurrent rate from the previous quarter. The noncurrent rate for commercial and industrial loans increased 4 basis points to 1.46 percent, which marks a seventh consecutive quarterly increase. The largest quarterly improvement in the noncurrent rate was in construction and development loans (down 10 basis points) and 1-to-4 family residential mortgages (down 5 basis points).

    Net Charge-Off Rate Remains Unchanged
    Community banks reported a net charge-off rate of 0.10 percent in the first quarter, unchanged from a year ago. The net charge-off rate for noncommunity banks increased to 0.57 percent, up 5 basis points from a year before. For community banks, all major loan categories except commercial and industrial loans (up 3 basis points) had a lower net charge-off rate compared to first quarter 2016. The net charge-off rate for construction and development loans was negative 0.01 percent, as recoveries surpassed charge-offs.

    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 2017, FDIC-Insured Community Banks

    TABLE V-B. Full Year 2016, FDIC-Insured Community Banks

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


    Footnotes:

    1 Non 1-to-4 family real estate loans include construction and development, farmland, multifamily, and nonfarm nonresidential loans.

    2 Other noninterest income includes items that are greater than $100,000 and exceed 3 percent of all other noninterest income reported. They include income and fees from printing and sale of checks, earnings on increase in value of cash surrender value of life insurance, income and fees from automated teller machines, rent and other income from other real estate owned, safe deposit box rent, net change in the fair values of financial instruments accounted for under a fair value option, bank card and credit card interchange fees, gains on bargain purchases, and other miscellaneous items.

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