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-insured institutions reported aggregate net income of $40.2 billion in the second quarter of 2014, up $2 billion (5.3 percent) from earnings of $38.2 billion the industry reported a year earlier. The increase in earnings was mainly attributable to a $1.9 billion (22.4 percent) decline in loan-loss provisions and a $1.5 billion (1.4 percent) decline in noninterest expenses. Strong loan growth contributed to an increase in net interest income compared to a year ago. However, lower income from reduced mortgage activity and a drop in trading revenue contributed to a year-over-year decline in noninterest income. More than half of the 6,656 insured institutions reporting (57.5 percent) had year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable during the second quarter fell to 6.8 percent from 8.4 percent a year earlier.
Community Bank Performance
Community banks—which represent 93 percent of insured institutions—reported net income of $4.9 billion in the second quarter, up $166 million (3.5 percent) from one year earlier. The increase was driven by higher net interest income and lower loan loss provisions. In the second quarter of 2014, loan balances at community banks grew at a faster pace than in the industry, asset quality indicators continued to show improvement, and community banks accounted for 45 percent of small loans to businesses.
Insurance Fund Indicators
Estimated insured deposits decreased slightly (0.2 percent) from the prior quarter, but increased 2.6 percent from one year earlier. The DIF reserve ratio was 0.84 percent at June 30, 2014, up from 0.80 percent at March 31, 2014, and 0.64 percent at June 30, 2013. Seven FDIC-insured institutions failed during the quarter.
While the number of minority depository institutions (MDIs) and community development financial institutions (CDFIs) is relatively small compared with the total number of insured institutions, MDIs and CDFIs play an important role in providing financial services to the communities they seek to serve. This study describes MDIs and FDIC-insured CDFIs and how the structure of this segment of the financial services industry has changed over time. The study also compares the performance of MDIs with other insured institutions. Although MDIs tend to underperform non-MDI institutions in terms of standard industry financial performance measures, the study finds that MDI offices tend to be located in communities with higher shares of minority populations. In addition, MDIs were found to originate a greater share of their mortgages to borrowers living in low- and moderate-income census tracts and to minority borrowers compared with other financial institutions. These findings demonstrate a high level of commitment on the part of MDIs to the populations they seek to serve and the essential role they play in their local communities.