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 $40.4 billion in the third quarter of 2015, up $1.9 billion (5.1 percent) from a year earlier. The increase in earnings was mainly attributable to a $3.2 billion decline in noninterest expenses, as itemized litigation expenses at large banks were $2.7 billion lower than a year ago. Of the 6,270 insured institutions reporting third quarter financial results, more than half (58.9 percent) reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable during the third quarter fell to 5 percent, down from 6.6 percent a year earlier and the lowest since the first quarter of 2005.
Community Bank Performance
Community banks—which represent 93 percent of insured institutions—reported net income of $5.2 billion in the third quarter, up $363.4 million (7.5 percent) from one year earlier. The increase was driven by higher net interest income and noninterest income, and lower provision expense. The 12-month growth rate in loan balances at community banks was 8.5 percent, almost twice the rate of noncommunity banks. Asset quality indicators continued to improve, and community banks accounted for 44 percent of small loans to businesses.
Insurance Fund Indicators
Insured deposits increased by 1.1 percent in the third quarter of 2015. The DIF reserve ratio rose to 1.09 percent on September 30, 2015, up from 1.06 percent at June 30, 2015, and 0.88 percent at September 30, 2014. One FDIC-insured institution failed during the quarter.
Closely held banks may face operational challenges in raising external capital and recruiting future managers, especially in rural areas. At the same time, closely held banks may have certain operational advantages, including the ability to focus on long-term goals and to minimize principal-agent problems that may arise from the separation of ownership and operational control. This paper compares the performance of closely and widely held banks as identified in a survey of FDIC bank examiners and finds that closely held banks do not appear, on net, to be underperforming widely held banks in recent years. Closely held banks where the day-to-day manager is a member of the ownership group seem to outperform banks with a hired manager. The survey of bank examiners in three FDIC supervisory Regions was used to identify the ownership and management structure of more than 1,350 community banks. The survey results suggest that almost 75 percent of community banks in these Regions can be regarded as closely held, typically on the basis of family or community ties.