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 $43.6 billion in the second quarter of 2016, up $584 million (1.4 percent) from a year earlier. The increase in earnings was mainly attributable to a $5.2 billion (4.8 percent) increase in net interest income and a $981 million decline in expenses for litigation reserves at a few large banks. Banks increased their loan-loss provisions by $3.6 billion (44.2 percent) compared to a year ago, partly in response to rising levels of troubled loans to commercial and industrial borrowers, particularly in the energy sector. Of the 6,058 insured institutions reporting second quarter financial results, 60.1 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the second quarter fell to 4.5 percent from 5.8 percent a year earlier.
Community Bank Performance
Community banks—which represent 92 percent of insured institutions—reported net income of $5.5 billion in the second quarter, up $451.3 million (9 percent) from the year-earlier quarter. Higher revenue from net interest income and noninterest income was offset in part by higher loan-loss provisions and noninterest expense. 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 only 0.2 percent in the second quarter of 2016. The DIF reserve ratio (the fund balance as a percent of estimated insured deposits) increased to 1.17 percent in the second quarter of 2016 from 1.13 percent in the prior quarter. Under FDIC regulations, several changes to the assessment system take effect beginning the quarter after the DIF reserve ratio first reaches or exceeds 1.15 percent.