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 $45.6 billion in the third quarter of 2016, up $5.2 billion (12.9 percent) from a year earlier. The increase in earnings was mainly attributable to a $10 billion (9.2 percent) increase in net interest income and a $1.2 billion (1.9 percent) rise in noninterest income. One-time accounting and expense items at three institutions had an impact on the growth in income. Of the 5,980 insured institutions reporting third quarter financial results, 60.8 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the third quarter fell to 4.6 percent from 5.2 percent a year earlier. That was the lowest percentage since the third quarter of 1997.
Community Bank Performance
Community banks—which represent 92 percent of insured institutions—reported net income of $5.6 billion in the third quarter, up $592.6 million (11.8 percent) from one year earlier. The increase was driven by higher net interest income and noninterest income, which was partly offset by higher loan-loss provisions and noninterest expense. The 12-month growth rate in loan balances at community banks was 9.4 percent, while growth at noncommunity banks was 6.5 percent. The noncurrent rate continued to improve, and community banks accounted for 43 percent of small loans to businesses.
Insurance Fund Indicators
Insured deposits increased by 2.1 percent in the third quarter of 2016. The DIF reserve ratio rose to 1.18 percent on September 30, 2016, up from 1.17 percent at June 30, 2016, and 1.09 percent at September 30, 2015. Two FDIC-insured institutions failed during the quarter.
Core Profitability of Community Banks, 1985–2015 - PDF (PDF Help)
The relatively low profitability reported by community banks since the 2008 financial crisis has sparked concerns about the core profitability of the community banking model. This paper constructs an econometric model using 31 years of data to estimate the impact of macroeconomic shocks on industry average pretax return on assets (ROA). After accounting for macroeconomic factors, the remaining unexplained variation is considered to be the core component of profitability. Core ROA is found to have been relatively stable between 1985 and 2015. It trended downward over the 1990s, but the effect of the financial crisis on industry composition has led to a reversal and a modest increase in core profitability. More than 80 percent of the post-crisis decline in profitability can be explained by negative macroeconomic shocks.
Mutual Institutions: Owned by the Communities They Serve - PDF (PDF Help)
Mutual institutions—savings banks and savings and loans owned by their depositors—are a unique type of community bank. This paper provides an overview of mutual institutions and their place in the U.S. financial system. They generally earn lower returns on assets than stock community banks, but have higher-quality assets. Mutuals also failed less often between 2008 and 2014 than did stock community banks. From their 19th-century origins as providers of small-denomination savings accounts and the means of pooling funds to finance homeownership, to their dominance of U.S. mortgage finance for much of the 20th century, and to their strong performance during the recent financial crisis, mutuals remain an important segment of the community banking sector.