FDIC-insured institutions made $64.4 billion in the second quarter, an 8.5 percent drop from a year ago, according to the Quarterly Banking Profile.
The $6 billion overall drop was due to a nearly $22 billion year-over-year increase in provision expenses, from negative $10.8 billion in 2021 to $11.1 billion this year. Also, more than half of the 4,771 banks the FDIC insures saw an annual decline in quarterly net income. Net income increased $4.6 billion or 7.8 percent from the first quarter as net interest income growth exceeded the increase in provisional expenses.
Community banks insured by the FDIC reported a 6.5 percent or $523 million drop in net income from the year prior due to higher noninterest expenses, lower noninterest income, losses from securities sales, and higher credit loss provisions. A majority of the 4,333 community banks had less quarterly net income than the previous year. Net income increased $583 million or 8.4 percent from the first quarter. Total loan and lease balances increased by 3.7 percent or $414.9 billion from the previous quarter.
Community bank net interest income increased by nearly $2 billion or 9.6 percent to $21.4 billion from the year-ago quarter, mainly due to income from real estate loans and investment securities. Community bank NIM increased 8 basis points to 3.33 percent. Provisions for credit losses increased $533.4 million or 739 percent from the year-ago quarter and $318.7 million or 110.4 percent from the previous quarter.
Credit quality remained high: The number of loans 90 days or more past due continued to decline, this time by $7.2 billion or 7.6 percent from the previous quarter. The noncurrent rate for total loans fell nine basis points from the previous quarter to 0.75 percent, the lowest rate in 16 years. However, loans past due 30-89 days grew by $11.4 billion or 25 percent from the year-ago quarter and 5.2 percent from the first quarter of the year.
Total loan and lease balances in the banking industry grew by $913 billion or 8.4 percent. The industry’s NIM increased 26 basis points from the previous quarter to 2.80 percent, the highest quarterly growth in 12 years, according to the FDIC. Seventy percent of banks reported higher net interest income than a year ago.
The banking industry experienced an aggregate return on average assets ratio of 1.08 percent, a drop of 16 basis points from the year-prior but up seven basis points from the first quarter. Driven by loan growth, the yield on earning assets grew to 3.05 percent, up 35 basis points from the previous quarter and 37 basis points from the prior year.
Twenty-eight institutions merged in the second quarter.
American Bankers Association Chief Economist Sayee Srinivasan said the report “reveals a strong banking sector that continues to provide support for the economy during a challenging period.
“Given the uncertain economic outlook, banks will continue to prudently prepare for potential changes in credit quality,” he added. “Overall, the industry remains on firm footing and well positioned to withstand potential headwinds resulting from the Federal Reserve’s ongoing efforts to fight inflation.”