The increase in net income was mainly attributable to a $7.9 billion or 6 percent increase in net interest income, the FDIC said.
Net income increased by $4.9 billion (8.7 percent) from a year ago to $60.7 billion, led by higher net interest income. Almost two-thirds of all institutions reported annual increases in net income and less than 4 percent of institutions were unprofitable. The average return on assets increased to 1.35 percent, up from 1.28 percent a year earlier.
Over the past 12 months, total loan and lease balances increased by 4.1 percent, a slight decline from the 4.4 percent annual growth rate reported last quarter. They fell, however, by $4.8 billion from fourth quarter 2018. Commercial and industrial loans registered the largest dollar increase from a year ago, up $155.6 billion, or 7.6 percent.
“With a historically low interest-rate environment and strong competition to attract lending, some institutions have ‘reached for yield,’ which limited net interest margin expansion,” said FDIC Chair Jelena McWilliams. “With the recent stabilization of interest rate hikes, some institutions may face new challenges in lending and funding. Therefore, banks must maintain prudent risk management in order to support lending through this economic cycle.”
The 4,930 insured institutions identified as community banks reported net income of $6.5 billion in the first quarter, up $596 million (10.1 percent) from a year earlier. Higher net interest income, higher realized gains on securities, and lower provision expense drove the year-over-year increase in quarterly earnings.
Lower noninterest income and higher noninterest expense partially offset the improvements. Most community banks (62 percent) reported net income growth year over year, and pretax return on assets rose 7 basis points to 1.40 percent.
Only 3.9 percent of community banks reported net losses for the quarter, the lowest share of community banks reporting first quarter net losses since first quarter 1997.
“The FDIC’s first quarter report shows the banking industry is healthy and poised to continue driving a robust U.S. economy,” said James Chessen, economist for the American Bankers Association. “America’s banks continued to maintain record high capital levels, abundant reserves and sustained deposit growth to support increased loan demand. Bank capital is approaching $2.1 trillion as capital-to-asset ratios have strengthened across the board, and asset quality continues to improve with declines in past-due accounts.”