The nation’s community banks had net income of $6.8 billion in the third quarter, up $1.2 billion from 2017. All FDIC-insured institutions pulled in a total of $62 billion for the quarter, up $14 billion from a year prior.
Of the 5,477 insured institutions reporting third quarter financial results, more than 70 percent reported year-over-year growth in quarterly earnings. Net income margin increased to 3.45 percent from 3.30 in third quarter 2017. The percent of unprofitable banks in the third quarter decreased to 3.5 percent from 4 percent a year ago. Net interest income totaled $137.1 billion in the third quarter, an increase of $9.6 billion (7.5 percent) from a year ago, with 83 percent of banks reporting increased net income.
“Improvement in net income was led by higher net operating revenue and a lower effective tax rate,” said FDIC Chair Jelena McWilliams. “Loan balances grew, net interest margins improved, and the number of ‘problem banks’ continued to decline. Community banks also reported another positive quarter, with loan growth and a net interest margin surpassing the overall industry.”
The 21.6 percent increase in net income at the 5,044 community banks came from an increase in net operating revenue and a reduction in income tax expenses. Both combined to offset growth in noninterest expense, up $855 million, with three quarters of community banks reporting higher noninterest expense.
Loan and lease balances rose $98.9 billion (6.6 percent) at community banks during the past 12 months. Nearly 80 percent reported annual growth in loan and lease balances, led by nonfarm residential (up $36.1 billion or 8.2 percent), 1-4 family residential (up $17.2 billion or 4.5 percent) and C&I loans (up $15.7 billion or 8.1 percent). Community Bank NIM rose to 3.74, up from 3.66 a year prior.
“The industry demonstrated another solid and consistent performance in the third quarter. Lending rose in every major category, helping to spur strong economic growth throughout the country,” said James Chessen, chief economist at the American Bankers Association. “Asset quality was the strongest it’s been in more than a decade while bank capital levels hit record highs. We’re also seeing competition for deposits heating up as banks look to further expand the lending that drives our economy forward.