FDIC-insured banks had net income of $18.5 billion in first quarter 2020, a decline of $42.2 billion (69.6 percent) from a year ago. Just over half of banks reported year-over-year declines in net income.
Deposits rose by $1.2 trillion in the first quarter from the previous quarter. On an annual basis, deposits grew by 13.3 percent, the largest year-over-year growth rate ever reported in the FDIC’s Quarterly Banking Profile.
Provision expenses increased by $38.8 billion, or 279.9 percent as a result of the economic decline, although adoption of CECL by some banks also added to that increase.
Loan balances increased by $442.9 billion during the first quarter, or 8 percent annually. This was the highest year-over-year growth rate since first quarter 2008.
“Although bank earnings were negatively affected by increases in loan loss provisions, banks effectively supported individuals and businesses during this downturn through lending and other critical financial services,” said FDIC Chair Jelena McWilliams. “Notwithstanding these disruptions, at the end of the first quarter, bank capital and liquidity levels remain strong, asset quality metrics are stable, and the number of ‘problem banks’ remains near historic lows.”
The 4,681 FDIC-insured community banks reported quarterly net income of $4.8 billion, representing a decline of $1.3 billion, or 20.9 percent. Provision expenses grew to $1.8 billion, three times the amount reported in first quarter 2019.
Loan growth held steady at 5.8 percent year-over-year in spite of weakening economic conditions, led by commercial real estate, commercial and industrial, and residential mortgages. Loans increased by $87.1 billion to $1.6 trillion, and 73 percent of community banks reported growth in loan and lease balances compared with first quarter 2019.
Domestic deposits of $1.8 trillion at community banks grew 1.6 percent in the quarter and 5.4 percent year over year. Domestic interestbearing deposit inflows of $23.6 billion (up 1.7 percent) outpaced that of noninterest-bearing deposits of $5.8 billion (up 1.5 percent).
Average net interest margin at community banks declined by 12 basis points to 3.55 percent. That was higher than the average for all banks of 3.13 percent in the first quarter, itself down from 3.42 percent a year prior.
Average return on assets at community banks decreased to 1.02 percent from 1.40 percent in first quarter 2019. For all banks, average ROA fell to 0.38 percent in first quarter 2020 from 1.35 percent in first quarter 2019.The share of unprofitable institutions increased to 7.3 percent.