FDIC-insured commercial banks and savings institutions reported aggregate net income of $60.2 billion in the second quarter of 2018, up $12.1 billion (25.1 percent) from a year ago.
The improvement in earnings was attributable to higher net interest income and a lower effective tax rate, the FDIC said. Average return on assets for the quarter increased to 1.37 percent, up from 1.13 percent in the second quarter of 2017.
More than 70 percent of those 5,542 reported year-over-year growth in quarterly earnings. The percent of unprofitable banks in the second quarter declined to 3.8 percent from 4.3 percent a year ago.
Loan and lease balances increased by $104.3 billion (1.1 percent) from the first quarter of 2018, and all major loan categories registered growth. Over the past 12 months, loan and lease balances grew by 4.2 percent, a slight decline from the 4.9 percent annual growth reported last quarter.
“The banking industry once again reported positive results for the quarter,” said Chair Jelena McWilliams. “Net income rose through higher net interest income as well as noninterest income. Loan growth was experienced in all major loan portfolios, while loan performance continues to improve. Lastly the number of ‘problem banks’ continued to fall. Community banks also reported a solid quarter with loan growth and a net interest margin that exceed the overall industry.”
Net income at the 5,111 institutions defined by the Fed as community banks reported $6.5 billion in net income, an increase of 21.1 percent from second quarter 2017. Higher net operating revenue and a lower effective tax rate led to that $1.1 billion boost in second-quarter net income.
Net operating revenue at community banks rose by $1.8 billion (8 percent) from the second quarter of 2017, led by higher net interest income (up $1.6 billion or 9 percent) and noninterest income (up $201.9 million or 4.5 percent). Loan-loss provisions declined by $193.5 million (22.5 percent), while noninterest expenses were $934.2 million (6.6 percent) higher.
Loan and lease balances rose by $103.2 billion (7 percent) in the past 12 months, exceeding the growth rate for noncommunity banks by more than 3 percentage points. Nearly 80 percent of community banks reported higher loan balances compared with second quarter 2017, and sixty percent reported increased small loans to businesses. Community banks added $9 billion (3.1 percent) in small loans to businesses since second quarter 2017 to a collective total of $297 billion.
Pretax ROA at community banks rose to 1.41 percent from 1.33 percent between first and second quarter 2018 and was up 5 basis points since second quarter 2017. Loan-loss provisions declined by $193.5 million (22.5 percent), while noninterest expenses were $934.2 million (6.6 percent) higher.