FDIC-insured institutions post combined earnings increase

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. recorded aggregate second-quarter net income of $43.6 billion, a 1.4 percent increase compared with $43 billion a year earlier.

The rise in quarterly earnings was attributable to a $5.2 billion increase in net interest income and a $981 million drop in litigation reserve expenses at a few large banks, according to an FDIC news release.

“Income and revenue both increased from a year ago, loan growth remained strong, the number of unprofitable banks was at an 18-year low and there were fewer banks on the problem list. Community banks reported strong net income, revenue and loan growth,” FDIC Chairman Martin Gruenberg said in the release. “However, challenges continue.

“Revenue growth remains sluggish as a prolonged period of low interest rates has put downward pressure on net interest margins. This has led some institutions to reach for yield, increasing their exposure to interest-rate risk.”

Second-quarter financial highlights:
    •    The 5,062 community banks insured by the FDIC posted net operating revenue of $22.8 billion, a 7.1 percent increase.
    •    Loan balances among all 6,058 reporting institutions grew by $182 billion during the quarter.
    •    The number of banks in danger of failure fell to 147 from 165 a year earlier, the smallest number of problem banks in seven years.