FDIC-insured institutions report combined earnings drop

Federal Deposit Insurance Corp.-insured commercial banks and savings institutions reported aggregate first-quarter net income of $39.1 billion, a 1.9 percent decrease from $39.8 billion a year earlier.

The decline was largely due to a $4.2 billion increase in provisions for loan losses, brought on by rising troubling loans to commercial and industrial borrowers in the energy sector. Another factor was a $2.2 billion drop in noninterest income, which equates to weaker trading income at a few large banks and lower income from servicing assets, according to a news release.  

However, 61.4 percent of the 6,122 insured institution posted an earnings increase from first-quarter 2015. The proportion of unprofitable banks was 5 percent - the lowest level since first-quarter 1998 - down from 5.7 percent a year earlier.

Two locally based holding companies, Great Southern Bancorp Inc. (Nasdaq: GSBC) and Guaranty Federal Bancshares Inc. (Nasdaq: GFED), reported decreased first-quarter net income. Great Southern net income available to common shareholders dropped 15 percent to $9.8 million, and Guaranty earnings dipped 4 percent to $1.3 million.

"The mixed first quarter results reflect an evolving economic environment," FDIC Chairman Martin Gruenberg said in the release. "Revenue increased from a year earlier and loan balances expanded at the highest 12-month rate since 2008. However, a prolonged period of low interest rates has narrowed margins and caused some institutions to reach for yield.”

First-quarter financial notes:
    •    Net operating revenue rose 2.7 percent to $173 billion, largely due to loan growth.
    •    Community banks - which account for 5,664 of the total reporting institutions - improved net income 7.4 percent to $5.2 billion. Net operating revenue moved up 6.9 percent to $22.2 billion.
    •    The number of problem banks - those in jeopardy of failing - dropped to 165 from 183 a year earlier. The figure is the smallest number in more than seven years and is down from a peak of 888 in first-quarter 2011.