FDIC says 4,672 FDIC-insured banks reported income of $79.8 billion

The Federal Deposit Insurance Corporation (FDIC) has released its Quarterly Banking Profile for the first quarter of 2023, revealing that 4,672 FDIC-insured commercial banks and savings institutions reported a combined net income of $79.8 billion.

This represents an increase of $11.5 billion, or 16.9 percent, compared to the previous quarter. However, after excluding the effects of acquiring two failed banks, the quarter-over-quarter net income would have remained relatively flat.

The growth in noninterest income, driven by the accounting treatment of the failed bank acquisitions and record-high trading revenue at large banks, outpaced the decline in net interest income and the increase in noninterest expenses.

“The banking industry has proven to be quite resilient during this period of stress,” said FDIC Chairman Martin J. Gruenberg. “Net income still remains high in relation to historical measures, asset quality metrics remain favorable, and the industry remains well capitalized.”

“However, the industry continues to face significant downside risks from the effects of inflation, rising market interest rates, slowing economic growth, and geopolitical uncertainty,” said Gruenberg.

The report highlights several key findings:

  1. Net Interest Margin (NIM) Decline: The NIM for the first quarter was 3.31 percent, which is 7 basis points lower than the previous quarter but 77 basis points higher than the same quarter last year. The decline in NIM can be attributed to the rising cost of deposits outpacing the yields on loans.
  2. Unrealized Losses on Securities: Unrealized losses on securities decreased for the second consecutive quarter, totaling $515.5 billion in the first quarter. This represents a decline of $102.2 billion, or 16.5 percent, from the previous quarter.
  3. Loan Balances: Total loan and lease balances experienced a modest decline of $14.6 billion, or 0.1 percent, from the previous quarter. The decline was mainly due to loans transferred to the FDIC as receiver and a seasonal decrease in credit card loan balances. However, compared to the same quarter last year, loan balances grew by $855.2 billion, or 7.5 percent.
  4. Total Deposits: Total deposits declined for the fourth consecutive quarter, reflecting a decrease in consumer and business deposits held by banks.
  5. Asset Quality Metrics: Despite some modest deterioration, asset quality metrics remained favorable. The noncurrent loan rate increased by 2 basis points to 0.75 percent, driven by noncurrent nonfarm, nonresidential commercial real estate loans. Total net charge-offs as a ratio of total loans increased by 5 basis points to 0.41 percent, primarily due to higher credit card net charge-offs.
  6. Community Banks: Net income for community banks declined by $306.0 million, or 4.2 percent, from the previous quarter, totaling $7.0 billion. However, compared to the same quarter last year, net income increased by $403.6 billion, or 6.1 percent.

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