WASHINGTON — U.S. banking earnings in the second quarter rose 7.3% from a year earlier to $43 billion as institutions enjoyed higher revenues and lower noninterest expenses, the Federal Deposit Insurance Corp. said Wednesday.
The agency's Quarterly Banking Profile reported a 2.1% year-over-year increase in revenue, supported by a 5.4% increase in loan growth. Loan growth was 2.2%, or $185 billion, higher than in the first quarter of this year.
Noninterest expenses were 1.1% lower compared to the second quarter of 2014 with "a few large banks" registering a $1.3 billion drop in litigation expenses.
However, the low interest-rate environment continued to put pressure on earnings. The average net interest margin was 3.06% in the second quarter, up from 3.02% in the first quarter but still below the 3.15% in the second quarter of 2014. Community banks did fair slightly better with an average net interest margin of 3.57%, but that was below the average margin for the same quarter of last year when it was 3.61%.
"The interest-rate environment remains challenging for banks," FDIC Chairman Martin Gruenberg said in remarks prepared for the report's release. "Revenue growth has been modest and net interest margins continued to decline - even as banks extended asset maturities to mitigate the impact of low rates."
Community banks also continued to outperform the industry as a whole with earnings increasing 11.8% in the second quarter compared to the same quarter last year, which was nearly double the 6.5% increase for larger banks. Community banks' income benefited from both higher interest and noninterest income.
However, Gruenberg noted that community banks may have relied on extending asset maturities to support interest income growth. "Community banks have increased the share of longer-term assets at a faster pace than the rest of the industry," he said.
Long-term assets represented 34.1% of total assets for community banks in the second quarter, which was up from 33.7% last year. Long-term assets at community banks also exceeded the 25.8% share for the industry as a whole and the 24.5% for non-community banks.
The number of institutions on the agency's "Problem List" fell by 25 to a total of 228, marking the 17th consecutive quarterly decline.