WASHINGTON — Banks and thrifts earned $7.6 billion in the first quarter, the highest level of earnings during the past four quarters, but still 61% lower than a year earlier, the Federal Deposit Insurance Corp. said Wednesday.
First quarter earnings, while relatively small, represented a vast improvement over the fourth quarter of last year, when banks lost $36.9 billion.
The FDIC's Quarterly Banking Profile said earnings continued to be hampered by a sizable growth in loan loss provisions. Banks set aside $60.9 billion in provisions in the first quarter, a 64% increase from a year earlier. Almost two out of every three banks increased their loss provisions. Goodwill impairment charges and other intangible asset expenses more than doubled to $7.2 billion from a year earlier.
Noninterest income helped to boost bank earnings, jumping 12.8% from the first quarter of last year, to $68.3 billion. Net interest income was 4.7% higher while gains on securities and other assets jumped 153%. The rebound in noninterest income stemmed from higher trading revenue at a few large banks, but gains on loan sales and increased servicing fees also provided a boost, the FDIC said.
Charge-offs continued to rise in all major loan categories. Banks charged-off $37.8 billion in the first quarter, slightly lower than the fourth quarter, but nearly double their level a year earlier. That increase was led by loans to commercial and industrial borrowers, where charge-offs increased by $4.2 billion. Credit card charge-offs rose by $3.4 billion, while charge-offs of real estate construction loans were up $2.9 billion and residential real estate loans charge-offs jumped by $2.7 billion.
Noncurrent loans also increased, jumping 25% — the largest quarterly increase in three years. The percentage of loans and leases that were noncurrent rose to 3.76% during the quarter. The FDIC said the noncurrent rate is now at its highest level since the second quarter of 1991.
The industry's total assets declined by $302 billion - or 2.2% — during the quarter, as a few large banks reduced their loan portfolios and trading accounts. It was the largest percentage decline in industry assets in a single quarter since the FDIC first began tracking the data. Eight large institutions accounted for the entire decline, the FDIC said. Most insured institutions actually increased assets during the quarter.
The number of banks and thrifts on the agency's "problem list" increased by 21%, to 305, while total assets at such institutions increased by 38%, to $220 billion.
The Deposit Insurance Fund now stands at its lowest point in well over a decade. Federal reserves totaled $13 billion at March 31, a $4.3 billion drop from yearend. The ratio of reserves to insured deposits was 0.27%, a 9 basis point decline from yearend.