WASHINGTON — It was mostly good news for banks
in the Federal Deposit Insurance Corp.'s third-quarter industry report card, a trend that has been relatively steady of late.
Earnings were up from a year earlier, reaching $47.9 billion. The average net interest margin rose 12 basis points from a year earlier to 3.30%, and average interest-bearing assets rose by 3.6%. Net interest income increased 7.4% year over year to $127.5 billion. More than 83% of all banks reported an increase in net interest income, and almost two out of every three banks reported higher net interest margins.
The trend was even true for community banks, which outperformed their peers. Their earnings grew 9.4% from a year earlier. The FDIC itself reported a successful quarter, with the ratio of insurance reserves to insured deposits increasing to 1.28% as of Sept. 30. That is the highest reserve ratio since the second quarter of 2005, when it was 1.24%.
Yet there were also signs of potential trouble to come. A slowdown in asset growth and gradually increasing charge-offs remain worries. Even though total assets increased by $168.8 billion, or 1%, during the quarter, asset growth slowed for the fourth consecutive quarter. Loan balances increased $96 billion during the third quarter, but that was down from $161 billion in the second quarter. Meanwhile, it was the eighth consecutive quarter that charge-offs increased.
“While overall performance improved from the prior year, the interest rate environment and competitive lending conditions continue to pose challenges for many institutions,” said FDIC Chairman Martin Gruenberg. “In addition, with the economy in the ninth year of an expansion that has been characterized by modest economic growth, the annual rate of loan growth has slowed in recent quarters.”
Here are some data snapshots from the Quarterly Banking Profile: