Community banks led the banking industry in first-quarter profit increases, with the sector’s aggregate net income rising 16% from a year ago, the Federal Deposit Insurance Corp. said Wednesday.
By comparison, profits at all FDIC-insured banks increased by only 6.9%.
“Community banks reported improved performance during the quarter that outpaced the overall industry,” FDIC Chairman Martin J. Gruenberg said in a news release. “Their earnings were up significantly from a year ago, and their loan growth was appreciably higher than the rest of the industry.”
For all FDIC-insured banks, the increase in earnings was mainly attributable to a $4.3 billion rise in net operating revenue due to stronger loan growth.
Total loan and lease balances increased 0.6% during the first three months of 2015, and for the 12 months ended March 31, loans and leases increased 5.4%, the biggest rise since mid-2008, the FDIC said.
At community banks, loan balances rose 1.3% during the first quarter and 9.1% during the past 12 months.
For all FDIC-insured banks, net interest income rose 1.5%. Noninterest income rose 4.6%, as trading income rose 23.9% and income from the sale, securitization, and servicing of single-family home mortgages rose 15.6%.
Non-current loans and leases fell 6%, net charge-offs fell 13.2%, and the annualized net charge-off rate fell to 0.43%, the lowest quarterly rate since the third quarter of 2006.
Net interest margins remain under pressure, with the average NIM declining to 3.02%, from 3.12% in the fourth quarter of 2014 and 3.16% in the year-ago period.
Asset yields fell more rapidly than funding costs as higher-yielding assets matured and were replaced by lower-yielding investments in an environment of low interest rates. Average margins at community banks declined to 3.55%, from 3.63% in the fourth quarter of 2014 and 3.57% one year ago.
“The current interest-rate environment remains challenging for banks,” Gruenberg said. “Revenue growth remains subdued, and net interest margins have continued to decline. Many institutions have responded by reaching for yield, which is a matter of ongoing supervisory attention.”
Still, the number of banks on the FDIC’s so-called problem list fell from 291 to 253 during the first quarter — the smallest number of banks on the list in six years.