7 Highlights from the Latest FDIC Quarterly Banking Profile

Susan Sharbel
September 13, 2021
Read Time: min

Banking Trends from the FDIC's 2Q Report

Net interest margin reached a new record low, but positive signs emerged in lending.

You might also like this webinar: "The Basics of Consumer Lending."

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Banking Data
Summary of the Latest FDIC Quarterly Profile

In case you missed it, the Federal Deposit Insurance Corp. (FDIC) released the latest Quarterly Banking Profile recently, and it has some helpful information on industry trends.  

Here are seven highlights from the quarter ended June 30, 2021:

 

NIM fell
Lower provision expenses drove net income

Net income

Net income of $70.4 billion represents an increase of 281% compared to one year ago (June 2020), driven by a $73 billion decline in provision expense.

NIM

Net interest margin (NIM) reached a new low of 2.50%, down 31 basis points from a year ago. Yield on earning assets fell to a much greater extent (53 basis points) than the cost of funds (18 basis points), which has very little room to move; both metrics are at record lows. Interestingly, 64.1% of institutions reported higher net interest income than one year ago (June 2020), and the FDIC said that several large institutions are driving the aggregate net interest income lower.

Bank numbers

While the number of FDIC-insured and -supervised institutions continues to dwindle, the assets that they manage does not and continues the upward trend, ending at $22.8 trillion as of June 2021. This represents an increase of 1% over June 2020. 86.1% of all banks have reported an increase in total assets with maturities over five years as financial institutions reach out further on the yield curve to chase earnings. In addition, 95.8 % of these financial institutions are reporting profits.

Return On Assets

Speaking of profitability, ROA is up 89 basis points from one year ago (June 2020) to 1.24%. Non-interest income increased by $5 billion (7.1%) from the year-ago period, while non-interest expense hit a record low of 2.23% of average assets.

Deposits

Deposits continue to flood institutions to the tune of $271.9 billion in June 2021; $175 billion of these deposits are non-interest bearing.

Lending

For the first time in since June 2020, loan and lease balances increased, $33.2 billion (0.3%) from the previous quarter. Increases in credit card and auto loan balances are fueling this growth with over half of all financial institutions reporting growth in the loan portfolio in the second quarter.

Credit trends

Non-current loans continue the downward trend; they were $13.2 billion, or 10.8%, lower than in March 2021. June 2021 also marks the second consecutive quarter of negative provision expense, with 63.3% of institutions reporting reductions in provisions. Charge offs are also at a record low of .27% in June 2021. With the deadline for adoption of the current expected credit loss (CECL) model around the corner, the allowance for loan and lease losses (ALLL) as a percentage of total loans and leases dropped 41 basis points from one year ago. However, it remains above pre-pandemic levels.

Recovery accelerating?
Cash and capital as opportunities unfold

What does this mean for financial institutions?  Economic recovery is showing signs of acceleration, and for the first time in a year we are seeing some movement on the credit front – the financial industry’s golden egg. Institutions spent 2020 increasing ALLL while credit quality remained resilient. The COVID-19 pandemic pushed digitalization advances while new technology is emerging almost daily, enabling financial leaders to make more informed decisions faster.

"Financial institutions have cash and capital, and opportunities are beginning to unfold. "

While overall margins have seen record lows, most institutions are reporting an increase in net interest income over last year (June 2020) with historic low-cost funding and increases in lending opportunities.

Financial institutions have cash and capital, and opportunities are beginning to unfold. Add to this the prospect of a Fed rate hike in late 2022 or 2023, and the future looks more profitable for financial institutions.

Gear up for growth. Learn more during this webinar: "Capital Planning for Banks & Credit Unions"
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We can help you navigate the uncertain environment. Abrigo's ALM model fully integrates with other Abrigo solutions, such as Sageworks ALLL, Stress Testing, Portfolio Insights, and more, giving you a seamless view of data and reporting across your financial institution.. Talk to a specialist to learn more.
About the Author

Susan Sharbel

Senior Advisor, Advisory Services
Susan Sharbel brings over 35 years of expertise in the banking industry, with a focus on asset/liability management and regulatory compliance. Prior to joining Abrigo, she was an ALM consultant leading ALM model implementations and managing the quarterly ALM process, support, and analysis for nearly 40 banking clients. As a

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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