Banking industry income increases

by Talk Business & Politics staff ([email protected]) 514 views 

Federally-insured commercial banks and savings intuitions saw net income rise by 35.9% to $69.5 billion in the third quarter, from the same period in 2020, according to a recent report from the Federal Deposit Insurance Corp. (FDIC).

The rise can be attributed to continued economic growth and improved credit conditions, leading to a third consecutive quarter of aggregate negative provision expense.

The 84 FDIC-insured banks in Arkansas reported earnings are exceeding 2020 and 2019 levels. Through the first three quarters of 2021, net income for Arkansas banks increased by 71.4% to $1.71 billion, from $999 million in the same period in 2020. Earnings have risen 40% from $1.22 billion in the same period in 2019.

“With strong capital and liquidity levels to support lending and protect against potential losses, the banking industry continued to support the country’s needs for financial services while navigating the challenges presented by the pandemic,” FDIC Chairman Jelena McWilliams said. “The banking industry reported strong earnings in third quarter 2021, supported by continued economic growth and further improvements in credit quality.”

Reports from the 4,914 FDIC-insured institutions show two-thirds of all banks noted improvements in quarterly net income, and the share of profitable institutions rose to 95.9%. However, net income declined 1.2% from the second quarter of 2021 as a result of an increase in provision expense from the period.

The banking industry reported an aggregate return on average assets ratio of 1.21%, up 0.24 percentage points from the same period in 2020 but down 0.03 percentage points from the second quarter of 2021. Net interest margin improved to 2.56%, up 0.06 percentage points from the recent record low in the previous quarter but down 0.12 percentage points from the third quarter in 2020.

Community banks reported a 19.6% increase in third-quarter net income, from the same period in 2020. The rise could be attributed to an increase in net interest income and a decline in provision expense.

In Arkansas, the number of reporting institutions fell to 84 in the third quarter, from 86 in the same period in 2020, and 91 in the same period in 2019. Total employees increased to 23,550, from 23,468 in 2020 and 23,099 in 2019.