US banking sector posts income gain in 2024, number of banks declines

The U.S. banking industry is doing well, with full-year net income up across the sector. However, smaller community banks posted a 2024 net income decline, according to a Federal Deposit Insurance Corporation (FDIC) report posted Tuesday (Feb. 25).

Commercial banks and savings institutions insured by the FDIC reported combined fourth quarter net income of $66.8 billion, up 2.3% compared with the same period in 2023. For the year, the banks and institutions reported combined net income of $268.2 billion, up 5.6% compared with 2023. Return on assets, a closely-watched metric in the sector, rose 0.03% to 1.12%.

Community banks, those with $10 billion or less in total assets, had combined 2024 net income of $25.9 billion, down 2.4% compared with 2023.

“The decline was caused by higher noninterest expense, up $3.9 billion (6.1%), and higher provision expense, up $671 million (20%), which offset the increases in net interest income, up $2.2 billion (2.7%), and noninterest income, up $1.1 billion (5.9%),” the FDIC noted in its report.

The total number of FDIC-insured institutions declined by 30 during the quarter to 4,487. During the quarter, four banks opened, one bank failed, one bank failed after quarter end and did not file a call report, three banks did not file a call report after selling a majority of their assets to credit unions, one bank otherwise closed, and 28 institutions merged with other banks, the FDIC reported.

Sayee Srinivasan, chief economist for the American Banking Association, said the FDIC report indicates that U.S. banks are a “healthy and strong driver of the U.S. economy.”

“Banks boasted strong capital and liquidity levels, which helped them make loans and safeguard against potential losses,” Srinivasan said in a statement. “While asset quality remained healthy overall, banks increased provisioning as part of their prudent risk management. The industry’s net interest income and net interest margin increased in the fourth quarter, helping banks maintain strong balance sheets as reflected in Tier 1 capital, which has grown to $2.2 trillion. At this stage of the U.S. economic cycle, the banking industry is well positioned to continue supporting customers, clients, and communities with the financial services they want and need.”