Banks realize 7.3% drop in net income in third quarter; ROAA also falls

Banks and thrifts earned $57.4 billion in the third quarter, down from the same period a year earlier by only because three large banks recorded “nonrecurring events,” the federal insurer of bank deposits said Tuesday.

However, the Federal Deposit Insurance Corp. (FDIC) also reported, the average return on average assets (ROAA) at federally insured banks and savings associations fell to 1.25% at the end of the third quarter 2019 from 1.41% a year earlier. That is still relatively high compared to recent year-end figures, such as in 2017, when ROAA was .97%.

“The banking industry reported positive results this quarter, despite nonrecurring events at three large institutions that affected quarterly net income,” said FDIC Board Chairman Jelena McWilliams. She did not name the three large banks, but the FDIC did note the “non-recurring events” totaled $4.9 billion. “Overall, the banking industry reported strong loan growth, and the number of ‘problem banks’ remained low,” she said.

According to the agency, net income was down 7.3% among federally insured banks and thrifts from a year ago ($4.5 billion). However, the agency added, 62% of all insured institutions reported a year-over-year increase in net income, and just more than 4% were unprofitable.

The FDIC also reported that no banks failed during the third quarter (although three bank failures were reported in late October and early November, the first few weeks of the year’s fourth quarter). The FDIC said the number of banks on its “problem list” fell in the third quarter from 56 to 55, which the agency said was the lowest number of problem banks since the first quarter of 2007. However, total assets of banks on the list grew slightly, from $48.5 billion to $48.8 billion.

However, FDIC also reported that four new banks opened during the fourth quarter – and 46 institutions were “absorbed by mergers.” At the end of the third quarter, FDIC said, there were 5,256 banks – down from 5,303 at the end of the second quarter.

FDIC-Insured Institutions Reported Net Income of $57.4 Billion in Third Quarter 2019