Third-quarter financial performance mixed for banks; slight or no improvement over previous quarter (but better than last year)

Banks had mixed financial results in the third quarter, easily outdistancing performance from a year ago (when the coronavirus crisis was raging) but slipping from last quarter, according to call report data released Tuesday.

The Federal Deposit Insurance Corp. (FDIC) said quarterly net income at banks for the end of the third quarter 2021 was up 35.9% ($18.4 billion) over the third-quarter end for the previous year. At that time, the coronavirus crisis was beginning its second spike for the year. That increase, the FDIC said, was “primarily due to a $19.7 billion decline in provision expense.”

However, third-quarter net income declined from the previous quarter of 2021 by $875.5 million (1.2%), the agency said. The drop was due to an increase in provision expense from the second quarter, the FDIC said, “up $5.5 billion to negative $5.2 billion.”

Likewise, return on average assets (considered the basic yardstick of bank profitability) was 1.21% at the end the third quarter. That’s 24 basis points (bp) higher than the year before – but down 3 bp from the previous quarter.

Net interest margins (NIM) for banks improved slightly but are still well within the hole carved out last year, the FDIC said. For the third quarter, NIM was 2.56%, up 6 bp from the record low posted in the second quarter. However, NIM is still down 12 bp from the previous year. The FDIC attributed the quarterly increase to a jump in net interest income of $5.2 billion (up 4%) from the prior quarter.

The FDIC third-quarter numbers also showed:

  • Loan and lease balances are up slightly from the previous quarter, rising 0.6% ($62.7 billion).
  • Delinquencies (of 90 days or more, or in “concurrent” status) are down, with a drop of 6.3% ($6.9 billion) from the second quarter.
  • The reserve ratio of 1.27% reserves to total deposits insured for the Deposit Insurance Fund (DIF) was the same as the second quarter at 1.27%.
  • Three new banks opened in the third quarter; 39 institutions merged with other insured banks, one bank went out of business – and no bank failures were reported.

FDIC-Insured Institutions Reported Net Income of $69.5 Billion in Third Quarter 2021