Warnings on the economy and chatter about interest rates.

The FDIC Quarterly Banking Profile arrived last week.

For the first time in several years net income fell. Net Income is the nation’s banks totaled $57.4 billion during the three months ended September 30, a decline of $4.5 billion (7.3 percent) from the third quarter of 2018.

Nonrecurring events at three large institutions, which totaled $4.9 billion, caused the decline in quarterly net income.

FDIC Quarterly Banking Profile on Community Banks

Community banks continued to shine as community banks reported a net income of $6.9 billion in third-quarter 2019, up $466 million from a year ago. Credit conditions remain stable and the number of problem banks fell from 56 to 55 during the third quarter, the lowest number of problem banks since the first quarter of 2007.  Total assets of problem banks rose modestly from $48.5 billion in the second quarter to $48.8 billion.

FDIC Chairman Jelena McWilliams sent a press release to accompany the new report. In the release, she said “Overall, the banking industry reported positive results, despite non-recurring events at three large institutions. While these events resulted in a modest decline in aggregate quarterly net income, the industry reported loan growth and the number of problem banks remained low. Community banks also reported another positive quarter. Net income rose at community banks primarily because of higher net operating revenue. Additionally, the annual rate of loan growth at community banks outpaced the overall industry.”

She also warned the banking industry about the economy.

“The record-long economic expansion continued in the United States. With two reductions in short-term rates and a flat yield curve this quarter, challenges in lending and funding continued,” McWilliams said. “The competition to attract and maintain loan customers and depositors remains strong; consequently, banks need to maintain rigorous underwriting standards and prudent risk management. Awareness of interest rate, liquidity, and credit risks at this stage of the economic cycle will position banks to be more resilient in maintaining lending through the economic cycle.”

A full copy of the report can be found here.

By: Tim Melvin

Related: Melvin: Are Community Banks an Alternative Investment?