Community bank net income declines in Q4

Community bank net income fell 6.5% in the fourth quarter and was down 2.4% in 2024 from the previous year, according to the FDIC’s latest Quarterly Banking Profile.

Key Drivers: Higher noninterest expense (up 5.4%), higher provision expenses (up 14.5%), and losses on the sale of securities (down $565.9 million) more than offset increases in net interest income (up 3.6%) and noninterest income (up 3.7%) during the fourth quarter.

Additional Data: For the fourth quarter, community banks reported:

• The pretax return on assets ratio decreased 13 basis points from the previous quarter but increased 3 basis points from one year earlier to 1.09%.

• The net interest margin increased 9 basis points from the previous quarter and 9 basis points year-over-year to 3.44%.

• Net operating revenue grew 3.6% quarter-over-quarter as net interest income and noninterest income increased.

• Noninterest expense increased 5.4% from the previous quarter and 6.3% from a year ago, and quarterly provision expense was up 14.5% and 8.1%, respectively.

• Unrealized losses on securities increased 29.6% from the previous quarter but were down 1.9% from the previous year.

• Total assets increased 0.7% quarter-over-quarter and 3.7% year-over-year.

• Loan and lease balances grew 1.3% from the previous quarter and 5.1% from the prior year, and loan growth was broad-based across categories except auto loans and credit cards.

• Deposits increased 1.6% from the previous quarter and were up 4.7% from a year ago.

Overall Industry: The overall banking industry reported a 2.3% increase in net income from the previous quarter driven by an increase in net interest income. Full-year net income was up 5.6% from 2023.

Deposit Insurance Fund: The Deposit Insurance Fund balance increased $4.0 billion to $137.1 billion, while the reserve ratio increased 3 basis points during the quarter to 1.28%.

Mergers and Closings: In the fourth quarter, the total number of FDIC-insured institutions declined by 30 to 4,487. 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.