The FDIC Quarterly Banking Profile for the first quarter of 2024 provides insights into the financial health of FDIC-insured institutions. Here are some key points:
- Net Income: The banking industry rebounded in the first quarter, with net income increasing by 79.5 percent from the prior quarter. Community banks reported a quarterly increase of 6.1 percent in net income.
- Net Interest Margin: The industry’s net interest margin declined to 3.17 percent due to increased funding costs and declining asset yields.
- Unrealized Losses: Unrealized losses on available-for-sale and held-to-maturity securities rose by $39 billion to $517 billion in the first quarter. Higher unrealized losses on residential mortgage-backed securities drove this increase.
- Loan Growth: Total loans declined by $35 billion (0.3 percent) in the first quarter. Community banks, however, saw more robust loan growth.
- Asset Quality: While most asset quality metrics remained favorable, there was material deterioration in commercial real estate (CRE) and credit card portfolios.
It’s essential to note that asset quality metrics did show some “material deterioration” in banks’ credit card and commercial real estate portfolios during that period1. Here are additional details:
- Commercial Real Estate (CRE) Exposures: More than 60 of the largest banks in the country are at increased risk of failure due to their CRE exposures. Sixty-seven banks have exposure to commercial real estate greater than 300% of their total equity. This excess exposure puts the banks at greater risk of failure.
- Risk Factors: Commercial properties are selling at serious discounts in the current market, which impacts banks’ CRE portfolios. Banks may eventually be forced by regulators to write down those exposures.
- Specific Banks: Flagstar Bank and Zion Bancorporation are the two largest banks with excessive exposure to commercial real estate. Flagstar Bank’s total CRE exposure was 553% of its total equity, while Zion Bancorp had a total CRE exposure of 440% of its total equity.