Chairman’s Opening Statement
First Quarter 2016 Quarterly Banking Profile
June 1, 2016
Good morning, and welcome to our release of first quarter 2016 results for
FDIC-insured institutions.
Overall, the banking industry reported mixed results for the first quarter.
By many measures, the industry had a positive quarter. Revenue increased
from a year earlier, loan balances grew at the fastest 12-month rate since
2008, the share of unprofitable banks fell to an 18-year low, and the
number of “problem banks” continued to decline.
However, banks are operating in a challenging environment. Net income
declined in the first quarter, noncurrent loans to the oil and gas industry
rose sharply, trading income was down, and net interest margins remained
low by historical standards.
Community banks reported another solid quarter, as most of the industry’s
trading operations and direct loans to oil and gas producers are in larger
institutions. Net income at community banks grew considerably from a year
earlier. And revenue growth, loan growth and net interest margins at
community banks were appreciably higher than the overall industry.
First Quarter 2016 Quarterly Banking Profile
June 1, 2016
Good morning, and welcome to our release of first quarter 2016 results for
FDIC-insured institutions.
Overall, the banking industry reported mixed results for the first quarter.
By many measures, the industry had a positive quarter. Revenue increased
from a year earlier, loan balances grew at the fastest 12-month rate since
2008, the share of unprofitable banks fell to an 18-year low, and the
number of “problem banks” continued to decline.
However, banks are operating in a challenging environment. Net income
declined in the first quarter, noncurrent loans to the oil and gas industry
rose sharply, trading income was down, and net interest margins remained
low by historical standards.
Community banks reported another solid quarter, as most of the industry’s
trading operations and direct loans to oil and gas producers are in larger
institutions. Net income at community banks grew considerably from a year
earlier. And revenue growth, loan growth and net interest margins at
community banks were appreciably higher than the overall industry.
First Quarter 2016 Quarterly Banking Profile Chairman’s Opening Statement
2
Chart 1:
Our first chart shows that net income was 39.1 billion dollars in the first
quarter, down 2 percent from a year earlier. This was the first year-over-
year decline in net income since the fourth quarter of 2014.
The decline in net income reported this quarter was largely due to a sharp
increase in reserves at larger institutions to recognize potential losses from
noncurrent commercial and industrial loans related to the energy sector.
In contrast to the overall industry, community banks reported net income
growth of 7.4 percent from a year earlier. Quarterly net income improved at
a majority of banks, and the share of unprofitable banks continued to
decline.
2
Chart 1:
Our first chart shows that net income was 39.1 billion dollars in the first
quarter, down 2 percent from a year earlier. This was the first year-over-
year decline in net income since the fourth quarter of 2014.
The decline in net income reported this quarter was largely due to a sharp
increase in reserves at larger institutions to recognize potential losses from
noncurrent commercial and industrial loans related to the energy sector.
In contrast to the overall industry, community banks reported net income
growth of 7.4 percent from a year earlier. Quarterly net income improved at
a majority of banks, and the share of unprofitable banks continued to
decline.