Friday, March 13, 2015

Why Was Bank Net Income Down 7.3% In The Fourth Quarter of 2014?

Every quarter the FDIC publishes a 305+ page update of member bank performance. In the fourth quarter of 2014, the FDIC reported that banks made a net income of $36.9 billion, down $2.9 billion or 7.3 percent from 2013. The decline was attributed to a $4.4 billion increase in litigation expenses for large banks and a decline in mortgage-related income. Here's what FDIC Chairman Martin J. Gruenberg had to say about the announcement:

The banking industry continued to improve at the end of the year. Although total industry earnings declined as a result of significant litigation expenses at a few large institutions and a continued decline in mortgage-related income, a majority of banks reported higher operating revenues and improved earnings from the previous year. In addition, banks made loans at a faster pace, asset quality improved, and the number of banks on the 'Problem List' declined to the lowest level in six years.
The Chairman also commented that community bank earnings were up 28% from the previous year. For the industry as a whole, over the past 12 months, loan and lease balances increased 5.3%, the highest growth rate since mid-year 2008. ROA fell to 0.96 percent in the fourth quarter from 1.09 percent in 2013 and ROE declined as well from 9.76 percent to 8.56 percent.

Other Highlights From the Report:

  • Full-year earnings totaled $152.7 billion. 
  • Full-year net income for 2014 was $1.7 billion (1.1 percent) less than 2013; the first decline in annual net income in five years. 
  • ROA for the full year was 1.01 percent. 
  • The number of "problem banks" fell for the 15th consecutive quarter.
To read the full report click here.