Introduction

Banks Show Wide Division

Banks Show Wide Division

All bank star-ratings were updated last weekend and all fourth quarter reports are now available for banks. At this writing we are still waiting on credit union data but we will have it analyzed and available as quickly as we can.

The FDIC’s Quarterly Banking Profile highlighted many of the positives for the quarter. For example:
– net income was 7.7% higher than fourth quarter 2015 bringing full year industry earning to $171.3 billion;
– loan balances grew in every major category and were up 5.3% in 2016.
– Community bank revenue and loan growth outpaced the industry.

But this is what caught our attention: A 5.2% jump in interest bearing assets drove the average net interest margin (NIM) up from 3.07% in 2015 to 3.13% in 2016. That sounds good until you look at the bigger picture. Aside from the 3.07% at 12/31/2015, 3.13% is the lowest year-end NIM in recent history. At the end of 2010, the industry NIM was 3.76% and it steadily declined, until now.

Also, fewer than half of the nation’s banks actually witnessed an increase in 2016; 54.3% reported lower NIMs than a year earlier.

By Size: Banks with assets greater than $250 billion reported the lowest NIM in the fourth quarter at 2.75%, but they generally have volume to make up for the low margin.

By Region:  The Chicago region reported the lowest NIMs by far at just 2.52%. The highest was San Francisco at 3.79%.

By Asset Concentration: 
Credit card banks always have the highest NIM (10.82%) and international banks generally have the lowest (2.36%). Setting those aside,  there is quite a spread, although nothing comes close to the credit cards. Agricultural lenders came in at #2 with a  collective fourth quarter NIM of 3.68%. Mortgage Lenders, on the other hand, reported a NIM of just 2.84%.

This will be particularly interesting as the Federal Reserve raises interest rates. (A rate rise is being discussed for the March 14-15 meeting.)