Although the number of banks continues to decline, profits remain robust. First quarter 2018 net income was 27.5% higher than first quarter 2017. Higher operating revenue and lower taxes took most of the credit for the $56 billion net income, but net interest income—up 8.5%, helped as well.
Even more impressive, at least in our opinion, is that the annualized return on assets at March 31st was 1.28%—up from 1.04% a year earlier.
Fewer than 4% of the nation’s banks were unprofitable in the quarter—that’s the lowest level since the first quarter of 1996—22 years ago.
Loan balances are up 4.9% from a year earlier, but not all loans are equal. Neither are all banks. Note that loan growth at Community Banks outpaced that of the industry as a whole.
Loan quality at community banks bested that of noncommunity banks as well. While noncurrent loans at community banks declined just slightly during the first quarter, at 0.85% they are 36 basis points lower than that of noncommunity banks. It makes perfect sense; at community banks, local people who know the area, make local decisions based on that knowledge.
That being said, the entire industry is doing quite well. A state-by-state list of all Recommended Banks (5-Stars or 4-Stars) as well as Troubled and Problematic (2-Stars or below) based on the new March 31, 2018 data can be found on page 7. Nearly 90% of the nation’s banks are now recommended by Bauer. Only 1.8%, actually fewer than 100, are currently rated 2-Stars or below.
