The FDIC report did say bank profits fell by 2 percent to $39.1 billion in the first quarter compared with the same period of 2015.
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Oil prices were over $100 a barrel in the summer of 2014, but a sharp fall during the last two years squeezed energy companies, making it harder to repay loans made during boom times. “However, banks are operating in a challenging environment”. The 5,664 FDIC-identified community banks posted $5.2 billion in net income in Q1, representing a year-over-year increase of 7.4 percent. Just over one-third of banks, 35.6 percent, stashed away more in reserves to deal with defaults, and that contributed to a $765 million or 1.9 percent decline in first quarter earnings. Total loan and lease balances increased 1.1 percent to $99.7 billion. Lenders to the energy sector, in particular, have been facing rising levels of troubled loans.
FDIC-insured banks also increased their loan-loss provisions 49.7 percent year-over-year to $12.5 billion.
“Banks’ exposure to the oil and gas industry is small and won’t restrain them from continuing to meet the credit needs of businesses and individuals”, Chessen said.
The increase in noncurrent loan balances marked a first in six years.
Eight financial services firms have paid the FDIC $190 million to settle claims they misled five US banks into buying risky mortgage securities from the former Countrywide Financial Corp, contributing to the banks’ failures.
The FDIC, whose full name is the Federal Deposit Insurance Corp, often seizes banks on the brink of collapse, and as receiver seeks to maximize recoveries for creditors.
Net charge-offs of loans to commercial and industrial borrowers were $1.1 billion, or 144.7 percent, higher than a year prior, with total net charge-offs of all loans $1.1 billion, or 12.3 percent, higher than in the first quarter of 2015.
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Settlement funds will be distributed among receiverships for Alabama’s Colonial Bank, Texas’ Franklin Bank and Guaranty Bank, Nevada’s Security Savings Bank, and Illinois’ Strategic Capital Bank, which failed in 2008 and 2009.
