Banking and Finance Law Daily FDIC releases 2020 4Q bank earnings
Wednesday, February 24, 2021

FDIC releases 2020 4Q bank earnings

By John M. Pachkowski, J.D.

2020 net income declined 36.5 percent, but quarterly net income increased 9.1 percent from a year ago

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation had aggregate net income totaling $59.9 billion in fourth quarter 2020, an increase of $5 billion, or 9.1 percent, from a year ago. The improvement in quarterly net income was led by a reduction in provision expenses.

Financial results for fourth quarter 2020 were included in the FDIC’s latest Quarterly Banking Profile which noted:

  • full-year 2020 net income declined 36.5 percent to $147.9 billion;
  • quarterly net income increased 9.1 percent from a year ago;
  • net interest margin remained unchanged from third quarter at a record low level;
  • community banks reported a 21.2 percent increase in quarterly net income year-over-year;
  • loan balances declined from the previous quarter, led by lower commercial and industrial lending activity; and
  • asset quality metrics remained stable from the previous quarter and from a year ago.

In remarks, FDIC Chairman Jelena McWilliams stated, "The low interest rate environment coupled with economic uncertainties will continue to challenge the banking industry, placing downward pressure on revenue and the net interest margin. However, the banking industry maintains strong capital and liquidity levels, which can mitigate potential future losses."

Commenting on the Deposit Insurance Fund, McWilliams noted the DIF balance was $117.9 billion on December 31, up $1.5 billion from the end of the third quarter. She added that the DIF reserve ratio declined one basis point to 1.29 percent, solely because of strong estimated insured deposit growth; and that in accordance with the Restoration Plan, the FDIC’s staff continues to closely monitor the factors that affect the reserve ratio and will provide progress reports and, as necessary, modifications to the plan to the FDIC’s Board at least semiannually.

Following release of the earnings report, Consumer Bankers Association President and CEO Richard Hunt said, "The FDIC’s latest report reveals the nation’s banks remained strong and resilient throughout 2020 despite the financial impact of COVID-19. Banks continue to play an instrumental role in assisting customers and small businesses struggling as a result of the pandemic, and we are proud of the industry’s unwavering commitment to championing the Paycheck Protection Program."

Robert Strand, Senior Economist at the American Bankers Association echoed the theme of resiliency, noting, "Today’s latest FDIC snapshot on the state of the banking industry as of the fourth quarter of 2020 shows that banks remain resilient through the pandemic-induced recession, and continue to serve as a steadying force for their communities and the broader economy. With strong capital and abundant liquidity parked in U.S. Treasury securities and other safe assets, banks are well-positioned to continue extending credit to support the recovery."

Companies: American Bankers Association; Consumer Bankers Association

MainStory: TopStory BankingOperations CapitalBaselAccords Covid19 DepositInsurance FinancialStability Loans

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