Loan growth and earnings showed continued improvement in Q4

With net income of $40.8 billion in the fourth quarter of 2015, earnings were up $4.4 billion (11.9 percent) for commercial banks and savings institutions compared to $36.5 billion a year earlier, the FDIC reported today..The 5,735 institutions identified as community banks by the FDIC reported $5.1 billion in net income in the fourth quarter, up 4 percent from than a year earlier. Net operating revenue was $22.6 billion in fourth quarter for community banks; up $1.6 billion (7.4 percent) compared to a year earlier..Industry earnings were up becaise of a $6.8 billion increase in net operating revenue and a $2.7 billion decline in noninterest expenses. Noninterest expenses were down, the FDIC said, because of a drop in litigation expenses at a few large banks..The proportion of banks that were unprofitable fell to 9.1 percent in fourth quarter, the lowest level for a fourth quarter since 1996 and down 9.9 percent a year earlier.."Revenue and income were up from the previous year, overall asset quality continued to improve, loan balances increased, and there were fewer banks on the problem list," said FDIC Chair Martin Gruenberg. "However, banks are operating in a challenging environment. Revenue growth continues to be held back by narrow interest margins. Many institutions are reaching for yield, given the competition for borrowers and low interest rates. And there are signs of growing credit risk, particularly among loans related to energy and agriculture.".Loan growth was the highest it has been since mid-2007 to mid-2008, the FDIC reported. Total loan and lease balances increased $197.3 billion (2.3 percent) during fourth quarter. For the year, loans and leases increased $530.1 billion (6.4 percent). At community banks, loan balances rose 2.5 percent during the fourth quarter of 2015 and increased 8.6 percent during the past 12 months, the FDIC said. (To see a chart of Midwest loan activity in Q4 see the March issue of NorthWestern Financial Review.)