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Mostly good news in second quarter 2018 bank results

Mostly Good News in Q2 Bank Data

The FDIC released a mostly positive Second Quarter 2018 Quarterly Banking Profile last Thursday. Net income got a healthy boost from lower tax rates as banks reported net income of $60.2 billion for the second quarter 2018, $12.1 billion or 25.1% higher than second quarter 2017. Had it not been for the new tax rate, net income would have gained $5.6 billion or 11.7%…

The FDIC currently has 82 banks on its Problem Bank List, down from 92 last quarter. Bauer currently has 91 banks on its Troubled and Problematic Report, down from 101 last quarter.

A Welcome By-Product of Displaced Bankers

After a 10 year drought, De Novo activity is finally picking up with the help of some very talented bankers with years of experience under their belts. What could be better than to have these seasoned professionals filling the needs of businesses and consumers that are in search of a community bank?

Because Money Doesn’t Grow on Fees

Wish we’d thought of that. But alas, the credit for that slogan goes to JRN listee 5-Star BMO Harris Bank, Chicago, IL. We have reported several times on the excessive fees charged by some banks (JRN 33:08), especially those that cater to our military and their families (a la 5-Star FSNB (formerly Fort Sill National Bank, Lawton, OK, which has a service fee to transaction deposit ratio of nearly 22%, one of the highest of any bank in the nation).

This week, however, we would like to laud community banks that have low service fee charges when compared to transaction deposit dollars.

Fed to Raise Interest Rates Next Month

Last week we reported that, depending on asset size distribution, net interest margins (NIMs) were making gradual headway with help from the Fed’s rate hikes over the past two years. As we look forward to a quarter point increase next month (Sept. 26th) let’s delve into that a little deeper.

Last week we intentionally left Big Banks out of the discussion. The business model for these behemoths is very different from that of community banks, which is our primary focus. But …

No Rate Increase, and That’s Okay

The Federal Reserve held interest rates steady at the FOMC’s two day meeting last week (between 1.75% & 2%) but the six quarter-point increases since December 2016 have slowly and steadily been making their presence known. Net interest margins (NIM) at FDIC-insured banks increased 30 basis points between the first quarter 2015 and first quarter 2018.

While smaller banks are overshadowed by the largest banks, it’s interesting to see that even the smallest community banks have seen improvements in NIM, which for banks with assets less than $100 million went from 3.58% to 3.75% in the past three years.

Soybeans as Trade War’s Weapon of Choice

Our concern is what happens to the banks—the unintended consequences. What matters to Bauer is that our community banks can continue to supply credit where it’s needed and that the credit extended continues to be done so prudently.

It Can Take a Long Time to Make a Quick Buck

Mutual conversions were once a way to make an easy buck. In the ’80s and ’90s it was common for depositors to open accounts at any mutual that would allow them. Then they’d sit back and hope the mutual would decide it was time to convert.

Depositors on record would get first crack at any stock offering and there was good money to be made. And it was easy money. But those conversions fizzled out after the turn of the century. Last year we reported that they were beginning to heat up again (JRN 34:12 & 32). But they’re different now.

New Hope for Distressed Communities

If the Community Reinvestment Act (CRA) were a person, we may be inclined to agree with Congressman Week’s assessment that CRA is experiencing a midlife crisis… but it’s not. It’s old and outdated and needs to be rejuvenated.

Out of State Branches, Responsibilities

Remember when banks couldn’t cross state lines? We do. Federal regulations prohibited the practice. Although, as the country stumbled its way through the Savings and Loan crisis in the 1980s, many states passed their own laws permitting out-of-state bank holding companies to acquire banks in their state under certain circumstances.

All Credit Union Star-Ratings Now Updated

Shares and deposits increased by $65.5 billion (5.8%) from March 31, 2017, ending the first quarter 2018 at $1.204 trillion. While that number pales in comparison to the nation’s banks (roughly 10%), it has been growing steadily for years. In fact, the largest three U.S. banks each have deposits totaling more than the entire credit union industry.

Blog (page 37)

Mostly Good News in Q2 Bank Data

A Welcome By-Product of Displaced Bankers

Because Money Doesn’t Grow on Fees

Fed to Raise Interest Rates Next Month

No Rate Increase, and That’s Okay

Soybeans as Trade War’s Weapon of Choice

It Can Take a Long Time to Make a Quick Buck

New Hope for Distressed Communities

Out of State Branches, Responsibilities

All Credit Union Star-Ratings Now Updated

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