While earnings managed to edge up, mortgage assets continued to fall at commercial banks and thrifts insured by the Federal Deposit Insurance Corp.
In the first quarter, the institutions' earnings were $36.0 billion, up $0.6 billion from the linked three-month period, according to the first issue of the FDIC Quarterly. However, net income was $0.9 billion below the level earned a year ago and was largest annual quarterly decrease in six years.
"Higher expenses for credit losses at large banks and narrower net interest margins at smaller institutions posed challenges to earnings during the quarter," FDIC explained.
More than two of each three institutions reported lower net interest margins than a year ago, but only about 37 percent of all institutions reported higher provisions for loan losses. Although within institutions of over $10 billion in assets, almost three-quarters raised their loss provisions. The $9.2 billion set aside in loan loss provisions was slightly below that in the fourth quarter but the $3.2-billion year-over-year increase was the largest in five years. It was the fifth consecutive quarter in which provisions exceeded net charge-offs. For one- to four-family residential mortgages net charge-offs were up by $268 million or 93.2 percent over the year.
Real estate loans accounted for the largest increases in noncurrent loans, those 90 days or more past due or in nonaccrual status. Noncurrent residential mortgages increased by 7.3 percent or $1.7 billion. The percentage of noncurrent one- to four-family residential loans rose from 1.05% to 1.13% during the quarter -- the highest rate in almost 13 years -- and the percentage of noncurrent home equity lines was at 0.44 percent. The overall percentage of noncurrent loans at FDIC-insured commercial banks and thrifts was at 0.83 percent -- the highest level in two and a half years after rising by $4 billion during the quarter and moving up since a cyclical low of 0.70 percent in mid-2006.
Assets at federally-insured commercial banks and thrifts grew 1 percent during the quarter and almost 7 percent over the year, the second-smallest quarterly increase in three and a half years and smallest annual growth in four and a half years mainly due to real estate loans, according to the report. Residential mortgage assets fell -- by $6.5 billion from the prior three months -- for the first time in thirteen quarters, HELs dropped by $2.6 billion. There was a decline for the second quarter in a row in total mortgage assets, which consist of mortgage loans plus mortgage-backed securities, thereby "mortgage activity is no longer contributing to growth," the report indicated.
The report covered information reported by 7,380 commercial banks and 1,270 savings institutions.