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Community bank net income increased 10 percent in the third quarter from the same time last year, according to the FDIC's Quarterly Banking Profile. The overall banking industry reported a 10.7 percent decline in net income from a year ago following a 173 percent increase from the second quarter.
Community banks reported the annual gain despite a 116.6 percent increase in provision expenses, with a 154.2 percent increase in revenue from loan sales driving the improvement.
Community banks' net interest margin compressed 41 basis points year-over-year to a record low 3.27 percent, as the decline in average earning asset yields continued to outpace the decline in average funding costs.
The banking industry's overall improvement was boosted by a 76.8 percent decline in provision expenses, though the average net interest margin fell by 68 basis points from a year ago to 2.68 percent, a record low. Net interest income declined by a record 7.2 percent, while average return on assets declined to 0.97 percent from 1.25 percent a year ago.
The Deposit Insurance Fund balance rose $1.8 billion from the previous quarter to $116.4 billion, and the reserve ratio was unchanged at 1.30 percent as deposit growth stabilized. During the third quarter, one new bank opened, 33 institutions were absorbed through mergers, and no banks failed.