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Second Quarter Banking Income Hits $70B as Recovery Continues

Community banks boosted by lower loss provisions and PPP income

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Second Quarter Banking Income Hits $70B as Recovery Continues

US banks continued to recover in the second quarter, posting aggregate net income of $70.4 billion, according to the Federal Deposit Insurance Corporation (FDIC).

The total across nearly 5,000 insured banks and savings groups marked an increase of 281%, or $51.9 billion, compared to the same period in 2020, at the height of the Covid-19 pandemic.

The huge increase in reported net income was largely down to banks holding far less back in reserves to guard against expected losses. The FDIC said provision expenses were down by $73 billion (117%) compared to the second quarter of 2020.

With strong capital and liquidity levels to support lending and protect against potential losses, the banking industry continued to support the country’s needs for financial services while navigating the challenges presented by the pandemic,” said FDIC chair Jelena McWilliams.

Among community banks, annual net income growth reached $1.9 billion in aggregate – also supported by lower loss provision expenses and higher net interest income. Provision expenses for community banks fell by 98%, or $2.3 billion, in the space of 12 months, while Paycheck Protection Program loan income also boosted balance sheets.

Compared to the first quarter of this year, aggregate loan and lease balances increased by $33.2 billion, or 0.3%, between April and June. While a small increase, it was the first quarter-on-quarter growth since the second quarter of 2020.

The aggregate value of loans that were overdue by 90 days or more fell by nearly 11%, or $13.2 billion, compared to the first three months of this year, the FDIC reported.

The FDIC’s quarterly data also indicated the elevated level of merger and acquisition activity in the banking industry: 28 institutions merged with other FDIC-insured banks or savings groups.

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