National Banking Trends
Earnings at commercial banks improved on a quarterly basis in the second quarter of 2013 with the aggregate return on average assets (ROAA) climbing to 1.13 percent and over 40 percent of banks reporting ROAAs above 1 percent (see the chart).
Margins, however, remained under pressure while banks' efforts to boost fee income met with only mixed success. Most strength in ROAA accrued to further declines in provisions, which fell to 0.27 percent of total loans, and cost-cutting measures. Just 7.7 percent of community banks nationwide reported negative earnings in the second quarter, 300 basis points (bps) lower than a year earlier. Asset quality continued to improve at the national level, with noncurrent loans falling 81 bps from a year earlier to 2.22 percent. With the exception of installment loans, the improvement occurred across bank portfolios. The nation's community banks reported their fourth consecutive quarter of moderate loan growth in the second quarter. After three quarters of declining growth, the nation's smallest community banks—those under $1 billion in assets—reported strong loan growth in the second quarter compared with a year ago (see the chart).
Credit cards and multifamily lending led in loan growth. Of note, single-family construction loan growth turned positive for the first time in several years. Finally, ahead of the implementation of Basel III, capital levels have steadily improved, reaching their highest levels since the beginning of the financial crisis.