Second Quarter 2021 Quarterly Banking Profile

FDIC Chairman Jelena McWilliams presented the second quarter 2021 performance results for FDIC-insured institutions in a September 8, 2021, press call.

The banking industry reported strong earnings in second quarter 2021, supported by continued economic growth and further improvements in credit quality. A second consecutive quarter of negative provision expense drove an increase in earnings year over year, as banks continued to adjust expectations for potential credit losses. Notably, the banking industry reported a modest quarterly increase in total loan balances for the first time since second quarter 2020, reflecting an uptick in loan demand, while the net charge-off rate reached a record low. However, persistent low interest rates contributed to further contraction in the average net interest margin, which reached a new record low this quarter.

Community banks also reported strong revenue growth, improved asset quality, and continued net interest margin compression this quarter. Like the broader industry, community banks reported increased balances in several loan categories relative to first quarter, despite a decline in aggregate loan balances because of repayment and forgiveness of Paycheck Protection Program (PPP) loans.

The Deposit Insurance Fund (DIF) balance was $120.5 billion on June 30, up $1.2 billion from the end of the first quarter. The reserve ratio increased two basis points to 1.27 percent due to continued growth in the fund balance and a decline in insured deposits. In accordance with the Restoration Plan approved last year, FDIC staff continues to closely monitor the factors that affect the reserve ratio and will provide progress reports and, as necessary, modifications to the plan to the Board at least semiannually.