The Federal Deposit Insurance Corporation released its latest "FDIC Quarterly Banking Profile" last week, which reviews "fourth quarter 2020 performance results for FDIC-insured institutions." The press release says, "For the commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC), aggregate net income totaled $59.9 billion in fourth quarter 2020, an increase of $5 billion (9.1 percent) from a year ago. The improvement in quarterly net income was led by a reduction in provision expenses. Financial results for fourth quarter 2020 are included in the FDIC's latest Quarterly Banking Profile.... The average net interest margin fell by 60 basis points from a year ago to 2.68 percent, matching third quarter's level. Net interest income declined for a fifth consecutive quarter, dropping by $5.4 billion (3.9 percent) from a year ago. The year-over-year reduction in yields on earning assets outpaced the decline in average funding costs, which are at record lows. Less than half of all banks (42.9 percent) reported lower net interest income compared to a year ago." The release continues, "The Deposit Insurance Fund totaled $117.9 billion in the fourth quarter, up $1.5 billion from the third quarter. The quarterly increase was led by assessment revenue and interest earned on investment securities held by the fund. The reserve ratio declined by 1 basis point from the previous quarter to 1.29 percent solely as a result of strong estimated insured deposit growth.... During the fourth quarter, three new banks opened, 31 institutions were absorbed through mergers, and two banks failed. 5,001 commercial banks and savings institutions filed fourth quarter Call Reports and are insured by the Federal Deposit Insurance Corporation (FDIC) as of December 31, 2020." A statement entitled, "Remarks by FDIC Chairman Jelena McWilliams and Director of the Division of Insurance and Research Diane Ellis on the Fourth Quarter 2020 Quarterly Banking Profile" explains, "While banking industry income for the full year 2020 declined from full year 2019 levels, banks remained resilient in fourth quarter 2020, consistent with the improving economic outlook. Fourth quarter net income rose, primarily due to lower provision expenses for credit losses and higher noninterest income. Net interest margin was unchanged from the record low level reached last quarter. Deposit growth accelerated in the fourth quarter, reflecting persistently high savings rates and lower spending. Banks reported modest declines in asset quality and loan volume.... The low interest rate environment coupled with economic uncertainties will continue to challenge the banking industry, placing downward pressure on revenue and the net interest margin. However, the banking industry maintains strong capital and liquidity levels, which can mitigate potential future losses. The Deposit Insurance Fund (DIF) balance was $117.9 billion on December 31, up $1.5 billion from the end of the third quarter. However, the reserve ratio declined one basis point to 1.29 percent, solely because of strong estimated insured deposit growth." It adds, "[D]eposits increased in the fourth quarter, rising $707 billion (4.1 percent) from third quarter. While the increase in deposits for the fourth quarter is below the quarterly increases reported during the first half of 2020, it is the third largest quarterly increase ever reported in the Quarterly Banking Profile.... The DIF balance was $117.9 billion on December 31, up $1.5 billion from the end of the third quarter. Assessment revenue was the primary driver of the increase in the fund. Interest earned on investment securities held by the DIF also increased the fund balance. However, unrealized losses on available-for-sale securities held by the DIF offset the effect of interest income. Estimated insured deposits grew by a robust 2.2 percent during the fourth quarter and stood at $9.1 trillion on December 31. Although this growth is below the record increases experienced during the first and second quarters of 2020, the growth rate was the highest fourth quarter growth rate since 2008, excluding quarters when the Dodd-Frank Act TAG program was in effect."

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