Correspondent Blog

On September 7, 2023, the FDIC released its banking profile.  This quarterly publication provides a comprehensive financial results summary for all FDIC-insured institutions (4,645 commercial banks and savings institutions insured by the FDIC).  While banks under $10B in assets comprise 97.8% of all banks by number, those same banks comprise only 14% of all banking…

Despite reaching the highest profitability in over a decade in 2022, US banks overall trade at a discount to other sectors as measured by P/E or P/Book, and approximately 53% of US banks have earned less than their cost of equity over the last five years. The high profitability for banks in 2022 was propelled…

Community banks have historically generated less non-interest or fee income than larger lenders.  One reason for this is the lack of analytics on how fee income translates to revenue and profitability.  While there are many ways that community banks can increase fee income, one specific source of non-interest income should be particularly appealing to community…

Most bankers and analysts believe that maintaining net interest margin (NIM) is crucial for bank profitability.  Many community banks are working hard to maintain NIM and thus profitability (ROA) – so the thinking goes.  However, the current focus on NIM may actually be hurting banks’ performance. The Dangers of Net Interest Margin We have tracked…

We looked at the average NIM and ROE for all operating banks in the country (4,973 of them) for the past ten years. We started with the thesis that the wider a bank’s NIM is, the more profitable the bank would be. We also looked at the NIM and ROE for almost 11,000 defunct banks…