MilePost: Rising rates shape US banks in latest FDIC snapshot

NIM Up!
For the first time in five years, the average net interest margin at US banks rose in 4Q15 over levels a year earlier, according to the FDIC’s latest Quarterly Banking Profile released today. The 3.13% NIM just topped the 3.12% NIM of late 2014. Most of the margin gain came at larger banks, where the late 2015 rise in short-term interest rates lifted asset portfolio performance. The QBP is at FDIC.gov.

But rate risk offsets retained earnings
Although rising rates helped US bank NIMs and contributed to $13.5 billion in retained earnings, market value losses in securities almost fully offset the gain. Accumulated other comprehensive income declined by $13.5 billion as higher rates reduced unrealized securities gains. Rising retained earnings and falling securities values left total bank equity capital up only 0.2%.

NIM down at community banks
NIM at community banks dropped to 3.60% from 3.63% a year before, although balance sheet growth still pushed up net interest income by 7%. Average asset yields fell faster than funding costs.

Securities trend follows bank size
Across all banks, securities made up 21.0% of assets up 4 basis points from a year ago. Most of the growth in securities portfolios came at larger banks since securities at community banks ended 2015 at 20.7% of assets, down from 21.7% a year before.