WASHINGTON — Residential mortgage assets grew 3.4% in the fourth quarter of 2015 from a year earlier, while the number of Federal Deposit Insurance Corp.-insured institutions that deal primarily in mortgages dropped more than 9% from the end of 2014.
Residential family mortgage assets grew by $62.3 billion while multifamily assets rose by $15 billion, or 4.6%, from a year ago, according to the FDIC's year-end Quarterly Banking Profile, a report card of the performance of institutions regulated by the agency released Tuesday.
The number of FDIC-insured mortgage lenders — which the agency defines as institutions whose residential mortgages and mortgage-backed securities exceed 50% of total assets — dropped 9.4% to 501.
Overall bank earnings rose nearly 12% to $40.8 billion in the fourth quarter from a year earlier, boosted by lower litigation expenses at a few large institutions. Margins improved markedly, with net operating revenue up 4.1%, to $174.3 billion, in the fourth quarter. The growth in noninterest income was driven in part by an upshot in servicing income by $2.1 billion, a good share of which is mortgage servicing. Net interest income grew 3.6% to $3.9 billion, compared to last year.
Noninterest expenses fell 2.5% from last year, to $2.7 billion, almost all of which was due to a $2.4 billion decline in itemized litigation expenses at a few large banks. Those fell by $2.4 billion from a year earlier to $616 million.
Meanwhile, the drop in expenses was offset by a 2.5% increase in salary and employee benefit expenses and a 2.7% increase in expenses for premises and other fixed assets.
The average net interest margin increased by one basis point, to 3.13%, marking the first instance in five years that the average interest margin hasn't been lower than a year earlier. The FDIC said most of the margin improvement occurred at large banks, however, whose portfolios were "better-positioned to benefit from the increase in short-term interest rates late in the quarter."
Overall, 9.1% of banks reported losses, down from 9.9% last year, which was the lowest proportion of unprofitable firms in the fourth quarter since 1996.
The FDIC noted that provisions for loan losses increased year over year for the sixth consecutive quarter, rising by 45.5% to $12 billion, the largest quarterly total in three years. Roughly 37% of banks reported higher quarterly provisions, which a similar percentage reported reductions.
Loan growth was a bright spot during the quarter, as total loans and leases rose by $197.3 billion. Most loan categories saw growth, including credit cards, which had a 5.8% increase, commercial and industrial loans, which jumped by $39.6 billion and nonfarm nonresidential real estate loans, which increased by $31.6 billion. Loans to small businesses and farms increased by $7.1 billion in the fourth quarter.
Total assets jumped by $167.8 billion, or 1.1%, from the third quarter. Still, the improvements were not equal across the board.
"Revenue growth continues to be held back by narrow interest margins," said FDIC Chairman Martin Gruenberg in prepared remarks. "Many institutions are reaching for yield, given the competition for borrowers and low interest rates. And there are signs of growing credit risk, particularly among loans related to energy and agriculture."
Community banks saw their revenue growth slow down to 4% year-over-year, with $5.1 billion in net income reported in the fourth quarter.
The number of institutions on the agency's "problem list" fell by 20, to 183, while their assets declined to $46.8 billion from $51.1 billion.
