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Quarterly Quarterly Banking Profile: Second Quarter 2021 The Importance of Technology Investments for Community Bank Lending and Deposit Taking During the Pandemic 2021 Volume 15, Number 3 Federal Deposit Insurance Corporation FDIC QUARTERLY A The FDIC Quarterly is published by the Division of Insurance and Research of the Federal Deposit Insurance Corporation and contains a comprehensive summary of the most current financial results for the banking industry. Feature articles appearing in the FDIC Quarterly range from timely analysis of economic and banking trends at the national and regional level that may affect the risk exposure of FDIC-insured institutions to research on issues affecting the banking system and the development of regulatory policy. Single copy subscriptions of the FDIC Quarterly can be obtained through the FDIC Public Information Center, 3501 Fairfax Drive, Room E-1002, Arlington, VA 22226. E-mail requests should be sent to publicinfo@fdic.gov. Change of address information also should be submitted to the Public Information Center. The FDIC Quarterly is available online by visiting the FDIC website at www.fdic.gov. To receive e-mail notification of the electronic release of the FDIC Quarterly and the individual feature articles, subscribe at www.fdic.gov/about/subscriptions/index.html. Chairman Jelena McWilliams Director, Division of Insurance and Research Diane Ellis Executive Editors George French Shayna M. Olesiuk Managing Editors Rosalind Bennett Alan Deaton Patrick Mitchell Philip A. Shively Editors Clayton Boyce Kathy Zeidler Publication Manager Lynne Montgomery Media Inquiries (202) 898-6993 FDIC QUARTERLY 2021 FDICQUARTERLY Volume 15 • Number 3 Quarterly Banking Profile: Second Quarter 2021 FDIC-insured institutions reported aggregate net income of $70.4 billion in second quarter 2021, an increase of $51.9 billion (281 percent) from the same quarter a year ago, driven by a $73 billion (117.3 percent) decline in provision expense. Two-thirds of all banks (66.4 percent) reported year-over-year improvement in quarterly net income. The share of profitable institutions increased slightly, up 1.4 percent year over year to 95.8 percent. However, net income declined $6.4 billion (8.3 percent) from first quarter 2021, driven by an increase in provision expense from first quarter 2021 (up $3.7 billion to negative $10.8 billion). The aggregate return on average assets ratio of 1.24 percent rose 89 basis points from a year ago but fell 14 basis points from first quarter 2021. See page 1 Community Bank Performance Community banks—which represent 91 percent of insured institutions—reported yearover-year quarterly net income growth of $1.9 billion (28.7 percent) in second quarter 2021, despite a narrower net interest margin. Nearly two-thirds of all community banks (65 percent) reported higher net income from the year-ago quarter. The pretax return on assets ratio of 1.54 percent rose 20 basis points from a year ago but fell 4 basis points from first quarter 2021. See page 15. Insurance Fund Indicators The Deposit Insurance Fund (DIF) balance totaled $120.5 billion at the end of second quarter 2021, an increase of $1.2 billion from the previous quarter. Assessment income, interest earned on investments, and negative provisions for insurance losses were the largest sources of the increase, offset partially by operating expenses and unrealized losses on availablefor-sale securities. The DIF reserve ratio was 1.27 percent at June 30, 2021, up 2 basis points from March 31, 2021, and down 3 basis points from June 30, 2020. See page 23. Featured Article: The Importance of Technology Investments for Community Bank Lending and Deposit Taking During the Pandemic Community banks that invested more in technology generally reported faster loan and deposit growth in 2020 than did banks with less technology investment. Moreover, the differences in loan and deposit growth associated with technology investment were greater in 2020 than the differences reported prior to the pandemic. Faster loan growth for community banks with greater technology investment largely stemmed from participation in the Paycheck Protection Program (PPP). These community banks, on average, originated a greater share of PPP loans regardless of the loan size, origination date, or borrower distance from the nearest bank branch. Meanwhile, the larger increases in deposit growth of community banks that invested more in technology were due to increases in deposit balances of existing customers rather than from new depositors. See page 31. The views expressed are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance Corporation. Some of the information used in the preparation of this publication was obtained from publicly available sources that are considered reliable. However, the use of this information does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation. Articles may be reprinted or abstracted if the publication and author(s) are credited. Please provide the FDIC’s Division of Insurance and Research with a copy of any publications containing reprinted material. FDIC QUARTERLY i QUARTERLY BANKING PROFILE Second Quarter 2021 INSURED INSTITUTION PERFORMANCE Quarterly Net Income Continued to Increase Year Over Year, Driven by a Second Consecutive Quarter of Negative Provision Expense Net Interest Margin Contracted Further to a New Record Low Quarterly Loan Balances Grew for the First Time Since Second Quarter 2020 Asset Quality Continued to Improve Quarterly Net Income Continued to Increase Year Over Year, Driven by a Second Consecutive Quarter of Negative Provision Expense Net income totaled $70.4 billion in second quarter 2021, an increase of $51.9 billion (281 percent) from the same quarter a year ago, driven by a $73 billion (117.3 percent) decline in provision expense. Two-thirds of all banks (66.4 percent) reported year-overyear improvement in quarterly net income. The share of profitable institutions increased slightly, up 1.4 percent year over year to 95.8 percent. However, net income declined $6.4 billion (8.3 percent) from first quarter 2021, driven by an increase in provision expense from first quarter 2021 (up $3.7 billion to negative $10.8 billion). The aggregate return on average assets ratio of 1.24 percent rose 89 basis points from a year ago but fell 14 basis points from first quarter 2021. Net Interest Margin Contracted Further to a New Record Low The average net interest margin contracted 31 basis points from a year ago to 2.50 percent— the lowest level on record. The contraction is due to the year-over-year reduction in earning asset yields (down 53 basis points to 2.68 percent) outpacing the decline in average funding costs (down 22 basis points to 0.18 percent). Both ratios declined from first quarter 2021 to record lows. Aggregate net interest income declined $2.2 billion (1.7 percent) from second quarter 2020. Reductions in net interest income at the largest institutions drove the aggregate decline in net interest income, as more than three-fifths of all banks (64.1 percent) reported higher net interest income compared with a year ago. Noninterest Income Continued to Increase Despite Lower Trading Revenue Noninterest income increased (up $5 billion, or 7.1 percent) from second quarter 2020 due to improvement in several categories. During the year ending second quarter 2021, “all other noninterest income” rose $7.9 billion (27.5 percent), offsetting both a $5.9 billion (42.1 percent) decline in trading revenue and a reduction in net gains on loan sales of $1.5 billion (19.7 percent).1 Increased income from service charges on deposit accounts (up $1.5 billion, or 21.5 percent) and fiduciary activities (up $1.2 billion, or 13.1 percent) from second quarter 2020 also supported the year-over-year improvement in noninterest income. More than two-thirds of all institutions (69.6 percent) reported higher noninterest income compared with the year-ago quarter. 1 All other noninterest income includes, but is not limited to, bankcard and credit card interchange fees, income and fees from wire transfers, and income and fees from automated teller machines. Chart 1 Chart 2 Quarterly Net Income Quarterly Net Interest Margin All FDIC-Insured Institutions $ Billions 100 All FDIC-Insured Institutions Securities and Other Gains/Losses, Net Net Operating Income 80 Percent 5.0 4.0 40 3.5 3.0 2.5 0 2.0 -20 1.5 -40 -60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. Assets $100 Million - $1 Billion Assets < $100 Million 4.5 60 20 Assets > $250 Billion Assets $10 Billion - $250 Billion Assets $1 Billion - $10 Billion 1.0 0.5 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. FDIC QUARTERLY 1 2021 • Volume 15 • Number 3 Noninterest Expense Relative to Average Assets Declined to a Record Low Noninterest expense rose $3.7 billion (3 percent) year over year, led by an increase in salary and benefit expense and “all other noninterest expense.” Nearly three-fourths of all banks (74.5 percent) reported higher noninterest expense year over year. Higher average assets per employee (up $0.9 million) also increased from a year ago to $11.1 million. However, noninterest expense as a percentage of average assets continued to decline, reaching a record low of 2.23 percent, down 14 basis points from the year-ago quarter. Net Operating Revenue to Average Assets Continued to Decline Net operating revenue (net interest income plus noninterest income) increased $2.8 billion (1.4 percent) from the year-ago quarter as improvement in noninterest income offset the decline in net interest income. However, growth in average assets and declining net interest income contributed to a 29 basis point decline in the ratio of quarterly net operating revenue to average assets. The ratio stood at 3.62 percent for the quarter—the lowest level since third quarter 1984. Provision Expense Was Negative for the Second Consecutive Quarter Provisions for credit losses (provisions) increased $3.7 billion from first quarter 2021 but declined $73 billion (117.3 percent) from the year-ago quarter to negative $10.8 billion.2 More than three-fifths of all institutions (63.3 percent) reported lower provisions compared with the year-ago quarter. Nearly 14 percent of institutions reported an increase in provisions during the same period, while the remaining institutions reported no material change. The net number of banks that have adopted current expected credit loss (CECL) accounting fell by 1 to 319 from first quarter 2021.3 CECL adopters reported aggregate negative provisions of $10.7 billion in second quarter, an increase of $4.3 billion from the previous quarter and a reduction of $67.6 billion from one year ago. Provisions for banks that have not adopted CECL accounting totaled negative $128.1 million (a reduction of $530.6 million from a quarter ago and $5.2 billion from one year ago). Allowance for Loan and Lease Losses to Total Loans Remained Higher Than Pre-Pandemic Level The allowance for loan and lease losses (ALLL) as a percentage of total loans and leases declined 41 basis points to 1.80 percent from the year-ago quarter due to negative provisions, but ALLL remains higher than the level of 1.18 percent reported in fourth quarter 2019. Similarly, the ALLL as a percentage of loans that are 90 days or more past due or in nonaccrual status (coverage ratio) declined 27 percentage points from the year-ago quarter to 178 percent but continued to exceed the financial crisis average of 79.1 percent.4 All insured institutions except the largest Quarterly Banking Profile asset size group (greater than $250 billion) reported higher aggregate coverage ratios compared with first quarter 2021. 2 Provisions for credit losses include both losses for loans and securities for CECL adopters but only loan losses for non-adopters. 3 Changes to the number of CECL accounting adopters may result from closures, mergers and acquisitions, or examination or audit findings. 4 The financial crisis refers to the period between December 2007 and June 2009. Chart 3 Chart 4 Change in Quarterly Loan-Loss Provisions Reserve Coverage Ratio All FDIC-Insured Institutions All FDIC-Insured Institutions Loan-Loss Reserves (Left Axis) Reserve Coverage Ratio (Right Axis) Noncurrent Loans (Left Axis) Coverage Adjusted for GNMA Guaranteed Loans (Right Axis) Noncurrents Adjusted for GNMA Guaranteed Loans (Left Axis) Quarter-Over-Quarter Change ($ Billions) 50 40 $ Billions 450 30 20 400 10 300 0 -10 -20 -30 -40 -50 -60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. 2 FDIC QUARTERLY Coverage Ratio (Percent) 250 200 350 150 250 200 100 150 100 50 50 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. Note: The reserve coverage ratio is the loan-loss reserves to noncurrent loans and leases. QUARTERLY BANKING PROFILE Noncurrent Loans Continued to Decline Quarter Over Quarter Loans that were 90 days or more past due or in nonaccrual status (noncurrent loans) continued to decline (down $13.2 billion, or 10.8 percent) from first quarter 2021, supporting a 12 basis point reduction in the noncurrent rate to 1.01 percent. Noncurrent 1–4 family residential loans declined most among loan categories from the previous quarter (down $5.9 billion, or 10.9 percent), followed by noncurrent commercial and industrial (C&I) loans (down $3.1 billion, or 13.9 percent). Three-fifths of all banks reported a reduction in noncurrent loans compared with first quarter 2021. The Net Charge-Off Rate Declined Further to a Record Low Net charge-offs continued to decline for the fourth consecutive quarter (down $8.3 billion, or 53.2 percent). In second quarter, the net charge-off rate fell 30 basis points to 0.27 percent, a record low. A decline in net charge-offs of credit card loans (down $3.3 billion, or 39.8 percent) and C&I loans (down $2.9 billion, or 69.7 percent) drove threefourths (75.5 percent) of the reduction in net charge-offs from the year-ago quarter. More than half of all banks (51.6 percent) reported a decline in net charge-offs from a year ago. Total Assets Increased, Especially Those With Maturities of More Than Five Years Total assets increased $224.8 billion (1 percent) from first quarter 2021 to $22.8 trillion. More than four-fifths (86.1 percent) of all banks reported an increase in assets with contractual maturities greater than five years compared with a quarter ago. Cash and balances due from depository institutions declined $108 billion (3 percent), while securities rose $248.9 billion (4.5 percent). Growth in mortgage-backed securities (up $122.7 billion, or 3.8 percent) and U.S. Treasury securities (up $91.2 billion, or 8.5 percent) continued to spur quarterly increases in total securities. Growth in held-to-maturity securities from first quarter 2021 (up $273.6 billion, or 16.8 percent) outpaced that of available-for-sale (AFS) securities (down $27.3 billion, or 0.7 percent). Quarterly Loan Balances Grew for the First Time Since Second Quarter 2020 Loan and lease balances increased $33.2 billion (0.3 percent) from the previous quarter, the first quarterly increase in loan balances since second quarter 2020. An increase in credit card loan balances (up $30.9 billion, or 4.1 percent) and an increase in auto loan balances (up $18.9 billion, or 3.8 percent) drove this growth. Half (50.3 percent) of all institutions reported a quarterly increase in total loans. Compared with second quarter 2020, loan and lease balances contracted slightly (down $133.9 billion, or 1.2 percent), driven by a reduction in C&I loans (down $360.4 billion, or 13.4 percent). An increase in “all other loans” (up $182.8 billion, or 18.2 percent) mitigated the annual contraction in total loan balances.5 Compared with the year-ago quarter, more than half (52.8 percent) of all institutions reported a decline in total loans, but more than threequarters (76.4 percent) of all institutions reported an increase in unused commitments to lend. 5 “All other loans” includes, but is not limited to, loans to nondepository institutions and loans for purchasing or carrying securities. Chart 5 Chart 6 Noncurrent Loan Rate and Quarterly Net Charge-Off Rate All FDIC-Insured Institutions Percent 6 Noncurrent Rate Quarterly Net Charge-Off Rate Quarterly Change in Loan Balances All FDIC-Insured Institutions $ Billions 500 400 5 300 200 4 3 Percent 12 8 100 4 0 0 -100 2 Quarterly Change (Left Axis) 12-Month Growth Rate (Right Axis) -200 -4 -300 -8 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 1 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. Source: FDIC. Note: FASB Statements 166 and 167 resulted in the consolidation of large amounts of securitized loan balances back onto banks' balance sheets in the first quarter of 2010. Although the total amount consolidated cannot be precisely quantified, the industry would have reported a decline in loan balances for the quarter absent this change in accounting standards. FDIC QUARTERLY 3 2021 • Volume 15 • Number 3 Deposits Continued to Grow but at a Moderated Pace in Second Quarter 2021 Deposits grew $271.9 billion (1.5 percent) in second quarter, down from the growth rate of 3.6 percent reported in first quarter 2021. The deposit growth rate in second quarter is near the long-run average growth rate of 1.2 percent.6 Deposits above $250,000 continued to drive the quarterly increase (up $297.8 billion, or 3.1 percent) and offset a decline in deposits below $250,000 (down $53.6 billion, or 0.7 percent). Noninterest-bearing deposit growth (up $175 billion, or 3.5 percent) continued to outpace that of interest-bearing deposits (up $53.3 billion, or 0.4 percent), with more than half of banks (57.3 percent) reporting higher noninterest-bearing deposit balances compared with the previous quarter. Equity Capital Growth Remained Strong Equity capital rose $55.3 billion (2.5 percent) from first quarter 2021. Retained earnings contributed $33.9 billion to equity formation despite a decline in retained earnings from first quarter (down $19.1 billion, or 36 percent). Banks distributed 51.9 percent of second quarter earnings as dividends, which were up $12.7 billion (53 percent) from a quarter ago. Nearly one-third (32 percent) of banks reported higher dividends compared with the year-ago quarter. The number of institutions with capital ratios that did not meet Prompt Corrective Action requirements for the well-capitalized category increased by three to nine from first quarter 2021.7 Three New Banks Opened in Second Quarter 2021 The number of FDIC-insured institutions declined from 4,978 in first quarter 2021 to 4,951.8 During second quarter 2021, three new banks opened, 28 institutions merged with other FDIC-insured institutions, two banks ceased operations, and no banks failed. The number of banks on the FDIC’s “Problem Bank List” declined by four from first quarter to 51. Total assets of problem banks declined $8.4 billion (15.4 percent) from first quarter to $45.8 billion. Author: Erica Jill Tholmer Senior Financial Analyst Division of Insurance and Research 6 The long-run average growth rate is based on the period between Q1 1984 and Q4 2012. Corrective Action categories are assigned based on reported capital ratios only and do not include the effects of regulatory downgrades. 8 The number of insured financial institutions excludes two banks that did not file Call Reports this quarter but continue to have active banking charters. 7 Prompt Chart 7 Quarterly Change in Deposits All FDIC-Insured Institutions $ Billions Chart 8 Number and Assets of Banks on the “Problem Bank List” Number 1,000 Assets of Problem Banks Number of Problem Banks Assets ($ Billions) 500 1,400 900 450 1,200 800 400 1,000 700 350 600 300 500 250 400 200 300 150 200 100 100 50 800 600 400 200 0 -200 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. 4 FDIC QUARTERLY 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. QUARTERLY BANKING PROFILE TABLE I-A. Selected Indicators, All FDIC-Insured Institutions* Return on assets (%) Return on equity (%) Core capital (leverage) ratio (%) Noncurrent assets plus other real estate owned to assets (%) Net charge-offs to loans (%) Asset growth rate (%) Net interest margin (%) Net operating income growth (%) Number of institutions reporting Commercial banks Savings institutions Percentage of unprofitable institutions (%) Number of problem institutions Assets of problem institutions (in billions) Number of failed institutions 2021** 2020** 2020 2019 2018 2017 2016 1.31 13.00 8.83 0.51 0.30 7.80 2.53 332.42 4,951 4,336 615 3.37 51 $46 0 0.37 3.49 8.77 0.59 0.56 15.73 2.97 -72.41 5,066 4,430 636 5.45 52 $48 2 0.72 6.85 8.81 0.61 0.50 17.36 2.82 -38.77 5,002 4,375 627 4.68 56 $56 4 1.29 11.38 9.66 0.55 0.52 3.92 3.36 -3.14 5,177 4,518 659 3.75 51 $46 4 1.35 11.98 9.70 0.60 0.48 3.03 3.40 45.45 5,406 4,715 691 3.44 60 $48 0 0.97 8.60 9.63 0.73 0.50 3.79 3.25 -3.27 5,670 4,918 752 5.61 95 $14 8 1.04 9.27 9.48 0.86 0.47 5.09 3.13 4.43 5,913 5,112 801 4.48 123 $28 5 * Excludes insured branches of foreign banks (IBAs). ** Through June 30, ratios annualized where appropriate. Asset growth rates are for 12 months ending June30. TABLE II-A. Aggregate Condition and Income Data, All FDIC-Insured Institutions (dollar figures in millions) Number of institutions reporting Total employees (full-time equivalent) CONDITION DATA Total assets Loans secured by real estate 1-4 Family residential mortgages Nonfarm nonresidential Construction and development Home equity lines Commercial & industrial loans Loans to individuals Credit cards Farm loans Other loans & leases Less: Unearned income Total loans & leases Less: Reserve for losses* Net loans and leases Securities** Other real estate owned Goodwill and other intangibles All other assets 2nd Quarter 2021 1st Quarter 2021 2nd Quarter 2020 %Change 20Q2-21Q2 4,951 2,058,714 4,978 2,067,221 5,066 2,077,846 -2.3 -0.9 $22,789,003 5,109,191 2,180,506 1,594,933 393,535 277,871 2,335,889 1,757,418 791,990 69,767 1,588,895 2,992 10,858,169 195,173 10,662,996 5,728,192 4,149 393,757 5,999,909 $22,564,251 5,079,254 2,178,189 1,575,705 388,392 286,043 2,457,771 1,689,879 761,103 68,072 1,533,095 3,077 10,824,995 214,262 10,610,734 5,479,335 4,433 392,017 6,077,732 $21,139,330 5,110,704 2,216,550 1,545,465 380,893 324,468 2,696,301 1,704,209 808,171 78,108 1,406,504 3,803 10,992,022 242,717 10,749,305 4,515,796 5,021 386,432 5,482,778 7.8 0.0 -1.6 3.2 3.3 -14.4 -13.4 3.1 -2.0 -10.7 13.0 -21.3 -1.2 -19.6 -0.8 26.8 -17.4 1.9 9.4 22,789,003 18,730,697 17,163,933 1,566,764 1,018,770 66,798 664,514 2,308,224 2,305,721 22,564,251 18,458,784 16,935,687 1,523,096 1,099,727 66,470 686,315 2,252,956 2,250,482 21,139,330 16,962,234 15,519,843 1,442,391 1,302,424 69,595 655,590 2,149,488 2,146,919 7.8 10.4 10.6 8.6 -21.8 -4.0 1.4 7.4 7.4 Total liabilities and capital Deposits Domestic office deposits Foreign office deposits Other borrowed funds Subordinated debt All other liabilities Total equity capital (includes minority interests) Bank equity capital Loans and leases 30-89 days past due Noncurrent loans and leases Restructured loans and leases Mortgage-backed securities Earning assets FHLB Advances Unused loan commitments Trust assets Assets securitized and sold Notional amount of derivatives INCOME DATA First Half 2021 45,543 109,662 47,190 3,386,814 20,799,357 207,759 8,917,077 19,845,670 463,194 186,058,286 First Half 2020 Total interest income Total interest expense Net interest income Provision for credit losses*** Total noninterest income Total noninterest expense Securities gains (losses) Applicable income taxes Extraordinary gains, net**** Total net income (includes minority interests) Bank net income Net charge-offs Cash dividends Retained earnings Net operating income $277,110 19,361 257,749 -25,187 152,247 249,936 2,128 40,634 26 146,768 146,655 16,415 60,291 86,364 145,027 $319,322 50,916 268,406 114,838 137,612 250,889 4,261 7,368 -105 37,079 36,992 30,173 46,554 -9,562 33,538 %Change 51,772 122,873 48,969 3,264,139 20,576,418 231,305 8,730,450 18,925,459 460,283 191,684,231 2nd Quarter 2021 55,683 118,254 48,297 2,651,813 19,227,935 378,493 8,366,753 17,007,732 550,281 181,707,660 2nd Quarter 2020 -18.2 -7.3 -2.3 27.7 8.2 -45.1 6.6 16.7 -15.8 2.4 %Change 20Q2-21Q2 -13.2 -62.0 -4.0 N/M 10.6 -0.4 -50.1 451.5 N/M 295.8 296.5 -45.6 29.5 N/M 332.4 $138,538 9,345 129,193 -10,782 75,786 126,051 733 20,048 26 70,422 70,376 7,295 36,506 33,869 69,814 $150,182 18,750 131,432 62,200 70,767 122,341 2,505 1,570 -79 18,513 18,469 15,573 14,029 4,440 16,443 -7.8 -50.2 -1.7 N/M 7.1 3.0 -70.7 1,176.7 N/M 280.4 281.0 -53.2 160.2 662.8 324.6 * For institutions that have adopted ASU 2016-13, this item represents the allowance for credit losses on loans and leases held for investment and allocated transfer risk. ** For institutions that have adopted ASU 2016-13, securities are reported net of allowances for credit losses. *** For institutions that have adopted ASU 2016-13, this item represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, this item represents the provision for loan and lease losses. **** See Notes to Users for explanation. N/M - Not Meaningful FDIC QUARTERLY 5 2021 • Volume 15 • Number 3 TABLE III-A. Second Quarter 2021, All FDIC-Insured Institutions Asset Concentration Groups* SECOND QUARTER (The way it is...) Number of institutions reporting Commercial banks Savings institutions Total assets (in billions) Commercial banks Savings institutions Total deposits (in billions) Commercial banks Savings institutions Bank net income (in millions) Commercial banks Savings institutions Performance Ratios (annualized, %) Yield on earning assets Cost of funding earning assets Net interest margin Noninterest income to assets Noninterest expense to assets Credit loss provision to assets** Net operating income to assets Pretax return on assets Return on assets Return on equity Net charge-offs to loans and leases Loan and lease loss provision to net charge-offs Efficiency ratio % of unprofitable institutions % of institutions with earnings gains Structural Changes New reporters Institutions absorbed by mergers Failed institutions All Insured Institutions 4,951 4,336 615 $22,789.0 21,359.1 1,429.9 18,730.7 17,538.2 1,192.5 70,376 66,089 4,287 Credit Card Banks 11 10 1 $477.8 395.9 81.9 339.6 278.0 61.5 6,995 5,739 1,256 International Banks 5 5 0 $5,762.7 5,762.7 0.0 4,486.3 4,486.3 0.0 15,788 15,788 0 Agricultural Banks 1,130 1,119 11 $289.1 282.9 6.2 245.8 242.3 3.4 1,025 978 47 Commercial Lenders 2,586 2,337 249 $7,185.0 6,724.7 460.4 6,016.6 5,654.2 362.4 22,669 21,226 1,444 Mortgage Lenders 280 77 203 $684.9 118.0 566.9 601.9 101.4 500.6 1,393 343 1,050 Consumer Lenders 32 20 12 $152.7 146.0 6.7 130.2 124.4 5.8 542 525 18 Other Specialized <$1 Billion 312 283 29 $64.5 59.5 5.0 53.7 50.3 3.4 281 102 180 All Other <$1 Billion 509 414 95 $119.4 95.7 23.8 102.7 83.1 19.7 324 287 37 All Other >$1 Billion 86 71 15 $8,052.9 7,773.8 279.1 6,753.8 6,518.1 235.7 21,358 21,103 256 2.68 0.18 2.50 1.34 2.23 -0.19 1.23 1.60 1.24 12.37 0.27 10.40 0.98 9.41 5.68 8.00 -0.92 5.75 7.55 5.76 42.93 2.37 1.93 0.11 1.82 1.62 2.03 -0.22 1.10 1.43 1.10 12.31 0.40 3.86 0.39 3.46 0.69 2.27 0.06 1.41 1.62 1.43 12.99 0.06 3.14 0.22 2.92 0.99 2.20 -0.12 1.25 1.61 1.27 11.68 0.12 1.83 0.15 1.69 0.86 1.47 -0.01 0.80 1.08 0.82 9.41 0.01 3.34 0.48 2.86 0.27 0.97 0.18 1.43 1.91 1.43 16.24 0.22 2.59 0.25 2.35 3.30 3.31 0.04 1.72 2.20 1.77 12.69 0.11 3.41 0.32 3.09 1.20 2.82 0.05 1.09 1.24 1.09 9.77 0.03 2.32 0.13 2.19 1.26 2.11 -0.22 1.06 1.38 1.07 10.75 0.21 -154.12 61.01 4.16 66.39 -50.59 54.34 0.00 100.00 -206.49 62.38 0.00 80.00 167.99 57.22 3.36 61.68 -158.39 59.42 2.55 73.90 -466.09 58.63 9.64 51.79 37.25 31.78 3.13 75.00 129.07 59.88 13.46 44.55 267.86 68.54 5.70 58.55 -236.92 64.18 3.49 67.44 3 28 0 0 0 0 0 0 0 0 5 0 1 22 0 0 0 0 0 0 0 2 0 0 0 1 0 0 0 0 PRIOR SECOND QUARTERS (The way it was...) Return on assets (%) 2020 2018 2016 0.36 1.37 1.06 0.11 2.73 2.27 0.28 1.23 0.96 1.41 1.34 1.23 0.50 1.28 1.06 1.16 1.07 0.94 0.51 1.20 0.96 3.00 3.75 2.51 1.29 1.14 0.94 0.14 1.45 1.01 Net charge-offs to loans & leases (%) 2020 2018 2016 0.57 0.48 0.45 4.26 4.02 3.28 0.79 0.50 0.55 0.19 0.19 0.16 0.28 0.16 0.22 0.02 0.01 0.06 0.34 1.14 0.64 0.36 0.05 0.27 0.07 0.09 0.16 0.50 0.36 0.40 * See Table V-A (page 10) for explanations. ** For institutions that have adopted ASU 2016-13, the numerator represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, the numerator represents the provision for loan and lease losses. 6 FDIC QUARTERLY QUARTERLY BANKING PROFILE TABLE III-A. Second Quarter 2021, All FDIC-Insured Institutions Asset Size Distribution SECOND QUARTER (The way it is...) Number of institutions reporting Commercial banks Savings institutions Total assets (in billions) Commercial banks Savings institutions Total deposits (in billions) Commercial banks Savings institutions Bank net income (in millions) Commercial banks Savings institutions Performance Ratios (annualized, %) Yield on earning assets Cost of funding earning assets Net interest margin Noninterest income to assets Noninterest expense to assets Credit loss provision to assets** Net operating income to assets Pretax return on assets Return on assets Return on equity Net charge-offs to loans and leases Loan and lease loss provision to net charge-offs Efficiency ratio % of unprofitable institutions % of institutions with earnings gains Structural Changes New reporters Institutions absorbed by mergers Failed institutions $100 Million to $1 Billion to $1 Billion $10 Billion 3,103 817 2,754 678 349 139 $1,117.8 $2,151.8 980.7 1,794.2 137.1 357.6 953.4 1,800.4 841.4 1,507.7 112.0 292.7 3,656 7,307 3,146 6,354 509 952 Geographic Regions* All Insured Institutions 4,951 4,336 615 $22,789.0 21,359.1 1,429.9 18,730.7 17,538.2 1,192.5 70,376 66,089 4,287 Less Than $100 Million 871 761 110 $53.0 46.7 6.3 44.4 39.6 4.9 143 131 13 $10 Billion to $250 Billion 147 131 16 $6,742.7 6,171.9 570.9 5,603.7 5,148.1 455.6 24,857 22,618 2,239 Greater Than $250 Billion New York 13 586 12 306 1 280 $12,723.8 $4,216.6 12,365.7 3,783.0 358.1 433.6 10,328.8 3,495.1 10,001.4 3,148.8 327.4 346.3 34,412 11,877 33,839 10,735 573 1,142 2.68 0.18 2.50 1.34 2.23 -0.19 1.23 1.60 1.24 12.37 0.27 3.75 0.39 3.36 1.59 3.39 0.07 1.09 1.24 1.09 8.17 0.07 3.74 0.36 3.38 1.32 2.89 0.07 1.30 1.55 1.32 12.14 0.06 3.61 0.30 3.31 1.17 2.60 -0.01 1.34 1.72 1.37 12.62 0.14 3.26 0.25 3.00 1.29 2.34 -0.18 1.47 1.93 1.49 13.95 0.35 2.11 0.10 2.00 1.39 2.04 -0.25 1.08 1.40 1.09 11.44 0.27 -154.12 61.01 4.16 66.39 187.45 71.94 13.55 53.04 207.42 64.23 2.45 65.61 -13.37 60.38 1.22 78.58 -90.85 56.94 1.36 92.52 3 28 0 3 6 0 0 19 0 0 2 0 Atlanta 565 514 51 $4,652.2 4,512.2 140.0 3,892.6 3,775.8 116.9 13,706 13,569 137 Chicago 1,059 915 144 $5,473.4 5,380.0 93.4 4,289.5 4,220.5 69.0 16,791 16,257 534 Kansas City 1,276 1,236 40 $4,174.8 4,134.4 40.4 3,422.2 3,389.4 32.8 12,056 11,961 96 Dallas 1,095 1,027 68 $1,887.2 1,310.3 576.9 1,621.6 1,110.4 511.2 5,501 4,573 928 San Francisco 370 338 32 $2,384.7 2,239.1 145.6 2,009.7 1,893.4 116.3 10,444 8,994 1,451 2.63 0.21 2.42 1.19 2.05 -0.11 1.13 1.46 1.14 11.01 0.25 2.67 0.15 2.52 1.15 2.21 -0.27 1.17 1.51 1.18 11.18 0.32 2.25 0.13 2.12 1.67 2.21 -0.21 1.23 1.60 1.23 13.06 0.20 2.67 0.18 2.49 1.22 2.18 -0.20 1.15 1.50 1.16 11.82 0.34 2.91 0.19 2.72 0.92 2.15 -0.10 1.15 1.44 1.17 11.74 0.08 3.59 0.30 3.30 1.72 2.74 -0.19 1.75 2.30 1.77 17.18 0.36 -252.89 63.42 0.00 84.62 -86.48 59.99 4.44 73.21 -169.89 63.74 6.73 72.04 -291.56 61.12 3.97 62.98 -135.53 62.34 3.37 61.13 -241.15 61.56 3.65 67.21 -88.13 56.29 4.59 72.43 0 1 0 0 0 0 0 2 0 2 2 0 1 7 0 0 7 0 0 10 0 0 0 0 PRIOR SECOND QUARTERS (The way it was…) Return on assets (%) 2020 2018 2016 0.36 1.37 1.06 0.98 1.08 0.92 1.29 1.27 1.10 1.09 1.29 1.06 0.38 1.47 1.13 0.14 1.34 1.02 0.13 1.20 0.90 0.32 1.50 0.96 0.51 1.30 1.01 -0.09 1.27 1.13 0.86 1.42 1.10 0.96 1.76 1.54 Net charge-offs to loans & leases (%) 2020 2018 2016 0.57 0.48 0.45 0.17 0.11 0.19 0.13 0.11 0.12 0.23 0.27 0.21 0.74 0.69 0.62 0.60 0.43 0.46 0.54 0.60 0.46 0.61 0.54 0.53 0.45 0.25 0.27 0.63 0.49 0.52 0.45 0.21 0.31 0.73 0.70 0.54 * See Table V-A (page 11) for explanations. ** For institutions that have adopted ASU 2016-13, the numerator represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, the numerator represents the provision for loan and lease losses. FDIC QUARTERLY 7 2021 • Volume 15 • Number 3 TABLE IV-A. First Half 2021, All FDIC-Insured Institutions Asset Concentration Groups* FIRST HALF (The way it is...) Number of institutions reporting Commercial banks Savings institutions Total assets (in billions) Commercial banks Savings institutions Total deposits (in billions) Commercial banks Savings institutions Bank net income (in millions) Commercial banks Savings institutions Performance Ratios (%) Yield on earning assets Cost of funding earning assets Net interest margin Noninterest income to assets Noninterest expense to assets Credit loss provision to assets** Net operating income to assets Pretax return on assets Return on assets Return on equity Net charge-offs to loans and leases Loan and lease loss provision to net charge-offs Efficiency ratio % of unprofitable institutions % of institutions with earnings gains Condition Ratios (%) Earning assets to total assets Loss allowance to: Loans and leases Noncurrent loans and leases Noncurrent assets plus other real estate owned to assets Equity capital ratio Core capital (leverage) ratio Common equity tier 1 capital ratio*** Tier 1 risk-based capital ratio*** Total risk-based capital ratio*** Net loans and leases to deposits Net loans to total assets Domestic deposits to total assets Structural Changes New reporters Institutions absorbed by mergers Failed institutions All Insured Institutions 4,951 4,336 615 $22,789.0 21,359.1 1,429.9 18,730.7 17,538.2 1,192.5 146,655 138,385 8,270 Credit Card Banks 11 10 1 $477.8 395.9 81.9 339.6 278.0 61.5 14,072 11,969 2,103 International Banks 5 5 0 $5,762.7 5,762.7 0.0 4,486.3 4,486.3 0.0 35,175 35,175 0 Agricultural Banks 1,130 1,119 11 $289.1 282.9 6.2 245.8 242.3 3.4 2,036 1,943 92 Commercial Lenders 2,586 2,337 249 $7,185.0 6,724.7 460.4 6,016.6 5,654.2 362.4 45,895 43,078 2,816 Mortgage Lenders 280 77 203 $684.9 118.0 566.9 601.9 101.4 500.6 2,942 721 2,221 Consumer Lenders 32 20 12 $152.7 146.0 6.7 130.2 124.4 5.8 1,563 1,530 33 Other Specialized <$1 Billion 312 283 29 $64.5 59.5 5.0 53.7 50.3 3.4 562 224 338 All Other <$1 Billion 509 414 95 $119.4 95.7 23.8 102.7 83.1 19.7 647 568 78 All Other >$1 Billion 86 71 15 $8,052.9 7,773.8 279.1 6,753.8 6,518.1 235.7 43,765 43,177 588 2.72 0.19 2.53 1.36 2.23 -0.23 1.30 1.67 1.31 13.00 0.30 10.58 1.02 9.55 5.17 7.54 -0.83 5.76 7.54 5.77 43.86 2.49 1.97 0.11 1.85 1.69 2.07 -0.34 1.23 1.61 1.24 13.87 0.47 3.85 0.42 3.43 0.70 2.26 0.06 1.42 1.64 1.44 12.95 0.04 3.17 0.23 2.94 1.01 2.20 -0.12 1.29 1.65 1.31 11.92 0.12 1.84 0.16 1.68 0.95 1.49 -0.02 0.85 1.14 0.88 10.16 0.02 3.34 0.51 2.83 0.81 0.96 -0.18 2.08 2.80 2.09 23.38 0.25 2.65 0.26 2.39 3.24 3.30 0.05 1.71 2.22 1.80 12.62 0.08 3.44 0.34 3.10 1.27 2.89 0.05 1.09 1.27 1.11 9.79 0.03 2.35 0.14 2.21 1.26 2.12 -0.23 1.09 1.40 1.11 11.09 0.25 -149.45 60.46 3.37 75.44 -42.67 52.55 0.00 100.00 -227.67 61.63 0.00 60.00 237.29 57.21 2.30 70.88 -143.40 58.83 2.17 84.92 -359.49 57.60 8.57 61.43 -67.19 26.92 3.13 84.38 235.43 59.95 11.54 42.31 307.17 68.97 4.32 63.85 -198.63 64.24 2.33 79.07 91.27 94.85 88.67 93.94 91.96 97.50 97.61 93.86 93.94 91.49 1.80 177.98 8.14 1,001.19 2.07 224.71 1.47 166.18 1.38 138.82 0.73 94.10 1.39 526.21 1.59 176.99 1.29 162.73 1.61 140.69 0.51 10.12 8.83 14.21 14.30 15.72 56.93 46.79 75.32 0.65 13.59 14.25 17.60 17.76 19.55 103.42 73.50 68.80 0.31 9.01 7.93 15.21 15.28 16.70 39.34 30.62 54.33 0.58 11.09 10.48 15.08 15.08 16.21 68.74 58.44 85.02 0.66 10.97 9.43 12.92 12.99 14.34 74.36 62.26 83.54 0.22 9.08 8.69 24.68 24.68 25.11 30.94 27.19 87.72 0.20 8.90 9.30 20.39 20.49 20.95 87.25 74.39 85.26 0.29 13.96 13.22 31.36 31.36 32.28 32.36 26.94 83.26 0.49 11.22 10.90 18.26 18.27 19.35 61.07 52.54 86.01 0.53 9.97 8.48 13.90 14.02 15.57 52.18 43.77 81.57 6 53 0 0 0 0 0 0 0 0 12 0 2 36 0 0 1 0 0 0 0 4 1 0 0 2 0 0 1 0 PRIOR FIRST HALVES (The way it was...) Number of institutions 2020 2018 2016 5,066 5,542 6,058 11 12 13 5 5 4 1,198 1,383 1,466 2,790 2,894 3,029 296 406 491 39 71 63 217 246 324 442 474 605 68 51 63 Total assets (in billions) 2020 2018 2016 $21,139.3 17,532.9 16,534.0 $504.9 626.4 502.0 $5,241.4 4,222.2 3,966.6 $280.1 283.8 270.7 $7,467.5 6,167.6 5,986.3 $610.4 356.4 396.2 $129.4 216.8 200.9 $38.1 39.7 56.4 $86.0 80.4 104.1 $6,781.6 5,539.6 5,050.8 Return on assets (%) 2020 2018 2016 0.37 1.33 1.02 0.11 2.71 2.31 0.36 1.22 0.90 1.34 1.32 1.22 0.35 1.24 1.01 1.06 1.08 0.95 1.29 1.31 1.00 2.98 3.63 2.50 1.10 1.07 0.93 0.28 1.35 0.97 Net charge-offs to loans & leases (%) 2020 2018 2016 0.56 0.49 0.45 4.30 4.02 3.27 0.77 0.53 0.57 0.14 0.13 0.13 0.26 0.17 0.22 0.02 0.02 0.06 0.41 0.97 0.65 0.34 0.11 0.17 0.07 0.13 0.15 0.49 0.37 0.40 Noncurrent assets plus OREO to assets (%) 2020 2018 2016 0.59 0.65 0.91 1.10 1.05 0.87 0.37 0.43 0.66 0.88 0.88 0.78 0.66 0.65 0.93 0.24 1.61 1.80 0.38 0.47 0.86 0.37 0.44 0.61 0.64 0.76 1.02 0.68 0.71 1.04 Equity capital ratio (%) 2020 2018 2016 10.16 11.30 11.27 11.48 15.29 14.81 8.99 10.02 9.95 11.46 11.31 11.58 11.15 11.91 11.88 8.61 11.23 11.59 9.58 10.35 10.24 16.40 16.62 15.48 12.36 11.86 11.98 9.90 11.12 11.18 * See Table V-A (page 10) for explanations. ** For institutions that have adopted ASU 2016-13, the numerator represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, the numerator represents the provision for loan and lease losses. *** Beginning March 2020, does not include institutions that have a Community Bank Leverage Ratio election in effect at the report date. 8 FDIC QUARTERLY QUARTERLY BANKING PROFILE TABLE IV-A. First Half 2021, All FDIC-Insured Institutions Asset Size Distribution FIRST HALF (The way it is...) Number of institutions reporting Commercial banks Savings institutions Total assets (in billions) Commercial banks Savings institutions Total deposits (in billions) Commercial banks Savings institutions Bank net income (in millions) Commercial banks Savings institutions Performance Ratios (%) Yield on earning assets Cost of funding earning assets Net interest margin Noninterest income to assets Noninterest expense to assets Credit loss provision to assets** Net operating income to assets Pretax return on assets Return on assets Return on equity Net charge-offs to loans and leases Loan and lease loss provision to net charge-offs Efficiency ratio % of unprofitable institutions % of institutions with earnings gains Condition Ratios (%) Earning assets to total assets Loss allowance to: Loans and leases Noncurrent loans and leases Noncurrent assets plus other real estate owned to assets Equity capital ratio Core capital (leverage) ratio Common equity tier 1 capital ratio*** Tier 1 risk-based capital ratio*** Total risk-based capital ratio*** Net loans and leases to deposits Net loans to total assets Domestic deposits to total assets Structural Changes New reporters Institutions absorbed by mergers Failed institutions $100 Million to $1 Billion to $1 Billion $10 Billion 3,103 817 2,754 678 349 139 $1,117.8 $2,151.8 980.7 1,794.2 137.1 357.6 953.4 1,800.4 841.4 1,507.7 112.0 292.7 7,320 15,237 6,290 13,243 1,030 1,993 Geographic Regions* All Insured Institutions 4,951 4,336 615 $22,789.0 21,359.1 1,429.9 18,730.7 17,538.2 1,192.5 146,655 138,385 8,270 Less Than $100 Million 871 761 110 $53.0 46.7 6.3 44.4 39.6 4.9 283 257 26 $10 Billion to $250 Billion 147 131 16 $6,742.7 6,171.9 570.9 5,603.7 5,148.1 455.6 50,619 46,556 4,063 Greater Than $250 Billion New York 13 586 12 306 1 280 $12,723.8 $4,216.6 12,365.7 3,783.0 358.1 433.6 10,328.8 3,495.1 10,001.4 3,148.8 327.4 346.3 73,197 23,948 72,039 21,723 1,158 2,224 2.72 0.19 2.53 1.36 2.23 -0.23 1.30 1.67 1.31 13.00 0.30 3.76 0.41 3.35 1.61 3.43 0.06 1.08 1.23 1.09 8.07 0.06 3.77 0.39 3.38 1.36 2.91 0.08 1.32 1.58 1.34 12.23 0.05 3.67 0.32 3.34 1.25 2.59 0.01 1.42 1.82 1.45 13.30 0.14 3.30 0.26 3.04 1.29 2.33 -0.20 1.52 1.99 1.54 14.35 0.37 2.14 0.11 2.03 1.41 2.06 -0.30 1.16 1.49 1.17 12.26 0.33 -149.45 60.46 3.37 75.44 171.24 72.73 11.25 59.59 276.36 63.99 2.03 75.09 16.67 58.62 0.49 90.58 -85.58 56.34 1.36 92.52 91.27 92.56 93.94 93.53 1.80 177.98 1.46 135.56 1.36 194.67 0.51 10.12 8.83 14.21 14.30 15.72 56.93 46.79 75.32 0.66 13.42 13.04 23.54 23.54 24.59 60.83 51.05 83.91 6 53 0 Atlanta 565 514 51 $4,652.2 4,512.2 140.0 3,892.6 3,775.8 116.9 28,670 28,279 391 Chicago 1,059 915 144 $5,473.4 5,380.0 93.4 4,289.5 4,220.5 69.0 35,914 34,821 1,093 Kansas City 1,276 1,236 40 $4,174.8 4,134.4 40.4 3,422.2 3,389.4 32.8 25,936 25,716 220 Dallas 1,095 1,027 68 $1,887.2 1,310.3 576.9 1,621.6 1,110.4 511.2 10,991 9,144 1,847 San Francisco 370 338 32 $2,384.7 2,239.1 145.6 2,009.7 1,893.4 116.3 21,196 18,701 2,495 2.67 0.23 2.44 1.20 2.08 -0.13 1.15 1.49 1.17 11.19 0.30 2.70 0.16 2.54 1.17 2.18 -0.28 1.24 1.58 1.25 11.75 0.34 2.28 0.12 2.16 1.72 2.24 -0.31 1.34 1.74 1.34 14.11 0.24 2.70 0.19 2.52 1.25 2.21 -0.25 1.23 1.58 1.25 12.79 0.38 2.94 0.20 2.74 0.97 2.18 -0.07 1.17 1.45 1.19 11.87 0.11 3.65 0.32 3.33 1.72 2.68 -0.17 1.79 2.38 1.82 17.66 0.39 -238.65 63.12 0.00 76.92 -84.85 60.25 4.10 83.45 -165.02 62.30 6.73 75.93 -319.69 60.88 3.40 73.28 -125.94 62.16 1.96 74.45 -132.45 61.06 2.83 71.96 -66.16 54.86 3.51 81.89 92.59 89.94 90.94 90.98 90.29 90.50 93.77 94.05 1.42 190.22 1.94 170.48 1.85 180.92 1.70 171.41 1.85 189.20 1.66 179.34 2.01 184.72 1.34 74.64 2.07 330.35 0.50 10.93 10.61 16.12 16.15 17.28 70.41 60.06 85.29 0.55 10.94 10.20 14.62 14.64 15.76 75.84 63.45 83.57 0.68 10.72 9.50 14.06 14.27 15.59 69.30 57.59 81.13 0.40 9.57 8.07 14.09 14.12 15.68 45.66 37.06 69.93 0.50 10.35 9.05 14.19 14.26 15.64 57.94 48.03 77.55 0.48 10.61 8.50 13.75 13.85 15.11 55.06 46.07 81.04 0.43 9.59 8.38 14.44 14.50 15.85 53.93 42.27 69.11 0.52 9.82 8.90 13.68 13.77 15.71 55.02 45.10 65.65 0.89 10.22 8.93 15.18 15.28 16.40 54.29 46.65 85.89 0.41 10.39 9.86 14.88 15.07 16.30 70.55 59.46 83.02 6 14 0 0 34 0 0 4 0 0 1 0 0 0 0 0 7 0 2 5 0 2 10 0 0 15 0 1 14 0 1 2 0 PRIOR FIRST HALVES (The way it was…) Number of institutions 2020 2018 2016 5,066 5,542 6,058 1,010 1,372 1,637 3,153 3,399 3,690 755 637 619 135 125 102 13 9 10 607 675 739 576 645 743 1,085 1,195 1,305 1,306 1,412 1,519 1,121 1,205 1,292 371 410 460 Total assets (in billions) 2020 2018 2016 $21,139.3 17,532.9 16,534.0 $60.6 81.8 96.7 $1,096.0 1,112.2 1,173.6 $2,024.4 1,706.7 1,724.1 $6,097.9 5,951.5 4,897.6 $11,860.4 8,680.7 8,642.0 $3,870.1 3,276.4 3,127.7 $4,363.0 3,614.2 3,467.9 $4,957.6 3,957.2 3,692.0 $4,123.9 3,626.7 3,604.1 $1,684.2 1,114.0 976.1 $2,140.6 1,944.4 1,666.2 Return on assets (%) 2020 2018 2016 0.37 1.33 1.02 0.93 1.02 0.92 1.18 1.23 1.07 0.94 1.28 1.05 0.12 1.42 1.08 0.33 1.29 0.97 0.34 1.17 0.85 0.18 1.41 0.92 0.50 1.29 0.97 0.20 1.22 1.08 0.82 1.38 1.07 0.51 1.70 1.44 Net charge-offs to loans & leases (%) 2020 2018 2016 0.56 0.49 0.45 0.15 0.15 0.15 0.12 0.10 0.11 0.22 0.22 0.20 0.75 0.71 0.62 0.57 0.44 0.47 0.52 0.61 0.47 0.62 0.55 0.53 0.44 0.25 0.27 0.58 0.51 0.53 0.38 0.21 0.31 0.77 0.72 0.53 Noncurrent assets plus OREO to assets (%) 2020 2018 2016 0.59 0.65 0.91 0.91 0.99 1.17 0.69 0.80 1.05 0.66 0.69 0.89 0.74 0.63 0.83 0.50 0.63 0.94 0.56 0.61 0.73 0.52 0.72 1.08 0.52 0.60 0.85 0.74 0.74 1.10 0.79 0.76 1.05 0.55 0.46 0.55 Equity capital ratio (%) 2020 2018 2016 10.16 11.30 11.27 13.59 13.35 12.97 11.19 11.32 11.47 10.82 11.74 11.78 10.88 12.14 12.21 9.56 10.61 10.60 10.61 12.49 12.01 10.64 12.08 12.37 9.62 10.49 10.31 9.57 10.26 10.15 10.41 11.55 11.21 10.49 11.26 12.22 * See Table V-A (page 11) for explanations. ** For institutions that have adopted ASU 2016-13, the numerator represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, the numerator represents the provision for loan and lease losses. *** Beginning March 2020, does not include institutions that have a Community Bank Leverage Ratio election in effect at the report date. FDIC QUARTERLY 9 2021 • Volume 15 • Number 3 TABLE V-A. Loan Performance, All FDIC-Insured Institutions Asset Concentration Groups* All Insured Institutions Credit Card Banks International Banks Agricultural Banks Commercial Lenders Mortgage Lenders Consumer Lenders Other Specialized <$1 Billion All Other <$1 Billion All Other >$1 Billion Percent of Loans 30-89 Days Past Due All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 0.42 0.28 0.20 0.17 0.36 0.68 0.24 0.82 0.73 0.91 0.24 0.42 0.25 0.00 0.00 0.00 0.00 0.26 0.30 0.85 0.85 0.79 0.17 0.79 0.35 0.08 0.33 0.05 0.44 0.45 0.51 0.63 0.58 0.78 0.33 0.43 0.40 0.63 0.25 0.13 0.37 0.57 0.55 0.68 0.63 0.69 0.50 0.45 0.30 0.30 0.18 0.20 0.29 0.51 0.18 0.60 0.97 0.58 0.24 0.28 0.27 0.68 0.24 0.16 0.23 0.27 0.16 0.19 0.76 0.17 0.03 0.25 0.11 0.14 0.09 0.00 0.18 0.12 0.02 0.68 0.55 0.68 0.01 0.47 0.62 0.86 0.42 0.26 0.46 0.81 0.45 0.91 1.95 0.86 0.75 0.63 0.57 0.42 0.47 0.15 0.43 0.68 0.46 0.78 0.57 0.78 0.51 0.57 0.70 0.18 0.20 0.19 0.45 1.01 0.20 1.03 0.70 1.17 0.16 0.55 Percent of Loans Noncurrent** All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 1.45 0.60 0.89 0.28 2.13 2.22 0.82 0.63 0.81 0.48 0.32 1.01 0.71 2.36 0.00 0.00 0.00 0.69 0.26 0.88 0.92 0.30 0.00 0.81 1.64 2.10 1.08 0.31 5.62 1.92 1.06 0.58 0.70 0.27 0.29 0.92 0.89 0.57 0.79 0.35 0.25 0.64 0.91 0.36 0.26 0.38 0.94 0.89 1.21 0.42 0.82 0.25 1.29 2.42 0.77 0.42 0.97 0.39 0.41 0.99 0.85 1.17 0.62 0.78 0.58 0.88 0.62 0.09 0.51 0.07 0.31 0.78 0.26 0.41 0.59 0.33 0.45 0.23 0.21 0.29 0.43 0.29 0.04 0.26 1.05 0.87 1.05 0.17 0.29 1.02 0.55 0.42 0.71 0.40 0.58 0.90 0.83 0.37 1.01 0.44 0.52 0.81 0.78 0.39 0.25 0.39 0.96 0.79 2.00 0.91 1.13 0.34 2.57 2.50 0.81 0.67 0.79 0.62 0.26 1.15 Percent of Loans Charged-Off (net, YTD) All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 0.01 0.02 0.06 0.02 -0.17 -0.02 0.24 1.46 2.73 0.39 0.10 0.30 0.04 0.62 0.00 0.00 0.00 0.03 0.94 2.68 2.76 1.41 0.00 2.49 -0.06 0.00 0.04 0.00 -0.54 -0.06 0.34 2.03 2.66 0.31 0.06 0.47 0.02 0.02 0.04 0.07 0.00 0.02 0.07 0.21 0.76 0.14 0.04 0.04 0.03 0.02 0.08 0.02 -0.06 -0.01 0.24 0.59 3.29 0.41 0.11 0.12 0.00 -0.02 0.01 0.26 -0.05 -0.01 0.01 0.32 2.35 0.25 0.04 0.02 0.00 0.00 0.05 -0.01 0.00 0.00 0.33 0.33 1.25 0.33 0.00 0.25 -0.03 -0.12 -0.07 0.00 0.00 0.00 -0.18 0.79 0.39 0.81 1.24 0.08 0.01 0.00 0.01 0.00 -0.02 0.01 0.10 0.14 1.32 0.13 0.04 0.03 -0.01 0.01 0.03 0.02 -0.22 -0.01 0.16 1.05 2.73 0.36 0.12 0.25 $5,109.2 393.5 1,594.9 490.5 277.9 2,180.5 2,335.9 1,757.4 792.0 965.4 1,658.7 10,861.2 $2.1 0.0 0.0 0.0 0.0 2.0 37.8 341.9 320.4 21.5 0.6 382.3 $564.0 17.8 59.9 83.6 27.6 320.0 351.0 360.8 261.3 99.5 526.3 1,802.1 $105.3 6.4 27.9 3.7 1.6 24.1 25.0 5.9 0.7 5.3 35.3 171.5 $2,760.9 285.6 1,158.1 321.4 145.1 800.9 1,134.3 278.1 17.3 260.8 365.4 4,538.8 $161.3 4.8 13.4 3.8 7.1 131.5 8.5 11.4 0.3 11.1 6.5 187.7 $25.8 0.2 1.5 0.4 0.2 23.5 8.8 75.7 0.4 75.3 4.9 115.2 $12.6 1.1 4.1 0.4 0.3 5.7 2.7 1.5 0.1 1.4 0.9 17.7 $49.1 3.5 11.0 1.5 1.6 27.9 6.7 5.2 0.0 5.1 2.6 63.6 $1,428.0 74.0 319.1 75.8 94.4 844.9 761.0 677.0 191.5 485.5 716.1 3,582.3 4,149.2 801.4 2,302.2 61.3 848.4 100.3 7.3 0.2 7.0 0.0 0.1 0.0 251.2 1.0 88.0 1.0 126.2 0.0 162.3 23.6 61.6 1.3 28.2 47.7 2,574.5 679.4 1,450.2 56.6 340.7 47.7 48.6 10.8 13.3 0.7 23.9 0.0 2.9 1.7 0.2 0.0 0.9 0.0 28.2 10.1 11.8 0.0 5.8 0.5 81.0 19.7 32.1 1.1 24.8 3.3 993.4 55.0 638.0 0.6 297.9 1.2 June 30, 2021 Loans Outstanding (in billions) All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases (plus unearned income) Memo: Other Real Estate Owned (in millions) All other real estate owned Construction and development Nonfarm nonresidential Multifamily residential real estate 1-4 family residential Farmland * Asset Concentration Group Definitions (Groups are hierarchical and mutually exclusive): Credit-card Lenders - Institutions whose credit-card loans plus securitized receivables exceed 50 percent of total assets plus securitized receivables. International Banks - Banks with assets greater than $10 billion and more than 25 percent of total assets in foreign offices. Agricultural Banks - Banks whose agricultural production loans plus real estate loans secured by farmland exceed 25 percent of the total loans and leases. Commercial Lenders - Institutions whose commercial and industrial loans, plus real estate construction and development loans, plus loans secured by commercial real estate properties exceed 25 percent of total assets. Mortgage Lenders - Institutions whose residential mortgage loans, plus mortgage-backed securities, exceed 50 percent of total assets. Consumer Lenders - Institutions whose residential mortgage loans, plus credit-card loans, plus other loans to individuals, exceed 50 percent of total assets. Other Specialized < $1 Billion - Institutions with assets less than $1 billion, whose loans and leases are less than 40 percent of total assets. All Other < $1 billion - Institutions with assets less than $1 billion that do not meet any of the definitions above, they have significant lending activity with no identified asset concentrations. All Other > $1 billion - Institutions with assets greater than $1 billion that do not meet any of the definitions above, they have significant lending activity with no identified asset concentrations. ** Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status. 10 FDIC QUARTERLY QUARTERLY BANKING PROFILE TABLE V-A. Loan Performance, All FDIC-Insured Institutions Asset Size Distribution Geographic Regions* All Insured Institutions Less Than $100 Million $100 Million to $1 Billion $1 Billion to $10 Billion $10 Billion to $250 Billion Percent of Loans 30-89 Days Past Due All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 0.42 0.28 0.20 0.17 0.36 0.68 0.24 0.82 0.73 0.91 0.24 0.42 0.81 0.66 0.63 0.93 0.32 1.06 0.73 0.98 0.88 0.98 0.43 0.76 0.34 0.41 0.23 0.17 0.34 0.47 0.31 1.20 1.60 1.17 0.46 0.38 0.23 0.31 0.17 0.15 0.22 0.31 0.24 0.99 2.08 0.61 0.21 0.27 0.33 0.29 0.20 0.20 0.31 0.50 0.17 0.72 0.76 0.68 0.20 0.36 0.64 0.16 0.20 0.12 0.45 0.95 0.29 0.89 0.63 1.13 0.25 0.52 Percent of Loans Noncurrent** All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 1.45 0.60 0.89 0.28 2.13 2.22 0.82 0.63 0.81 0.48 0.32 1.01 1.08 0.65 1.17 0.67 0.69 1.00 1.20 0.61 0.57 0.61 1.14 1.08 0.72 0.59 0.73 0.26 0.66 0.72 0.59 0.47 1.28 0.42 0.89 0.70 0.75 0.46 0.75 0.26 0.55 1.01 0.85 0.69 1.75 0.33 0.35 0.75 1.68 0.40 0.94 0.23 1.28 3.08 0.78 0.63 0.87 0.43 0.40 1.14 Percent of Loans Charged-Off (net, YTD) All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 0.01 0.02 0.06 0.02 -0.17 -0.02 0.24 1.46 2.73 0.39 0.10 0.30 0.02 0.00 0.01 0.00 -0.02 0.01 0.17 0.22 2.76 0.19 0.11 0.06 0.00 -0.01 0.01 0.00 0.00 0.00 0.11 0.54 3.66 0.32 0.12 0.05 0.02 -0.01 0.04 0.02 -0.02 -0.01 0.16 1.62 5.11 0.37 0.09 0.14 $5,109.2 393.5 1,594.9 490.5 277.9 2,180.5 2,335.9 1,757.4 792.0 965.4 1,658.7 $18.2 1.0 3.8 0.4 0.3 8.8 4.0 1.7 0.0 1.7 3.6 $501.5 47.0 191.6 28.7 14.8 170.7 113.1 26.8 1.7 25.1 39.8 10,861.2 27.4 4,149.2 801.4 2,302.2 61.3 848.4 100.3 54.0 8.9 19.1 6.4 17.1 2.4 June 30, 2021 Loans Outstanding (in billions) All real estate loans Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases (plus unearned income) Memo: Other Real Estate Owned (in millions) All other real estate owned Construction and development Nonfarm nonresidential Multifamily residential real estate 1-4 family residential Farmland Greater Than $250 Billion New York Atlanta Chicago Kansas City Dallas San Francisco 0.33 0.45 0.22 0.21 0.28 0.46 0.13 0.69 0.81 0.61 0.06 0.31 0.43 0.27 0.18 0.09 0.42 0.68 0.23 1.21 0.85 1.49 0.17 0.49 0.40 0.20 0.21 0.07 0.37 0.61 0.30 0.53 0.51 0.55 0.31 0.38 0.72 0.19 0.17 0.31 0.53 1.25 0.32 0.77 0.68 0.92 0.32 0.56 0.40 0.24 0.18 0.15 0.33 0.79 0.27 0.61 0.38 0.68 0.22 0.37 0.22 0.32 0.22 0.20 0.15 0.21 0.21 0.87 0.82 0.91 0.28 0.38 1.81 1.14 1.08 0.39 3.43 2.18 0.85 0.63 0.73 0.54 0.26 1.02 1.38 1.14 1.24 0.31 2.00 1.90 0.77 0.67 0.99 0.47 0.16 0.99 1.48 0.40 0.76 0.57 1.60 2.27 0.78 0.75 0.88 0.65 0.18 0.98 1.48 0.98 1.00 0.30 2.61 1.90 0.72 0.36 0.58 0.20 0.33 0.93 1.54 0.29 1.02 0.18 3.58 2.05 1.07 0.69 0.83 0.45 0.44 1.09 2.46 0.27 0.57 0.18 1.00 6.46 0.79 0.52 0.86 0.42 0.31 1.80 0.56 0.38 0.65 0.14 0.91 0.59 0.78 0.69 0.80 0.61 0.52 0.63 0.04 0.05 0.11 0.03 -0.07 -0.01 0.30 1.44 2.64 0.42 0.14 0.37 -0.03 0.01 0.02 0.01 -0.30 -0.03 0.22 1.49 2.68 0.36 0.08 0.33 0.04 0.09 0.10 0.03 -0.08 -0.01 0.20 1.53 3.00 0.54 0.08 0.30 0.01 0.05 0.06 0.05 -0.16 -0.01 0.25 1.35 2.71 0.26 0.13 0.34 -0.01 0.01 0.08 0.00 -0.20 -0.04 0.25 1.18 2.49 0.14 0.06 0.24 -0.01 -0.01 0.06 0.04 -0.30 -0.03 0.27 2.10 2.89 0.76 0.07 0.38 0.00 0.00 0.03 -0.01 -0.14 0.00 0.22 0.69 1.76 0.34 0.05 0.11 0.01 -0.05 0.06 0.00 -0.08 0.00 0.20 1.42 2.69 0.43 0.24 0.39 $964.0 96.3 418.3 106.3 34.5 277.3 268.1 80.5 20.7 59.8 73.3 $1,891.7 164.3 648.9 218.5 103.3 740.7 857.2 756.1 342.6 413.5 456.8 $1,733.8 85.0 332.4 136.5 125.0 982.9 1,093.5 892.4 427.0 465.4 1,085.2 $1,069.7 78.5 363.8 168.8 62.6 390.9 420.1 311.5 122.3 189.3 260.1 $909.8 64.8 307.2 44.4 64.8 415.4 540.8 412.0 179.4 232.7 321.5 $1,031.2 65.4 243.6 121.4 68.6 507.9 529.3 353.4 152.6 200.8 438.8 $844.1 54.7 204.2 44.7 39.8 401.0 392.0 279.4 177.8 101.6 406.3 $569.1 83.1 236.5 27.1 18.0 185.1 185.0 66.6 15.9 50.6 72.2 $685.3 47.0 239.6 84.1 24.0 280.1 268.7 334.5 144.1 190.5 159.8 681.2 1,385.9 3,961.8 4,804.8 2,061.4 2,184.1 2,352.7 1,921.8 892.9 1,448.2 823.6 326.6 287.6 30.6 125.0 53.9 1,355.2 236.1 942.1 15.1 124.3 36.9 875.0 197.8 391.4 7.4 271.4 7.0 1,041.4 32.0 662.0 1.8 310.6 0.0 522.2 89.8 201.2 8.0 223.1 0.1 993.1 187.4 607.2 19.7 166.5 12.4 677.7 84.9 325.7 8.2 221.7 11.6 534.4 128.1 254.0 5.7 98.6 38.0 803.8 262.2 404.3 12.9 97.1 27.3 618.0 49.1 509.9 6.7 41.5 10.9 * Regions: New York - Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont, U.S. Virgin Islands Atlanta - Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia Chicago - Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin Kansas City - Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota Dallas - Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee, Texas San Francisco - Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Pacific Islands, Utah, Washington, Wyoming ** Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status. FDIC QUARTERLY 11 2021 • Volume 15 • Number 3 TABLE VI-A. Derivatives, All FDIC-Insured Call Report Filers Asset Size Distribution (dollar figures in millions; notional amounts unless otherwise indicated) ALL DERIVATIVE HOLDERS Number of institutions reporting derivatives Total assets of institutions reporting derivatives Total deposits of institutions reporting derivatives Total derivatives 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020 3rd Quarter 2020 2nd Quarter 2020 % Change 20Q22 1Q2 1,373 $21,044,777 17,273,924 186,058,286 1,388 $20,832,558 17,013,783 191,684,231 1,388 $20,149,449 16,393,959 165,711,793 1,374 $19,491,668 15,709,088 181,124,686 1,381 $19,425,459 15,570,184 181,707,660 -0.6 8.3 10.9 2.4 28 $1,933 1,599 253 662 $311,562 264,276 21,941 534 $1,562,783 1,308,436 205,856 136 $6,444,725 5,370,840 4,588,195 13 $12,723,774 10,328,773 181,242,041 Derivative Contracts by Underlying Risk Exposure Interest rate Foreign exchange* Equity Commodity & other (excluding credit derivatives) Credit Total 133,334,821 43,728,636 4,254,960 1,631,946 3,106,414 186,056,777 137,477,448 45,257,498 4,004,712 1,582,254 3,361,030 191,682,942 116,058,430 41,448,704 3,774,715 1,394,504 3,034,285 165,710,638 129,835,475 42,148,550 4,022,629 1,536,154 3,580,623 181,123,431 132,119,135 41,266,839 3,574,339 1,491,420 3,254,590 181,706,323 0.9 6.0 19.0 9.4 -4.6 2.4 252 0 0 0 0 252 21,568 0 21 0 25 21,614 197,956 3,507 34 68 3,111 204,676 2,698,316 1,659,012 78,161 98,104 54,600 4,588,195 130,416,728 42,066,117 4,176,744 1,533,774 3,048,678 181,242,041 Derivative Contracts by Transaction Type Swaps Futures & forwards Purchased options Written options Total 106,971,001 37,583,984 17,945,500 17,894,265 180,394,750 107,719,719 40,934,399 18,603,556 18,371,380 185,629,054 96,423,495 32,350,455 16,098,917 15,891,741 160,764,608 99,580,043 39,822,587 17,889,179 17,706,928 174,998,738 101,734,113 41,019,662 16,881,937 16,682,488 176,318,200 5.1 -8.4 6.3 7.3 2.3 2 0 0 1 3 2,347 4,163 270 3,894 10,674 122,014 21,481 15,145 16,809 175,450 2,368,077 1,781,514 152,474 154,158 4,456,224 104,478,561 35,776,825 17,777,611 17,719,402 175,752,399 63,859 10,331 -13,321 6,125 16,825 -21,074 69,365 13,849 -6,866 3,967 16,748 -18,373 70,648 -11,466 -7,165 -452 14,331 -18,166 73,198 -7,256 -700 -1,087 3,830 -7,167 60,216 -19,636 -1,171 -3,800 -3,347 553 6.0 N/M 1,037.6 N/M N/M N/M 0 0 0 0 0 0 20 0 6 0 0 0 229 3 2 0 15 -15 10,737 947 -984 207 -110 -176 52,872 9,382 -12,345 5,918 16,920 -20,883 71,258,970 45,947,274 22,279,960 30,839,509 4,557,853 2,502,654 3,806,830 957,152 153,371 76,501,727 44,407,789 22,231,036 32,130,016 4,336,231 2,405,347 3,504,313 870,551 124,452 62,457,197 39,201,919 20,844,428 29,434,113 4,404,492 2,402,103 3,287,136 770,821 138,573 76,385,765 39,963,944 20,500,301 29,396,427 4,299,182 2,299,468 3,210,066 882,054 133,921 80,160,078 41,098,879 19,986,413 29,049,567 4,238,687 2,179,498 2,850,740 825,667 128,679 -11.1 11.8 11.5 6.2 7.5 14.8 33.5 15.9 19.2 1 7 0 0 0 0 0 0 0 4,701 1,996 2,973 0 0 0 7 14 0 26,405 45,368 82,791 2,672 347 10 5 4 4 1,274,896 812,193 469,000 1,512,885 100,156 16,293 33,646 40,352 2,586 69,952,968 45,087,709 21,725,196 29,323,952 4,457,350 2,486,351 3,773,172 916,782 150,780 2,234,059 2,137,329 215,834 2,149,899 2,050,971 435,795 1,820,961 2,023,406 215,486 1,926,264 2,249,588 433,136 1,860,285 2,163,848 227,777 20.1 -1.2 -5.2 0 0 0 10 11 69 68 813 1,515 37,625 39,847 7,330 2,196,356 2,096,658 206,920 24.8 34.9 25.6 34.0 30.2 31.0 29.9 32.5 31.9 29.8 0.4 0.0 0.3 0.2 1.9 1.1 5.4 4.9 40.5 58.7 Fair Value of Derivative Contracts Interest rate contracts Foreign exchange contracts Equity contracts Commodity & other (excluding credit derivatives) Credit derivatives as guarantor** Credit derivatives as beneficiary** Derivative Contracts by Maturity*** Interest rate contracts < 1 year 1-5 years > 5 years Foreign exchange and gold contracts < 1 year 1-5 years > 5 years Equity contracts < 1 year 1-5 years > 5 years Commodity & other contracts (including credit derivatives, excluding gold contracts) < 1 year 1-5 years > 5 years Risk-Based Capital: Credit Equivalent Amount Total current exposure to tier 1 capital (%) Total potential future exposure to tier 1 capital (%) Total exposure (credit equivalent amount) to tier 1 capital (%) Less Than $100 Million $100 Million to $1 Billion $1 Billion to $10 Billion $10 Billion to $250 Billion Greater Than $250 Billion 59.7 59.6 61.2 62.4 61.8 0.4 0.5 3.0 10.3 99.2 21.5 6.8 137.3 130.7 124.8 -82.8 0.0 5.1 -0.1 6.0 10.6 190 16,326,433 13,321,986 188 16,185,202 13,124,988 187 15,885,372 12,847,286 185 15,380,670 12,338,386 185 15,391,035 12,272,454 2.7 6.1 8.6 0 0 0 21 10,152 8,669 88 331,938 277,438 70 4,034,178 3,396,712 11 11,950,165 9,639,166 Derivative Contracts by Underlying Risk Exposure Interest rate Foreign exchange Equity Commodity & other Total 129,126,796 40,661,753 4,225,427 1,594,653 175,608,628 133,860,018 42,039,817 3,976,351 1,544,723 181,420,909 112,807,097 39,084,210 3,746,888 1,358,385 156,996,580 126,595,325 39,147,645 3,997,150 1,501,890 171,242,010 129,050,986 38,663,882 3,549,571 1,458,446 172,722,886 0.1 5.2 19.0 9.3 1.7 0 0 0 0 0 514 0 0 0 514 43,737 3,176 3 19 46,936 Trading Revenues: Cash & Derivative Instruments Interest rate** Foreign exchange** Equity** Commodity & other (including credit derivatives)** Total trading revenues** 3,373 1,546 2,384 767 8,070 -29 6,343 2,388 1,772 10,474 3,625 18 2,480 191 6,314 2,826 1,942 750 1,380 6,898 4,638 3,841 3,139 2,036 13,653 -27.3 -59.8 -24.1 -62.3 -40.9 0 0 0 0 0 0 0 0 0 0 5 6 16 0 27 -20 226 -1 87 293 3,389 1,314 2,369 679 7,750 5.9 18.1 7.5 21.0 4.6 16.8 4.9 22.0 9.2 302.5 0.0 0.0 0.0 0.0 0.8 2.7 0.9 2.8 7.7 23.5 609 20,003,432 16,400,333 615 19,837,879 16,179,892 623 19,263,989 15,655,539 620 18,645,439 15,010,871 626 18,558,616 14,856,297 -2.7 7.8 10.4 2 111 92 147 75,405 63,447 323 1,144,952 954,373 124 6,059,191 5,053,648 13 12,723,774 10,328,773 4,170,881 548,414 29,534 37,294 4,786,122 3,573,201 569,053 28,361 37,531 4,208,145 3,192,677 511,407 27,826 36,119 3,768,028 3,162,582 534,403 25,479 34,264 3,756,727 3,010,232 527,340 24,768 32,974 3,595,314 38.6 4.0 19.2 13.1 33.1 3 0 0 0 3 10,139 0 21 0 10,160 128,238 196 31 49 128,514 1,289,228 37,465 10,100 3,238 1,340,032 2,743,272 510,753 19,381 34,006 3,307,413 Credit losses on derivatives**** HELD FOR TRADING Number of institutions reporting derivatives Total assets of institutions reporting derivatives Total deposits of institutions reporting derivatives Share of Revenue Trading revenues to gross revenues (%)** Trading revenues to net operating revenues (%)** HELD FOR PURPOSES OTHER THAN TRADING Number of institutions reporting derivatives Total assets of institutions reporting derivatives Total deposits of institutions reporting derivatives Derivative Contracts by Underlying Risk Exposure Interest rate Foreign exchange Equity Commodity & other Total notional amount 1,409,088 127,673,456 1,544,177 39,114,400 68,061 4,157,363 94,866 1,499,767 3,116,192 172,444,987 All line items are reported on a quarterly basis. N/M - Not Meaningful * Includes spot foreign exchange contracts. All other references to foreign exchange contracts in which notional values or fair values are reported exclude spot foreign exchange contracts. ** Does not include banks filing the FFIEC 051 report form, which was introduced in first quarter 2017. *** Derivative contracts subject to the risk-based capital requirements for derivatives. **** Credit losses on derivatives is applicable to all banks filing the FFIEC 031 report form and banks filing the FFIEC 041 report form that have $300 million or more in total assets, but is not applicaable to banks filing the FFIEC 051 form. 12 FDIC QUARTERLY QUARTERLY BANKING PROFILE TABLE VII-A. Servicing, Securitization, and Asset Sales Activities (All FDIC-Insured Call Report Filers)* Asset Size Distribution (dollar figures in millions) Assets Securitized and Sold with Servicing Retained or with Recourse or Other Seller-Provided Credit Enhancements Number of institutions reporting securitization activities Outstanding Principal Balance by Asset Type 1-4 family residential loans Home equity loans Credit card receivables Auto loans Other consumer loans Commercial and industrial loans All other loans, leases, and other assets Total securitized and sold Maximum Credit Exposure by Asset Type 1-4 family residential loans Home equity loans Credit card receivables Auto loans Other consumer loans Commercial and industrial loans All other loans, leases, and other assets Total credit exposure Total unused liquidity commitments provided to institution’s own securitizations Securitized Loans, Leases, and Other Assets 30-89 Days Past Due (%) 1-4 family residential loans Home equity loans Credit card receivables Auto loans Other consumer loans Commercial and industrial loans All other loans, leases, and other assets Total loans, leases, and other assets Securitized Loans, Leases, and Other Assets 90 Days or More Past Due (%) 1-4 family residential loans Home equity loans Credit card receivables Auto loans Other consumer loans Commercial and industrial loans All other loans, leases, and other assets Total loans, leases, and other assets Securitized Loans, Leases, and Other Assets Charged-off (net, YTD, annualized, %) 1-4 family residential loans Home equity loans Credit card receivables Auto loans Other consumer loans Commercial and industrial loans All other loans, leases, and other assets Total loans, leases, and other assets Seller’s Interests in Institution's Own Securitizations – Carried as Loans Home equity loans Credit card receivables Commercial and industrial loans Seller’s Interests in Institution's Own Securitizations – Carried as Securities Home equity loans Credit card receivables Commercial and industrial loans Assets Sold with Recourse and Not Securitized Number of institutions reporting asset sales Outstanding Principal Balance by Asset Type 1-4 family residential loans All other loans, leases, and other assets Total sold and not securitized 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020 3rd Quarter 2020 2nd Quarter 2020 % Change 20Q221Q2 Less Than $100 Million $100 Million to $1 Billion $1 Billion to $10 Billion $10 Billion to $250 Billion Greater Than $250 Billion 35 8 60 59 57 58 61 -1.6 0 6 11 $356,054 7 0 316 1,388 0 95,055 377,736 $358,230 7 0 392 1,469 0 91,085 383,561 $382,125 8 0 289 1,569 0 87,334 363,080 $406,116 8 0 579 1,669 0 88,993 390,560 $449,854 9 0 980 1,512 0 90,064 434,330 -20.9 -22.2 0.0 -67.8 -8.2 0.0 5.5 -13.0 $0 0 0 0 0 0 0 0 $5,469 0 0 0 0 0 0 0 $13,862 0 0 0 0 0 7,661 0 964 0 0 26 0 0 2,301 0 67 1,057 0 0 26 0 0 2,274 0 76 1,210 0 0 26 0 0 2,029 0 71 1,403 0 0 38 0 0 2,010 0 71 1,522 0 0 48 0 0 2,205 0 32 -36.7 0.0 0.0 -45.8 0.0 0.0 4.4 0.0 109.4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 51 0 0 0 0 0 63 0 0 541 0 0 26 0 0 116 0 0 372 0 0 0 0 0 2,122 0 67 1.9 1.9 0.0 2.0 2.4 0.0 0.6 1.7 2.0 6.3 0.0 1.9 2.9 0.0 0.5 1.8 2.7 5.3 0.0 4.2 3.1 0.0 0.6 2.5 3.0 7.2 0.0 3.1 2.3 0.0 1.5 3.1 5.9 8.3 0.0 2.6 3.0 0.0 4.7 6.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.4 0.0 1.2 1.9 0.0 2.0 1.3 0.0 1.2 0.8 2.3 0.0 0.0 0.0 3.5 0.0 0.5 1.8 2.4 27.3 0.0 0.2 2.2 0.0 1.9 2.1 2.7 24.5 0.0 0.2 2.4 0.0 1.8 2.3 3.0 28.9 0.0 0.6 2.4 0.0 2.4 2.5 2.9 27.8 0.0 0.8 2.2 0.0 2.9 2.8 4.6 28.9 0.0 0.9 3.2 0.0 0.4 4.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 1.5 0.0 3.6 27.3 0.0 0.2 1.0 0.0 0.3 2.8 2.0 0.0 0.0 0.0 3.6 0.0 2.1 2.0 0.0 1.7 0.0 0.0 0.2 0.0 0.1 0.0 0.0 1.8 0.0 0.1 0.1 0.0 0.1 0.0 0.1 11.9 0.0 3.6 1.0 0.0 0.2 0.1 0.1 10.2 0.0 2.0 0.8 0.0 0.2 0.1 0.1 8.4 0.0 1.1 0.4 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.7 0.0 0.0 0.1 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.1 0.0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0 0.0 0.0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0 0.0 0.0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $103,179 $233,545 7 0 0 0 316 0 716 672 0 0 5,596 81,798 61,721 316,015 345 340 343 347 345 0.0 3 110 154 69 9 37,950 135,583 173,533 36,084 135,492 171,577 35,364 131,293 166,657 31,869 128,103 159,972 28,990 126,493 155,483 30.9 7.2 11.6 14 0 14 6,283 12 6,295 17,855 342 18,197 12,479 36,897 49,377 1,320 98,331 99,651 Maximum Credit Exposure by Asset Type 1-4 family residential loans All other loans, leases, and other assets Total credit exposure 14,644 39,279 53,923 13,149 39,242 52,391 13,564 37,880 51,444 12,870 36,997 49,867 10,753 36,423 47,176 36.2 7.8 14.3 1 0 1 762 12 774 6,784 51 6,835 6,443 11,710 18,153 654 27,507 28,161 Support for Securitization Facilities Sponsored by Other Institutions Number of institutions reporting securitization facilities sponsored by others Total credit exposure Total unused liquidity commitments 37 22,536 408 38 23,478 415 37 23,986 418 37 24,893 412 35 26,480 413 5.7 -14.9 -1.2 1 0 0 10 0 0 14 0 0 8 1,559 295 4 20,977 113 5,704,566 5,624,357 5,781,994 5,804,674 5,912,001 -3.5 2,717 161,475 392,024 1,288,833 3,859,518 20,683 18,417 19,694 17,209 17,348 19.2 0 0 0 0 20,683 54,035 204 142 3.4 56,072 3,435 106 3.5 56,904 1,029 77 3.6 59,373 1,364 92 3.7 59,835 -246 39 3.8 -9.7 -182.9 264.1 0 7 0 0.0 0 269 4 0.1 0 218 1 0.4 501 167 73 2.4 53,534 -456 63 5.1 Other Assets serviced for others** Asset-backed commercial paper conduits Credit exposure to conduits sponsored by institutions and others Unused liquidity commitments to conduits sponsored by institutions and others Net servicing income (for the quarter) Net securitization income (for the quarter) Total credit exposure to Tier 1 capital (%)*** * Does not include banks filing the FFIEC 051 report form, which was introduced in first quarter 2017. ** The amount of financial assets serviced for others, other than closed-end 1-4 family residential mortgages, is reported when these assets are greater than $10 million. *** Total credit exposure includes the sum of the three line items titled “Total credit exposure” reported above. FDIC QUARTERLY 13 QUARTERLY BANKING PROFILE COMMUNITY BANK PERFORMANCE Community banks are identified based on criteria defined in the FDIC’s 2020 Community Banking Study. When comparing community bank performance across quarters, prior-quarter dollar amounts are based on community banks designated as such in the current quarter, adjusted for mergers. In contrast, prior-quarter ratios are based on community banks designated during the previous quarter. Quarterly Net Income for Community Banks Continued to Increase Year Over Year, Driven by Lower Provision Expense and Higher Net Interest Income Net Interest Margin Contracted Further Loan and Lease Balances Declined From the Previous Quarter, Primarily Due to Payoff and Forgiveness of Paycheck Protection Program Loans Asset Quality Improved Quarterly Net Income for Community Banks Continued to Increase Year Over Year, Driven by Lower Provision Expense and Higher Net Interest Income Community banks reported year-over-year quarterly net income growth of $1.9 billion (28.7 percent) in second quarter 2021, despite a narrower net interest margin (NIM). Provision expense (provisions) decreased $2.3 billion (98.1 percent) from second quarter 2020 but remained positive at $46.1 million. In comparison, noncommunity banks had provisions of negative $10.8 billion. Net interest income increased $1.4 billion (7.2 percent) from second quarter 2020 primarily because of lower interest expense and higher commercial and industrial (C&I) loan interest income, partially from the recognition of loan fees earned through the payoff and forgiveness of Paycheck Protection Program (PPP) loans. Nearly two-thirds of the 4,490 FDIC-insured community banks (65 percent) reported higher net income from the year-ago quarter. The pretax return on assets ratio of 1.54 percent rose 20 basis points from a year ago but fell 4 basis points from first quarter 2021. Net Interest Margin Contracted Further The quarterly NIM narrowed 26 basis points from the year-ago quarter to 3.25 percent, despite an increase in net interest income of $1.4 billion (7.2 percent). Earning asset growth (up $232.4 billion, or 10.2 percent) outpaced net interest income growth, causing the contraction in NIM. The decline in average yields on earning assets also outpaced the decline in average funding costs. The average yield on earning assets fell 57 basis points to 3.57 percent, and the average funding cost fell 31 basis points to 0.32 percent—both record lows. Chart 1 Chart 2 Contributors to the Year-Over-Year Change in Income FDIC-Insured Community Banks $ Billions 4.0 3.0 Positive Factor $1.86 $1.35 -$2.32 $0.25 $1.17 Negative Factor -$0.31 $0.58 2.0 Percent Community Banks (3.25) Industry (2.50) 4.00 3.75 3.50 1.0 3.25 0.0 3.00 -1.0 2.75 -2.0 -3.0 Net Interest Margin +29% +7% Net Income Net Interest Income Source: FDIC. -98% +4% +8% Loan Loss Noninterest Noninterest Provisions Income Expense -59% +46% Realized Gains on Securities Income Taxes 2.50 2.25 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: FDIC. FDIC QUARTERLY 15 2021 • Volume 15 • Number 3 Noninterest Income Increased From Second Quarter 2020 Noninterest income increased $251.9 million (4.3 percent) from a year ago. Increases in “all other noninterest income” and service charges on deposit accounts offset a decline in gains on loan sales.1 During the year ending second quarter 2021, all other noninterest income rose $203.6 million (9.3 percent), and higher revenue from service charges on deposit accounts (up $134.8 million, or 23.5 percent) offset a reduction in net gains on loan sales of $322.3 million (14.5 percent). The increase in net interest income and noninterest income contributed to growth in quarterly net operating revenue, which rose $1.6 billion (up 6.5 percent) from the year-ago quarter. Noninterest Expense Increased From the Year-Ago Quarter An increase in salary and benefits expense of $688.2 million (7.8 percent) drove the growth in noninterest expense (up $1.2 billion, or 7.8 percent) year over year. Average assets per employee increased 8.4 percent to $6.8 million from the year-ago quarter. Noninterest expense as a percentage of average assets declined 18 basis points from the year-ago quarter to 2.45 percent, a near historic low. Net Operating Revenue to Average Assets Continued to Decline Net operating revenue (net interest income plus noninterest income) increased $1.6 billion (6.5 percent) from the year-ago quarter as net interest income and noninterest income improved. Growth in net operating revenue was outpaced by the growth in average assets, contributing to a 33 basis point decline in the ratio of net operating revenue to average assets. The ratio stood at 3.97 percent for the quarter—the lowest level since first quarter 2009. Provision Expense as a Percent of Net Operating Revenue Declined to a Record Low Provisions declined $345.1 million (88.2 percent) from the previous quarter and $2.3 billion (98.1 percent) from the year-ago quarter to $46.1 million. Provisions measured 0.18 percent of net operating revenue, a record low. Less than one-sixth of community banks (14.9 percent) reported higher provisions compared with the year-ago quarter.2 Allowance for Loan and Lease Losses Remains High The allowance for loan and lease losses as a percentage of total loans and leases increased 9 basis points from the year-ago quarter to 1.31 percent despite nominal provisions. The allowance for loan and lease losses as a percentage of loans that are 90 days or more past due or in nonaccrual status (coverage ratio) increased 39.8 percentage points from the year-ago quarter to 191.7 percent, a record high, due to declines in noncurrent loans. This ratio is well above the financial crisis average of 64.5 percent.3 The coverage ratio for community banks is 15.4 percentage points above the coverage ratio for noncommunity banks. Eighty-eight community banks had adopted current expected credit loss (CECL) accounting as of second quarter. Community bank CECL adopters reported negative provisions of $208.3 million in second quarter, a reduction of $130.7 million from the previous quarter and a reduction of $746.4 million from one year ago. Provisions for community banks that had not adopted CECL accounting totaled $254.5 million, a reduction of $214.4 million from a quarter ago and $1.6 billion from one year ago. 1 All other noninterest income includes, but is not limited to, bankcard and credit card interchange fees, income and fees from wire transfers, and income and fees from automated teller machines. 2 Provisions for credit losses include both losses for loans and securities for CECL adopters but only loan losses for non-adopters. 3 The financial crisis refers to the period between December 2007 and June 2009. Chart 3 Chart 4 Change in Loan Balances and Unused Commitments FDIC-Insured Community Banks Change 2Q 2021 vs. 2Q 2020 Change 2Q 2021 vs. 1Q 2021 $ Billions 40 32.4 30 0 Share of Loan Portfolio Noncurrent Percent 16 C&D Loans Nonfarm Nonresidential RE 1–4 Family RE C&I Loans Home Equity Farm Loans 14 12 20 10 Noncurrent Loan Rates for FDIC-Insured Community Banks 9.0 7.3 2.7 -1.1 -0.2 -10 -20 -13.7 3.7 2.1 2.1 4 1–4 Family Construction & Agricultural Commercial RE Commercial Residential Development Production & Construction & Industrial RE Loan Balances 16 FDIC QUARTERLY 8 6 -4.1 -10.1 Nonfarm Commercial Nonresidential & Industrial RE Source: FDIC. 10 10.5 12.4 Unused Commitments 2 0 2008 2009 2010 Source: FDIC. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 QUARTERLY BANKING PROFILE The Noncurrent Rate Declined From First Quarter 2021 Loans and leases that were 90 days or more past due or in nonaccrual status (noncurrent loans and leases) declined $894.6 million (7.1 percent) to $11.6 billion from first quarter 2021. Noncurrent 1–4 family residential loans declined most among loan categories from the previous quarter (down $281.1 million, or 8.1 percent). The noncurrent rate for total loans and leases improved 5 basis points to 0.68 percent from the previous quarter. The noncurrent rate did not materially increase in any loan portfolio. Net Charge-Offs Declined Broadly Declines in net charge-off balances across most loan portfolios contributed to a reduction in the net charge-off rate for total loans. The net charge-off rate for community banks declined 8 basis points from the year-ago quarter to 0.05 percent. The net charge-off rate for consumer loans declined the most among major loan categories, down 51 basis points to 0.36 percent. Total Assets Increased From the Previous Quarter Total assets increased $44.1 billion (1.7 percent) from the previous quarter, driven by increased securities holdings. Securities grew $46.6 billion (9.6 percent) quarter over quarter, supported by a $46 billion increase in deposits. Cash and balances due from depository institutions and securities represent almost one-third (31.7 percent) of total assets. Loan and Lease Balances Declined From the Previous Quarter but Grew During the Past Year Community banks reported a decline in loan and lease balances (0.5 percent) between first quarter 2021 and second quarter 2021. A decrease in C&I loan balances (down $33.8 billion, or 10.1 percent) drove the trend, led by a $38.3 billion decline in PPP loan balances. More than two-thirds of community banks (68.5 percent) reported a decrease in C&I loans in second quarter 2021 from first quarter 2021. Growth in commercial real estate (CRE) portfolios (up $21.5 billion, or 2.9 percent) offset some of the decline in C&I loans. An increase in CRE loan commitments (up $10.9 billion, or 10.5 percent) drove the quarterover-quarter growth in unused commitments. Loan and lease balances grew $5.7 billion (0.3 percent) during the year ending second quarter 2021. Strong growth in CRE portfolios (up $61.7 billion, or 8.9 percent) offset declines in C&I loans, agricultural production loans, and 1–4 family mortgage loans during the year. C&I loans declined (down $47.6 billion, or 13.7 percent) reflecting, in part, the payoff and forgiveness of PPP loans. Agricultural production loans (down $5.7 billion, or 11.2 percent) and 1–4 family loans (down $4 billion, or 1.1 percent) also declined year over year. Small loans to businesses declined 8 percent to $343.5 billion from the year-ago quarter, reflecting, in part, the payoff and forgiveness of PPP loans. C&I loans to small businesses led the decline (down $26.9 billion, or 15 percent) followed by agricultural production loans to small farm businesses (down $3.2 billion, or 11.9 percent). Deposits Continued to Grow in Second Quarter 2021 Deposits at community banks increased $46 billion (2.1 percent) in second quarter. Two-thirds of community banks (66.1 percent) reported an increase in deposits during the second quarter. Growth in deposits of more than $250,000 (up $47.8 billion, or 4.7 percent) offset a small decline in deposits under $250,000 (down $1.2 billion, or 0.1 percent). Brokered deposits declined $3.8 billion (6.7 percent) during the quarter. Average funding costs fell 31 basis points to 0.32 percent, a record low for community banks. Capital Levels Remained Strong Equity capital grew $8.3 billion (3 percent) during the quarter, driven by retained earnings of $5.3 billion. However, the leverage capital ratio declined 13 basis points to 10.14 percent as growth in average assets outpaced tier 1 capital formation. The average tier 1 risk-based capital ratio among noncommunity bank leverage ratio (CBLR) filers was 14.71 percent in second quarter 2021, up 7 basis points from the prior quarter. The average CBLR for the 1,789 banks that elected to use the CBLR framework was 11 percent. Two New Community Banks Opened in Second Quarter 2021 The number of community banks declined to 4,490, down 38 from the previous quarter.4 Two new community banks opened, 12 banks transitioned from community to noncommunity banks, one bank transitioned from noncommunity bank to community bank, two banks self-liquidated, and 27 community banks merged during the quarter. Author: James K. Presley-Nelson Senior Financial Analyst Division of Insurance and Research 4 The number of community bank reporters excludes two banks that did not file Call Reports this quarter but continue to have active banking charters. FDIC QUARTERLY 17 2021 • Volume 15 • Number 3 TABLE I-B. Selected Indicators, FDIC-Insured Community Banks Return on assets (%) Return on equity (%) Core capital (leverage) ratio (%) Noncurrent assets plus other real estate owned to assets (%) Net charge-offs to loans (%) Asset growth rate (%) Net interest margin (%) Net operating income growth (%) Number of institutions reporting Percentage of unprofitable institutions (%) 2021* 2020* 2020 2019 2018 2017 2016 1.28 12.03 10.14 0.50 0.05 9.15 3.26 46.97 4,490 3.47 1.00 8.74 10.48 0.65 0.12 8.30 3.50 -14.13 4,621 5.11 1.09 9.72 10.32 0.59 0.12 14.06 3.39 0.02 4,557 4.52 1.19 10.24 11.15 0.65 0.13 -1.26 3.66 -4.16 4,748 3.98 1.19 10.57 11.09 0.70 0.13 2.20 3.72 27.90 4,979 3.64 0.96 8.65 10.80 0.78 0.16 1.12 3.62 0.19 5,227 5.72 0.99 8.81 10.69 0.94 0.16 3.05 3.57 2.46 5,461 4.67 * Through June 30, ratios annualized where appropriate. Asset growth rates are for 12 months ending June 30. TABLE II-B. Aggregate Condition and Income Data, FDIC-Insured Community Banks 2nd Quarter 2021 1st Quarter 2021 2nd Quarter 2020 %Change 20Q2-21Q2 4,490 392,145 4,528 390,288 4,621 389,579 -2.8 0.7 $2,671,932 1,240,837 378,973 511,727 119,961 40,654 300,544 66,780 1,970 45,733 47,012 1,317 1,699,589 22,324 1,677,265 531,293 1,559 18,078 443,737 $2,636,504 1,222,558 381,088 499,383 115,970 40,854 335,061 64,520 1,880 44,694 47,784 1,354 1,713,264 22,609 1,690,655 486,615 1,709 17,980 439,544 $2,447,866 1,197,326 388,165 474,462 113,961 43,434 346,924 62,283 1,846 52,411 38,545 1,380 1,696,108 20,719 1,675,389 395,245 2,234 17,907 357,090 9.2 3.6 -2.4 7.9 5.3 -6.4 -13.4 7.2 6.7 -12.7 22.0 -4.5 0.2 7.7 0.1 34.4 -30.2 1.0 24.3 Total liabilities and capital Deposits Domestic office deposits Foreign office deposits Brokered deposits Estimated insured deposits Other borrowed funds Subordinated debt All other liabilities Total equity capital (includes minority interests) Bank equity capital 2,671,932 2,269,413 2,266,700 2,712 52,664 1,545,878 94,415 338 23,769 283,996 283,872 2,636,504 2,230,974 2,228,676 2,298 56,464 1,542,121 104,654 343 23,853 276,679 276,555 2,447,866 2,016,192 2,013,804 2,387 64,189 1,439,720 139,237 237 25,121 267,079 266,970 9.2 12.6 12.6 13.6 -18.0 7.4 -32.2 42.6 -5.4 6.3 6.3 Loans and leases 30-89 days past due Noncurrent loans and leases Restructured loans and leases Mortgage-backed securities Earning assets FHLB Advances Unused loan commitments Trust assets Assets securitized and sold Notional amount of derivatives 5,291 11,643 5,112 241,255 2,508,125 57,845 384,670 342,175 24,145 145,295 6,695 12,590 5,284 222,763 2,474,385 63,414 369,822 300,529 23,129 162,066 6,919 13,644 5,413 185,919 2,288,646 89,028 323,912 279,747 20,355 170,779 -23.5 -14.7 -5.6 29.8 9.6 -35.0 18.8 22.3 18.6 -14.9 (dollar figures in millions) Number of institutions reporting Total employees (full-time equivalent) CONDITION DATA Total assets Loans secured by real estate 1-4 Family residential mortgages Nonfarm nonresidential Construction and development Home equity lines Commercial & industrial loans Loans to individuals Credit cards Farm loans Other loans & leases Less: Unearned income Total loans & leases Less: Reserve for losses* Net loans and leases Securities** Other real estate owned Goodwill and other intangibles All other assets INCOME DATA Total interest income Total interest expense Net interest income Provision for credit losses*** Total noninterest income Total noninterest expense Securities gains (losses) Applicable income taxes Extraordinary gains, net**** Total net income (includes minority interests) Bank net income Net charge-offs Cash dividends Retained earnings Net operating income First Half 2021 First Half 2020 %Change 2nd Quarter 2021 2nd Quarter 2020 %Change 20Q2-21 Q2 $44,082 4,260 39,822 437 12,569 32,148 556 3,661 1 16,703 16,680 408 6,118 10,562 16,238 $44,745 7,718 37,027 4,203 10,646 30,348 342 2,109 1 11,356 11,338 952 5,621 5,717 11,048 -1.5 -44.8 7.5 -89.6 18.1 5.9 62.7 73.6 N/M 47.1 47.1 -57.2 8.8 84.7 47.0 $22,210 2,015 20,195 46 6,062 16,217 213 1,862 1 8,346 8,335 223 3,057 5,279 8,171 $22,470 3,437 19,033 2,403 5,978 15,307 530 1,282 0 6,550 6,538 520 2,448 4,090 6,110 -1.2 -41.4 6.1 -98.1 1.4 5.9 -59.8 45.3 N/M 27.4 27.5 -57.1 24.9 29.1 33.7 * For institutions that have adopted ASU 2016-13, this item represents the allowance for credit losses on loans and leases held for investment and allocated transfer risk. ** For institutions that have adopted ASU 2016-13, securities are reported net of allowances for credit losses. *** For institutions that have adopted ASU 2016-13, this item represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, this item represents the provision for loan and lease losses. **** See Notes to Users for explanation. 18 FDIC QUARTERLY N/M - Not Meaningful QUARTERLY BANKING PROFILE TABLE II-B. Aggregate Condition and Income Data, FDIC-Insured Community Banks Prior Periods Adjusted for Mergers 2nd Quarter 2021 1st Quarter 2021 2nd Quarter 2020 %Change 20Q2-21Q2 4,490 392,145 4,488 388,766 4,483 383,872 0.2 2.2 $2,671,932 1,240,837 378,973 511,727 119,961 40,654 300,544 66,780 1,970 45,733 47,012 1,317 1,699,589 22,324 1,677,265 531,293 1,559 18,078 443,737 $2,627,843 1,219,048 379,710 498,308 115,716 40,676 334,373 64,241 1,878 44,416 47,684 1,356 1,708,406 22,525 1,685,881 484,683 1,701 17,888 437,690 $2,432,978 1,185,984 383,006 469,403 111,760 43,187 348,192 62,986 1,885 51,485 46,626 1,358 1,693,917 20,694 1,673,223 388,485 2,208 17,196 351,866 9.8 4.6 -1.1 9.0 7.3 -5.9 -13.7 6.0 4.5 -11.2 0.8 -3.0 0.3 7.9 0.2 36.8 -29.4 5.1 26.1 Total liabilities and capital Deposits Domestic office deposits Foreign office deposits Brokered deposits Estimated insured deposits Other borrowed funds Subordinated debt All other liabilities Total equity capital (includes minority interests) Bank equity capital 2,671,932 2,269,413 2,266,700 2,712 52,664 1,545,878 94,415 338 23,769 283,996 283,872 2,627,843 2,223,424 2,221,126 2,298 56,467 1,536,002 104,561 343 23,803 275,712 275,587 2,432,978 1,999,483 1,997,096 2,387 63,812 1,422,772 143,804 346 25,098 264,247 264,143 9.8 13.5 13.5 13.6 -17.5 8.7 -34.3 -2.3 -5.3 7.5 7.5 Loans and leases 30-89 days past due Noncurrent loans and leases Restructured loans and leases Mortgage-backed securities Earning assets FHLB Advances Unused loan commitments Trust assets Assets securitized and sold Notional amount of derivatives 5,291 11,643 5,112 241,255 2,508,125 57,845 384,670 342,175 24,145 145,295 6,666 12,538 5,257 221,995 2,466,297 63,418 368,677 299,560 23,024 162,013 6,871 13,333 5,525 182,462 2,275,736 89,419 323,765 274,830 20,410 170,304 -23.0 -12.7 -7.5 32.2 10.2 -35.3 18.8 24.5 18.3 -14.7 (dollar figures in millions) Number of institutions reporting Total employees (full-time equivalent) CONDITION DATA Total assets Loans secured by real estate 1-4 Family residential mortgages Nonfarm nonresidential Construction and development Home equity lines Commercial & industrial loans Loans to individuals Credit cards Farm loans Other loans & leases Less: Unearned income Total loans & leases Less: Reserve for losses* Net loans and leases Securities** Other real estate owned Goodwill and other intangibles All other assets INCOME DATA Total interest income Total interest expense Net interest income Provision for credit losses*** Total noninterest income Total noninterest expense Securities gains (losses) Applicable income taxes Extraordinary gains, net**** Total net income (includes minority interests) Bank net income Net charge-offs Cash dividends Retained earnings Net operating income First Half 2021 First Half 2020 %Change 2nd Quarter 2021 2nd Quarter 2020 %Change 20Q2-21 Q2 $44,082 4,260 39,822 437 12,569 32,148 556 3,661 1 16,703 16,680 408 6,118 10,562 16,238 $44,294 7,686 36,608 4,150 10,298 29,808 327 2,091 1 11,185 11,169 943 5,539 5,630 10,889 -0.5 -44.6 8.8 -89.5 22.0 7.8 N/M 75.0 N/M 49.3 49.3 -56.8 10.5 87.6 49.1 $22,210 2,015 20,195 46 6,062 16,217 213 1,862 1 8,346 8,335 223 3,057 5,279 8,171 $22,270 3,426 18,844 2,365 5,810 15,046 525 1,279 0 6,489 6,478 513 2,456 4,022 6,052 -0.3 -41.2 7.2 -98.1 4.3 7.8 N/M 45.6 N/M 28.6 28.7 -56.5 24.4 31.2 35.0 * For institutions that have adopted ASU 2016-13, this item represents the allowance for credit losses on loans and leases held for investment and allocated transfer risk. ** For institutions that have adopted ASU 2016-13, securities are reported net of allowances for credit losses. *** For institutions that have adopted ASU 2016-13, this item represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, this item represents the provision for loan and lease losses. **** See Notes to Users for explanation. N/M - Not Meaningful FDIC QUARTERLY 19 2021 • Volume 15 • Number 3 TABLE III-B. Aggregate Condition and Income Data by Geographic Region, FDIC-Insured Community Banks Second Quarter 2021 (dollar figures in millions) Geographic Regions* All Community Banks New York Atlanta Chicago Kansas City Dallas San Francisco 4,490 392,145 497 80,479 510 43,255 982 80,476 1,217 71,162 1,005 82,854 279 33,919 $2,671,932 1,240,837 378,973 511,727 119,961 40,654 300,544 66,780 1,970 45,733 47,012 1,317 1,699,589 22,324 1,677,265 531,293 1,559 18,078 443,737 $683,119 363,392 131,569 139,376 26,768 12,021 75,343 18,502 382 551 13,760 224 471,323 5,496 465,828 113,841 245 5,222 97,983 $288,397 131,896 37,380 62,824 15,280 5,527 31,223 6,320 100 1,337 2,843 214 173,405 2,277 171,128 58,500 243 1,318 57,208 $480,345 213,792 63,538 85,031 18,086 8,855 54,298 11,746 207 7,288 11,234 150 298,207 3,970 294,237 103,517 290 3,494 78,806 $452,982 194,142 54,743 69,105 18,339 4,545 51,421 11,641 699 25,695 6,946 173 289,672 4,146 285,526 95,079 316 2,814 69,246 $495,055 216,552 66,059 93,323 30,641 4,364 54,323 12,537 193 8,126 7,042 296 298,283 4,025 294,259 107,154 388 2,881 90,374 $272,034 121,063 25,685 62,068 10,846 5,342 33,936 6,036 389 2,736 5,187 260 168,698 2,410 166,288 53,201 77 2,349 50,119 Total liabilities and capital Deposits Domestic office deposits Foreign office deposits Brokered deposits Estimated insured deposits Other borrowed funds Subordinated debt All other liabilities Total equity capital (includes minority interests) Bank equity capital 2,671,932 2,269,413 2,266,700 2,712 52,664 1,545,878 94,415 338 23,769 283,996 283,872 683,119 571,669 571,049 620 20,619 384,010 29,647 240 8,416 73,146 73,126 288,397 248,787 248,777 10 3,257 163,415 7,689 7 2,173 29,742 29,739 480,345 405,191 404,859 332 7,955 295,420 19,723 34 3,808 51,589 51,511 452,982 385,297 385,297 0 9,981 282,828 16,442 6 3,111 48,125 48,124 495,055 426,398 426,398 0 6,555 285,289 12,316 40 3,564 52,738 52,716 272,034 232,070 230,320 1,750 4,297 134,917 8,598 11 2,697 28,657 28,656 Loans and leases 30-89 days past due Noncurrent loans and leases Restructured loans and leases Mortgage-backed securities Earning assets FHLB Advances Unused loan commitments Trust assets Assets securitized and sold Notional amount of derivatives 5,291 11,643 5,112 241,255 2,508,125 57,845 384,670 342,175 24,145 145,295 1,337 3,655 1,727 63,084 643,323 18,055 103,883 77,111 9,797 60,375 530 1,043 423 26,907 269,931 5,010 34,504 11,110 111 11,612 850 2,097 1,107 42,393 450,078 13,400 68,595 68,085 4,794 23,653 953 1,776 809 36,009 426,023 10,783 72,995 118,990 4,177 26,335 1,336 2,269 641 41,738 463,477 7,012 62,002 44,270 4,911 13,537 284 804 404 31,124 255,293 3,584 42,691 22,609 354 9,784 $22,210 2,015 20,195 46 6,062 16,217 213 1,862 1 8,346 8,335 223 3,057 5,279 8,171 $5,413 569 4,843 -66 1,247 3,801 139 605 0 1,891 1,889 77 451 1,438 1,779 $2,357 186 2,171 16 617 1,800 19 188 0 803 802 19 134 668 787 $3,883 359 3,523 14 1,518 3,060 13 353 0 1,627 1,625 16 731 893 1,616 $3,998 392 3,607 57 1,073 2,805 14 243 1 1,589 1,589 57 796 793 1,576 $4,347 377 3,970 80 1,095 3,155 23 223 0 1,628 1,622 41 647 975 1,608 $2,213 131 2,081 -54 512 1,596 5 249 0 808 808 14 297 512 804 Number of institutions reporting Total employees (full-time equivalent) CONDITION DATA Total assets Loans secured by real estate 1-4 Family residential mortgages Nonfarm nonresidential Construction and development Home equity lines Commercial & industrial loans Loans to individuals Credit cards Farm loans Other loans & leases Less: Unearned income Total loans & leases Less: Reserve for losses** Net loans and leases Securities*** Other real estate owned Goodwill and other intangibles All other assets INCOME DATA Total interest income Total interest expense Net interest income Provision for credit losses**** Total noninterest income Total noninterest expense Securities gains (losses) Applicable income taxes Extraordinary gains, net***** Total net income (includes minority interests) Bank net income Net charge-offs Cash dividends Retained earnings Net operating income * See Table V-A for explanation. ** For institutions that have adopted ASU 2016-13, this item represents the allowance for credit losses on loans and leases held for investment and allocated transfer risk. *** For institutions that have adopted ASU 2016-13, securities are reported net of allowances for credit losses. **** For institutions that have adopted ASU 2016-13, this item represents provisions for credit losses on a consolidated basis; for institutions that have not adopted ASU 2016-13, this item represents the provision for loan and lease losses. ***** See Notes to Users for explanation. 20 FDIC QUARTERLY QUARTERLY BANKING PROFILE Table IV-B. Second Quarter 2021, FDIC-Insured Community Banks All Community Banks Performance ratios (annualized, %) Yield on earning assets Cost of funding earning assets Net interest margin Noninterest income to assets Noninterest expense to assets Loan and lease loss provision to assets Net operating income to assets Pretax return on assets Return on assets Return on equity Net charge-offs to loans and leases Loan and lease loss provision to net charge-offs Efficiency ratio Net interest income to operating revenue % of unprofitable institutions % of institutions with earnings gains 2nd Quarter 2021 3.57 0.32 3.25 0.92 2.45 0.01 1.23 1.54 1.26 11.92 0.05 20.67 61.40 76.91 4.25 64.81 1st Quarter 2021 3.64 0.37 3.26 1.01 2.48 0.06 1.26 1.58 1.30 12.16 0.04 211.80 60.66 75.12 4.00 73.79 Second Quarter 2021, Geographic Regions* New York 3.40 0.36 3.04 0.74 2.25 -0.04 1.05 1.48 1.12 10.49 0.07 -86.38 62.05 79.52 4.83 71.03 Atlanta 3.54 0.28 3.26 0.87 2.53 0.02 1.11 1.39 1.13 11.01 0.04 83.60 64.07 77.88 6.67 71.57 Chicago 3.47 0.32 3.15 1.27 2.56 0.01 1.35 1.66 1.36 12.79 0.02 85.41 60.32 69.89 3.97 61.51 Kansas City 3.77 0.37 3.40 0.95 2.48 0.05 1.40 1.62 1.41 13.37 0.08 101.40 59.50 77.06 3.37 60.15 Dallas 3.79 0.33 3.46 0.89 2.57 0.07 1.31 1.51 1.32 12.50 0.06 195.18 62.06 78.38 3.78 65.97 San Francisco 3.50 0.21 3.29 0.76 2.37 -0.08 1.20 1.57 1.20 11.46 0.03 -391.34 61.29 80.26 5.38 69.18 Dallas 3.83 0.35 3.48 0.95 2.59 0.08 1.34 1.55 1.36 12.70 0.05 274.98 61.40 77.41 2.99 71.14 San Francisco 3.54 0.22 3.32 0.82 2.39 -0.03 1.22 1.58 1.22 11.52 0.04 -111.65 60.44 79.17 4.30 80.29 Table V-B. First Half 2021, FDIC-Insured Community Banks All Community Banks Performance ratios (%) Yield on earning assets Cost of funding earning assets Net interest margin Noninterest income to assets Noninterest expense to assets Loan and lease loss provision to assets Net operating income to assets Pretax return on assets Return on assets Return on equity Net charge-offs to loans and leases Loan and lease loss provision to net charge-offs Efficiency ratio Net interest income to operating revenue % of unprofitable institutions % of institutions with earnings gains First Half 2021 3.61 0.35 3.26 0.97 2.47 0.03 1.25 1.56 1.28 12.03 0.05 107.18 61.01 76.01 3.47 74.57 First Half 2020 4.23 0.73 3.50 0.94 2.68 0.37 0.97 1.19 1.00 8.74 0.12 441.22 63.07 77.67 5.11 51.20 First Half 2021, Geographic Regions* New York 3.45 0.39 3.06 0.75 2.28 -0.01 1.03 1.46 1.11 10.32 0.07 -24.28 62.61 79.24 4.63 83.50 Atlanta 3.59 0.31 3.28 0.89 2.53 0.04 1.12 1.41 1.15 11.03 0.03 211.23 63.60 77.59 6.67 75.69 Chicago 3.52 0.34 3.17 1.36 2.60 0.05 1.38 1.71 1.41 13.10 0.02 335.49 59.56 68.61 3.36 72.20 Kansas City 3.79 0.39 3.40 1.02 2.50 0.07 1.43 1.67 1.45 13.63 0.06 169.53 58.88 75.70 1.97 73.87 * See Table V-A for explanation. FDIC QUARTERLY 21 2021 • Volume 15 • Number 3 Table VI-B. Loan Performance, FDIC-Insured Community Banks Geographic Regions* June 30, 2021 All Community Banks New York Atlanta Chicago Kansas City Dallas San Francisco Percent of Loans 30-89 Days Past Due All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 0.29 0.34 0.19 0.26 0.27 0.40 0.26 0.98 1.57 0.96 0.31 0.31 0.29 0.44 0.19 0.40 0.26 0.30 0.16 0.90 1.45 0.89 0.07 0.28 0.28 0.27 0.16 0.14 0.29 0.49 0.29 0.92 1.07 0.92 0.19 0.31 0.30 0.26 0.23 0.15 0.28 0.46 0.24 0.46 0.68 0.45 0.17 0.28 0.29 0.31 0.19 0.15 0.32 0.37 0.30 0.74 2.57 0.62 0.48 0.33 0.38 0.41 0.22 0.19 0.36 0.57 0.38 1.98 0.93 2.00 0.43 0.45 0.13 0.17 0.10 0.05 0.11 0.20 0.21 0.66 0.82 0.64 0.27 0.17 Percent of Loans Noncurrent All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 0.72 0.52 0.71 0.29 0.57 0.84 0.63 0.45 0.68 0.44 0.62 0.68 0.85 0.80 0.88 0.34 0.62 1.03 0.68 0.31 1.06 0.29 0.08 0.78 0.62 0.42 0.55 0.41 0.44 0.82 0.56 0.40 0.61 0.39 0.46 0.60 0.77 0.54 0.88 0.26 0.44 0.80 0.62 0.25 0.22 0.25 0.43 0.70 0.60 0.44 0.61 0.30 0.32 0.46 0.51 0.30 0.83 0.27 0.95 0.61 0.74 0.39 0.68 0.22 0.37 0.93 0.80 1.09 0.48 1.10 0.66 0.76 0.47 0.44 0.39 0.17 1.22 0.52 0.48 0.28 0.38 0.28 0.73 0.48 Percent of Loans Charged-Off (net, YTD) All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases 0.01 -0.01 0.03 0.02 -0.01 0.00 0.09 0.46 4.03 0.35 0.10 0.05 0.03 0.01 0.06 0.01 -0.01 0.01 0.13 0.61 4.22 0.53 0.05 0.07 -0.01 -0.05 0.00 0.00 -0.02 -0.01 0.08 0.47 0.67 0.46 0.22 0.03 0.00 -0.01 0.02 0.00 -0.01 -0.01 0.05 0.13 1.17 0.11 0.07 0.02 0.03 0.00 0.05 0.11 -0.04 0.00 0.06 0.55 7.52 0.13 0.08 0.06 0.01 0.01 0.01 0.00 0.05 0.00 0.12 0.39 1.30 0.37 0.10 0.05 -0.01 -0.06 0.00 0.00 -0.01 -0.01 0.06 0.58 1.80 0.50 0.24 0.04 Loans Outstanding (in billions) All loans secured by real estate Construction and development Nonfarm nonresidential Multifamily residential real estate Home equity loans Other 1-4 family residential Commercial and industrial loans Loans to individuals Credit card loans Other loans to individuals All other loans and leases (including farm) Total loans and leases $1,240.8 120.0 511.7 113.4 40.7 379.0 300.5 66.8 2.0 64.8 92.7 1,700.9 $363.4 26.8 139.4 51.4 12.0 131.6 75.3 18.5 0.4 18.1 14.3 471.5 $131.9 15.3 62.8 6.5 5.5 37.4 31.2 6.3 0.1 6.2 4.2 173.6 $213.8 18.1 85.0 20.8 8.9 63.5 54.3 11.7 0.2 11.5 18.5 298.4 $194.1 18.3 69.1 13.2 4.5 54.7 51.4 11.6 0.7 10.9 32.6 289.8 $216.6 30.6 93.3 8.5 4.4 66.1 54.3 12.5 0.2 12.3 15.2 298.6 $121.1 10.8 62.1 13.1 5.3 25.7 33.9 6.0 0.4 5.6 7.9 169.0 Memo: Unfunded Commitments (in millions) Total Unfunded Commitments Construction and development: 1-4 family residential Construction and development: CRE and other Commercial and industrial 384,670 36,283 76,915 123,783 103,883 6,682 22,568 34,649 34,504 5,372 7,978 9,622 68,595 4,263 12,532 25,106 72,995 5,781 11,741 21,615 62,002 10,836 15,106 18,486 42,691 3,349 6,990 14,305 * See Table V-A for explanation. Note: Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status. 22 FDIC QUARTERLY QUARTERLY BANKING PROFILE INSURANCE FUND INDICATORS Deposit Insurance Fund Increases by $1.2 Billion Insured Deposits Shrink Slightly in the Second Quarter DIF Reserve Ratio Rises 2 Basis Points to 1.27 Percent During the second quarter, the Deposit Insurance Fund (DIF) balance increased by $1.2 billion to $120.5 billion. Assessment income of $1.6 billion, interest earned on investments of $251 million, and negative provisions for insurance losses of $42 million were the largest sources of the increase. Operating expenses of $466 million and unrealized losses on available-for-sale securities of $233 million partially offset the increase in the fund balance. No insured institutions failed in the second quarter. The deposit insurance assessment base—average consolidated total assets minus average tangible equity—increased by 2.5 percent in the second quarter and by 8.5 percent over 12 months.1, 2 Total estimated insured deposits decreased by 0.2 percent in the second quarter and increased by 7.3 percent ($649 million) year over year. The increase in the DIF, combined with the slight decrease in insured deposits, resulted in the DIF reserve ratio rising by 2 basis points to 1.27 percent at June 30, 2021. This is the first quarterly increase in the DIF reserve ratio since the third quarter of 2019 when the reserve ratio stood at 1.41 percent. The June 30, 2021, reserve ratio was 3 basis points lower than the previous year; the 12-month decline in the reserve ratio was entirely the result of extraordinary insured deposit growth. The Dodd-Frank Act, enacted on July 21, 2010, contained several provisions to strengthen the DIF. Among other things, it: (1) raised the minimum reserve ratio for the DIF to 1.35 percent (from the former minimum of 1.15 percent); (2) required that the reserve ratio reach 1.35 percent by September 30, 2020. Once the reserve ratio reaches 1.35 percent, the September 30, 2020, deadline in the Dodd-Frank Act will have been met and will no longer apply. If the reserve ratio later falls below 1.35 percent, even if that occurs before September 30, 2020, the FDIC will have a minimum of eight years to return the reserve ratio to 1.35 percent, reducing the likelihood of a large increase in assessment rates. The reserve ratio exceeded the 1.35 percent minimum imposed by the Dodd-Frank Act on September 30, 2018, when the reserve ratio was 1.36 percent. The reserve ratio continued to exceed the 1.35 percent minimum for all subsequent quarters until June 30, 2020, when, due to extraordinary insured deposit growth, the reserve ratio dropped 8 basis points to 1.30 percent. Since the reserve ratio fell below its statutorily required minimum of 1.35 percent on June 30, 2020, the FDIC Board adopted a new Fund Restoration Plan in September 2020. Author: Kevin Brown Senior Financial Analyst Division of Insurance and Research 1 There are additional adjustments to the assessment base for banker’s banks and custodial banks. for estimated insured deposits and the assessment base include insured branches of foreign banks, in addition to insured commercial banks and savings institutions. 2 Figures FDIC QUARTERLY 23 2021 • Volume 15 • Number 3 Table I-C. Insurance Fund Balances and Selected Indicators Deposit Insurance Fund* 2nd Quarter 2021 1st Quarter 2021 4th Quarter 2020 3rd Quarter 2020 2nd Quarter 2020 1st Quarter 2020 4th Quarter 2019 3rd Quarter 2019 2nd Quarter 2019 1st Quarter 2019 4th Quarter 2018 3rd Quarter 2018 2nd Quarter 2018 $119,362 $117,897 $116,434 $114,651 $113,206 $110,347 $108,940 $107,446 $104,870 $102,609 $100,204 $97,588 $95,072 1,589 1,862 1,884 2,047 1,790 1,372 1,272 1,111 1,187 1,369 1,351 2,728 2,598 251 284 330 392 454 507 531 544 535 507 481 433 381 0 466 0 454 0 470 0 451 0 465 0 460 0 460 0 443 0 459 0 434 0 453 0 434 0 445 -42 -57 -48 -74 -47 12 -88 -192 -610 -396 -236 -121 -141 2 1 9 5 2 2 21 4 9 2 2 2 3 -233 1,185 -285 1,465 -338 1,463 -284 1,783 -383 1,445 1,450 2,859 -45 1,407 86 1,494 694 2,576 421 2,261 788 2,405 -234 2,616 -162 2,516 120,547 119,362 117,897 116,434 114,651 113,206 110,347 108,940 107,446 104,870 102,609 100,204 97,588 5.14 5.44 6.84 6.88 6.71 7.95 7.54 8.72 10.10 10.31 10.63 10.72 11.42 1.27 1.25 1.29 1.30 1.30 1.38 1.41 1.41 1.40 1.36 1.36 1.36 1.33 9,490,281 9,513,932 9,123,046 8,927,668 8,841,566 8,181,859 7,828,160 7,744,543 7,695,116 7,699,009 7,525,204 7,378,900 7,357,163 7.34 16.28 16.54 15.28 14.90 6.27 4.03 4.96 4.59 4.94 5.14 3.89 4.39 (dollar figures in millions) Beginning Fund Balance Changes in Fund Balance: Assessments earned Interest earned on investment securities Realized gain on sale of investments Operating expenses Provision for insurance losses All other income, net of expenses Unrealized gain/(loss) on available-for-sale securities** Total fund balance change Ending Fund Balance Percent change from four quarters earlier Reserve Ratio (%) Estimated Insured Deposits Percent change from four quarters earlier Domestic Deposits Percent change from four quarters earlier 17,203,254 16,980,214 16,339,032 Assessment Base*** Percent change from four quarters earlier 19,688,529 10.53 Number of Institutions Reporting 18.31 15,716,702 15,563,637 14,351,881 13,262,843 13,020,253 23.19 20.71 21.70 12.78 4.77 12,788,773 12,725,363 12,659,406 12,367,954 12,280,904 5.27 4.14 6/18 1.36 9/18 12/18 3.36 3.83 16.57 16.40 16.10 15.74 5.92 4.56 4.43 3.77 3.27 3.01 2.67 2.79 4,960 4,987 5,011 5,042 5,075 5,125 5,186 5,267 5,312 5,371 5,415 5,486 5,551 Deposit Insurance Fund Balance and Insured Deposits ($ Millions) Percent of Insured Deposits 1.36 4.37 8.46 DIF Reserve Ratios 1.33 3.41 19,214,767 18,805,803 18,464,915 18,153,227 16,483,536 16,156,600 15,904,422 15,683,980 15,561,770 15,452,126 15,229,424 15,113,551 1.36 3/19 1.40 6/19 1.41 1.41 9/19 12/19 1.38 1.30 3/20 6/20 1.30 1.29 1.25 9/20 12/20 3/21 DIF Balance 1.27 6/18 9/18 12/18 3/19 6/19 9/19 12/19 3/20 6/20 9/20 12/20 3/21 6/21 6/21 $97,588 100,204 102,609 104,870 107,446 108,940 110,347 113,206 114,651 116,434 117,897 119,362 120,547 DIF-Insured Deposits $7,357,163 7,378,900 7,525,204 7,699,009 7,695,116 7,744,543 7,828,160 8,181,859 8,841,566 8,927,668 9,123,046 9,513,932 9,490,281 Table II-C. Problem Institutions and Failed Institutions (dollar figures in millions) 2021**** 2020**** Problem Institutions Number of institutions Total assets 2020 2019 51 $45,823 52 $48,127 56 $55,830 51 $46,190 60 $48,481 95 $13,939 123 $27,624 183 $46,780 Failed Institutions Number of institutions Total assets***** 0 $0 2 $253 4 $455 4 $209 0 $0 8 $5,082 5 $277 8 $6,706 * Quarterly financial statement results are unaudited. ** Includes unrealized postretirement benefit gain (loss). *** Average consolidated total assets minus tangible equity, with adjustments for banker’s banks and custodial banks. **** Through June 30. ***** Total assets are based on final Call Reports submitted by failed institutions. 24 FDIC QUARTERLY 2018 2017 2016 2015 QUARTERLY BANKING PROFILE Table III-C. Estimated FDIC-Insured Deposits by Type of Institution (dollar figures in millions) June 30, 2021 Commercial Banks and Savings Institutions FDIC-Insured Commercial Banks FDIC-Supervised OCC-Supervised Federal Reserve-Supervised FDIC-Insured Savings Institutions OCC-Supervised FDIC-Supervised Federal Reserve-Supervised Total Commercial Banks and Savings Institutions Other FDIC-Insured Institutions U.S. Branches of Foreign Banks Total FDIC-Insured Institutions Number of Institutions Total Assets Domestic Deposits* Est. Insured Deposits 4,336 2,887 755 694 $21,359,063 3,677,448 14,241,986 3,439,629 $15,971,759 3,052,833 10,322,634 2,596,292 $8,533,097 1,838,464 5,483,216 1,211,417 615 272 307 36 1,429,940 611,072 396,109 422,759 1,192,174 491,797 315,598 384,779 925,379 405,032 236,868 283,479 4,951 22,789,003 17,163,933 9,458,476 9 88,358 39,320 31,805 4,960 22,877,361 17,203,254 9,490,281 * Excludes $1.6 trillion in foreign office deposits, which are not FDIC insured. Table IV-C. Distribution of Institutions and Assessment Base by Assessment Rate Range Quarter Ending March 31, 2021 (dollar figures in billions) Annual Rate in Basis Points* Number of Institutions Percent of Total Institutions Amount of Assessment Base Percent of Total Assessment Base 1.50 - 3.00 2,926 58.7 $4,833.8 25.16 3.01 - 6.00 1,448 29.0 12,154.0 63.25 6.01 - 10.00 508 10.2 2,072.6 10.79 10.01 - 15.00 39 0.8 108.2 0.56 15.01 - 20.00 63 1.3 45.9 0.24 20.01 - 25.00 3 0.1 0.2 0.00 > 25.00 0 0.0 0.0 0.00 * Beginning in the second quarter of 2011, the assessment base was changed to average consolidated total assets minus tangible equity, as required by the Dodd-Frank Act. FDIC QUARTERLY 25 2021 • Volume 15 • Number 3 Notes to Users This publication contains financial data and other information for depository institutions insured by the Federal Deposit Insurance Corporation (FDIC). These notes are an integral part of this publication and provide information regarding the comparability of source data and reporting differences over time. Tables I-A through VIII-A. The information presented in Tables I-A through VIII-A of the FDIC Quarterly Banking Profile is aggregated for all FDIC-insured Call Report filers, both commercial banks and savings institutions. Some tables are arrayed by groups of FDIC-insured institutions based on predominant types of asset concentration, while other tables aggregate institutions by asset size and geographic region. Quarterly and full-year data are provided for selected indicators, including aggregate condition and income data, performance ratios, condition ratios, and structural changes, as well as past due, noncurrent, and charge-off information for loans outstanding and other assets. Tables I-B through VI-B. The information presented in Tables I-B through VI-B is aggregated for all FDIC-insured commercial banks and savings institutions meeting the criteria for community banks that were developed for the FDIC’s Community Banking Study, published in December, 2012: https://www.fdic.gov/resources/communitybanking/cbi-study.html. The determination of which insured institutions are considered community banks is based on five steps. The first step in defining a community bank is to aggregate all charter-level data reported under each holding company into a single banking organization. This aggregation applies both to balance-sheet measures and the number and location of banking offices. Under the FDIC definition, if the banking organization is designated as a community bank, every charter reporting under that organization is also considered a community bank when working with data at the charter level. The second step is to exclude any banking organization where more than 50 percent of total assets are held in certain specialty banking charters, including: credit card specialists, consumer nonbank banks, industrial loan companies, trust companies, bankers’ banks, and banks holding 10 percent or more of total assets in foreign offices. Once the specialty organizations are removed, the third step involves including organizations that engage in basic banking activities as measured by the total loans-to-assets ratio (greater than 33 percent) and the ratio of core deposits to assets (greater than 50 percent). Core deposits are defined as non-brokered deposits in domestic offices. Analysis of the underlying data shows that these thresholds establish meaningful levels of basic lending and deposit gathering and still allow for a degree of diversity in how individual banks construct their balance sheets. The fourth step includes organizations that operate within a limited geographic scope. This limitation of scope is used as a proxy measure for a bank’s relationship approach to banking. Banks that operate within a limited market area have more ease in managing relationships at a personal level. Under this step, four criteria are applied to each banking organization. They include both a minimum and maximum number of total banking offices, a maximum level of deposits for any one office, and location-based criteria. The limits on the number of and deposits per office are adjusted upward quarterly. For banking offices, banks must have 26 FDIC QUARTERLY more than one office, and the maximum number of offices is 40 in 1985 and reached 87 in 2016. The maximum level of deposits for any one office is $1.25 billion in deposits in 1985 and reached $6.97 billion in deposits in 2016. The remaining geographic limitations are also based on maximums for the number of states (fixed at 3) and large metropolitan areas (fixed at 2) in which the organization maintains offices. Branch office data are based on the most recent data from the annual June 30 Summary of Deposits Survey that are available at the time of publication. Finally, the definition establishes an asset-size limit, also adjusted upward quarterly and below which the limits on banking activities and geographic scope are waived. The asset-size limit is $250 million in 1985 and reached $1.39 billion in 2016. This final step acknowledges the fact that most of those small banks that are not excluded as specialty banks meet the requirements for banking activities and geographic limits in any event. Summary of FDIC Research Definition of Community Banking Organizations Community banks are designated at the level of the banking organization. (All charters under designated holding companies are considered community banking charters.) Exclude: Any organization with: — No loans or no core deposits — Foreign Assets ≥ 10% of total assets — More than 50% of assets in certain specialty banks, including: • credit card specialists • consumer nonbank banks1 • industrial loan companies • trust companies • bankers’ banks Include: All remaining banking organizations with: — Total assets < indexed size threshold 2 — Total assets ≥ indexed size threshold, where: • Loan to assets > 33% • Core deposits to assets > 50% • More than 1 office but no more than the indexed maximum number of offices.3 • Number of large MSAs with offices ≤ 2 • Number of states with offices ≤ 3 • No single office with deposits > indexed maximum branch deposit size.4 Tables I-C through IV-C. A separate set of tables (Tables I-C through IV-C) provides comparative quarterly data related to the Deposit Insurance Fund (DIF), problem institutions, failed institutions, estimated FDIC- 1 Consumer nonbank banks are financial institutions with limited charters that can make commercial loans or take deposits, but not both. 2 Asset size threshold indexed to equal $250 million in 1985 and $1.39 billion in 2016. 3 Maximum 4 Maximum number of offices indexed to equal 40 in 1985 and 87 in 2016. branch deposit size indexed to equal $1.25 billion in 1985 and $6.97 billion in 2016. QUARTERLY BANKING PROFILE insured deposits, as well as assessment rate information. Depository institutions that are not insured by the FDIC through the DIF are not included in the FDIC Quarterly Banking Profile. U.S. branches of institutions headquartered in foreign countries and non-deposit trust companies are not included unless otherwise indicated. Efforts are made to obtain financial reports for all active institutions. However, in some cases, final financial reports are not available for institutions that have closed or converted their charters. DATA SOURCES The financial information appearing in this publication is obtained primarily from the Federal Financial Institutions Examination Council (FFIEC) Consolidated Reports of Condition and Income (Call Reports) and the OTS Thrift Financial Reports (TFR) submitted by all FDIC-insured depository institutions. (TFR filers began filing Call Reports effective with the quarter ending March 31, 2012.) This information is stored on and retrieved from the FDIC’s Research Information System (RIS) database. COMPUTATION METHODOLOGY Parent institutions are required to file consolidated reports, while their subsidiary financial institutions are still required to file separate reports. Data from subsidiary institution reports are included in the Quarterly Banking Profile tables, which can lead to double-counting. No adjustments are made for any doublecounting of subsidiary data. Additionally, c ertain adjustments are made to the OTS Thrift Financial Reports to provide closer conformance with the reporting and accounting requirements of the FFIEC Call Reports. (TFR f ilers began filing Call Reports effective with the quarter e nding March 31, 2012.) All condition and performance ratios represent weighted averages, which is the sum of the individual numerator values divided by the sum of individual denominator values. All asset and liability figures used in calculating performance ratios represent average amounts for the period (beginning-of-period amount plus endof-period amount plus any interim periods, divided by the total number of periods). For “pooling-of-interest” mergers, the assets of the acquired institution(s) are included in average assets, since the year-to-date income includes the results of all merged institutions. No adjustments are made for “purchase accounting” mergers. Growth rates represent the percentage change over a 12-month period in totals for institutions in the base period to totals for institutions in the current period. For the community bank subgroup, growth rates will reflect changes over time in the number and identities of institutions designated as community banks, as well as changes in the assets and liabilities, and income and expenses of group members. Unless indicated otherwise, growth rates are not adjusted for mergers or other changes in the composition of the community bank subgroup. When community bank growth rates are adjusted for mergers, prior period balances used in the calculations represent totals for the current group of community bank reporters, plus prior period amounts for any institutions that were subsequently merged into current community banks. All data are collected and presented based on the location of each reporting institution’s main office. Reported data may include assets and liabilities located outside of the reporting institution’s home state. In addition, institutions may relocate across state lines or change their charters, resulting in an inter-regional or inter-industry migration; institutions can move their home offices between regions, savings institutions can convert to commercial banks, or commercial banks may convert to savings institutions. ACCOUNTING CHANGES Financial accounting pronouncements by the Financial Accounting Standards Board (FASB) can result in changes in an individual bank’s accounting policies and in the Call Reports they submit. Such accounting changes can affect the aggregate amounts presented in the QBP for the current period and the period-to-period comparability of such financial data. The current quarter’s Financial Institution Letter (FIL) and related Call Report supplemental instructions can provide additional explanation to the QBP reader beyond any material accounting changes discussed in the QBP analysis. https://www.fdic.gov/news/financial-institution-letters/2021/ fil21049.html https://www.fdic.gov/regulations/resources/call/call.html Further information on changes in financial statement presentation, income recognition and disclosure is a vailable from the FASB. http://www.fasb.org/jsp/FASB/Page/ LandingPage&cid=1175805317350. DEFINITIONS (in alphabetical order) All other assets – total cash, balances due from depository institutions, premises, fixed assets, direct investments in real estate, investment in unconsolidated subsidiaries, customers’ liability on acceptances outstanding, assets held in trading accounts, federal funds sold, securities purchased with agreements to resell, fair market value of derivatives, prepaid deposit insurance assessments, and other assets. All other liabilities – bank’s liability on acceptances, limited-life preferred stock, allowance for estimated off-balance-sheet credit losses, fair market value of derivatives, and other liabilities. Assessment base – effective April 1, 2011, the deposit insurance assessment base changed to “average consolidated total assets minus average tangible equity” with an additional adjustment to the assessment base for banker’s banks and custodial banks, as permitted under Dodd-Frank. Previously the assessment base was “assessable deposits” and consisted of deposits in banks’ domestic offices with certain adjustments. Assessment rate schedule – Initial base assessment rates for small institutions are based on a combination of financial ratios and CAMELS component ratings. Initial rates for large institutions— generally those with at least $10 billion in assets—are also based on CAMELS component ratings and certain financial measures combined into two scorecards—one for most large institutions and another for the remaining very large institutions that are structurally and operationally complex or that pose unique challenges and risks in case of failure (highly complex institutions). The FDIC may take additional information into account to make a limited adjustment to a large institution’s scorecard results, which are used to determine a large institution’s initial base assessment rate. While risk categories for small institutions (except new institutions) were eliminated effective July 1, 2016, initial rates for small institutions are subject to minimums and maximums based on an institution’s CAMELS composite rating. (Risk categories for large institutions were eliminated in 2011.) The current assessment rate schedule became effective July 1, 2016. Under the current schedule, initial base assessment rates range from 3 to 30 basis points. An institution’s total base assessment rate may differ from its initial rate due to three possible adjustments: (1) Unsecured Debt Adjustment: An institution’s rate may decrease FDIC QUARTERLY 27 2021 • Volume 15 • Number 3 by up to 5 basis points for unsecured debt. The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an institution’s initial base assessment rate (IBAR). Thus, for example, an institution with an IBAR of 3 basis points would have a maximum unsecured debt adjustment of 1.5 basis points and could not have a total base assessment rate lower than 1.5 basis points. (2) Depository Institution Debt Adjustment: For institutions that hold long-term unsecured debt issued by another insured depository institution, a 50 basis point charge is applied to the amount of such debt held in excess of 3 percent of an institution’s Tier 1 capital. (3) Brokered Deposit Adjustment: Rates for large institutions that are not well capitalized or do not have a composite CAMELS rating of 1 or 2 may increase (not to exceed 10 basis points) if their brokered deposits exceed 10 percent of domestic deposits. The assessment rate schedule effective July 1, 2016, is shown in the following table: Total Base Assessment Rates* Established Small Banks 1 or 2 3 4 or 5 Large and Highly Complex Institutions** Initial Base Assessment Rate 3 to 16 6 to 30 16 to 30 3 to 30 Unsecured Debt Adjustment -5 to 0 -5 to 0 -5 to 0 -5 to 0 Brokered Deposit Adjustment N/A N/A N/A 0 to 10 Total Base Assessment Rate 1.5 to 16 3 to 30 11 to 30 1.5 to 40 CAMELS Composite * All amounts for all categories are in basis points annually. Total base rates that are not the minimum or maximum rate will vary between these rates. Total base assessment rates do not include the depository institution debt adjustment. ** Effective July 1, 2016, large institutions are also subject to temporary assessment surcharges in order to raise the reserve ratio from 1.15 percent to 1.35 percent. The surcharges amount to 4.5 basis points of a large institution’s assessment base (after making certain adjustments). Each institution is assigned a risk-based rate for a quarterly assessment period near the end of the quarter following the assessment period. Payment is generally due on the 30th day of the last month of the quarter following the assessment period. Supervisory rating changes are effective for assessment purposes as of the examination transmittal date. Assets securitized and sold – total outstanding principal balance of assets securitized and sold with servicing retained or other seller-provided credit enhancements. Capital Purchase Program (CPP) – as announced in October 2008 under the TARP, the Treasury Department purchase of noncumulative perpetual preferred stock and related warrants that is treated as Tier 1 capital for regulatory capital purposes is included in “Total equity capital.” Such warrants to purchase common stock or noncumulative preferred stock issued by publicly-traded banks are reflected as well in “Surplus.” Warrants to purchase common stock or noncumulative preferred stock of not-publiclytraded bank stock are classified in a bank’s balance sheet as “Other liabilities.” Common equity Tier 1 capital ratio – ratio of common equity Tier 1 capital to risk-weighted assets. Common equity Tier 1 capital includes common stock instruments and related surplus, retained earnings, accumulated other comprehensive income (AOCI), and limited amounts of common equity Tier 1 minority interest, minus applicable regulatory adjustments and deductions. Items that are 28 FDIC QUARTERLY fully deducted from common equity Tier 1 capital include goodwill, other intangible assets (excluding mortgage servicing assets) and certain deferred tax assets; items that are subject to limits in common equity Tier 1 capital include mortgage servicing assets, eligible deferred tax assets, and certain significant investments. Beginning March 2020, this ratio does not include institutions that have a Community Bank Leverage Ratio election in effect at the report date. Construction and development loans – includes loans for all property types under construction, as well as loans for land acquisition and development. Core capital – common equity capital plus noncumulative perpetual preferred stock plus minority interest in consolidated subsidiaries, less goodwill and other ineligible intangible assets. The amount of e ligible intangibles (including servicing rights) included in core capital is limited in accordance with supervisory capital regulations. Cost of funding earning assets – total interest expense paid on deposits and other borrowed money as a percentage of average earning assets. Credit enhancements – techniques whereby a company attempts to reduce the credit risk of its obligations. Credit enhancement may be provided by a third party (external credit enhancement) or by the originator (internal credit enhancement), and more than one type of enhancement may be associated with a given issuance. Deposit Insurance Fund (DIF) – the Bank (BIF) and Savings Association (SAIF) Insurance Funds were merged in 2006 by the Federal Deposit Insurance Reform Act to form the DIF. Derivatives notional amount – the notional, or contractual, amounts of derivatives represent the level of involvement in the types of derivatives transactions and are not a quantification of market risk or credit risk. Notional amounts represent the amounts used to calculate contractual cash flows to be exchanged. Derivatives credit equivalent amount – the fair value of the derivative plus an additional amount for potential future c redit exposure based on the notional amount, the remaining maturity and type of the contract. Derivatives transaction types: Futures and forward contracts – contracts in which the buyer agrees to purchase and the seller agrees to sell, at a specified future date, a specific quantity of an underlying variable or index at a specified price or yield. These contracts exist for a variety of variables or indices, (traditional agricultural or physical commodities, as well as currencies and interest rates). Futures contracts are standardized and are traded on organized exchanges which set limits on counterparty credit exposure. Forward contracts do not have standardized terms and are traded over the counter. Option contracts – contracts in which the buyer acquires the right to buy from or sell to another party some specified amount of an underlying variable or index at a stated price (strike price) during a period or on a specified future date, in return for compensation (such as a fee or premium). The seller is obligated to purchase or sell the variable or index at the discretion of the buyer of the contract. Swaps – obligations between two parties to exchange a series of cash flows at periodic intervals (settlement dates), for a specified period. The cash flows of a swap are either fixed, or determined for each settlement date by multiplying the quantity QUARTERLY BANKING PROFILE (notional principal) of the underlying variable or index by specified reference rates or prices. Except for currency swaps, the notional principal is used to calculate each payment but is not exchanged. Derivatives underlying risk exposure – the potential exposure characterized by the level of banks’ concentration in particular underlying instruments, in general. Exposure can result from market risk, credit risk, and operational risk, as well as, interest rate risk. Domestic deposits to total assets – total domestic office deposits as a percent of total assets on a consolidated basis. Earning assets – all loans and other investments that earn interest or dividend income. Efficiency ratio – Noninterest expense less amortization of intangible assets as a percent of net interest income plus noninterest income. This ratio measures the proportion of net operating revenues that are absorbed by overhead expenses, so that a lower value indicates greater efficiency. Estimated insured deposits – in general, insured deposits are total domestic deposits minus estimated uninsured deposits. Beginning March 31, 2008, for institutions that file Call Reports, insured deposits are total assessable deposits minus estimated uninsured deposits. Beginning September 30, 2009, insured deposits include deposits in accounts of $100,000 to $250,000 that are covered by a temporary increase in the FDIC’s standard maximum deposit insurance amount (SMDIA). The Dodd-Frank Wall Street Reform and Consumer Protection Act enacted on July 21, 2010, made permanent the standard maximum deposit insurance amount (SMDIA) of $250,000. Also, the Dodd-Frank Act amended the Federal Deposit Insurance Act to include noninterest-bearing transaction accounts as a new temporary deposit insurance account category. All funds held in noninterest-bearing transaction accounts were fully insured, without limit, from December 31, 2010, through December 31, 2012. Failed/assisted institutions – an institution fails when regulators take control of the institution, placing the assets and liabilities into a bridge bank, conservatorship, receivership, or another healthy institution. This action may require the FDIC to provide funds to cover losses. An institution is defined as “assisted” when the institution remains open and receives assistance in order to continue operating. Fair Value – the valuation of various assets and liabilities on the alance sheet—including trading assets and liabilities, availableb for-sale securities, loans held for sale, assets and l iabilities accounted for under the fair value option, and foreclosed assets— involves the use of fair values. During periods of market stress, the fair values of some financial instruments and nonfinancial assets may decline. FHLB advances – all borrowings by FDIC-insured institutions from the Federal Home Loan Bank System (FHLB), as reported by Call Report filers, and by TFR filers prior to March 31, 2012. Goodwill and other intangibles – intangible assets include ervicing rights, purchased credit card relationships, and other s identifiable intangible assets. Goodwill is the excess of the purchase price over the fair market value of the net assets acquired, less subsequent impairment adjustments. Other intangible assets are recorded at fair value, less subsequent quarterly amortization and impairment adjustments. Loans secured by real estate – includes home equity loans, junior liens secured by 1-4 family residential properties, and all other loans secured by real estate. Loans to individuals – includes outstanding credit card balances and other secured and unsecured consumer loans. Long-term assets (5+ years) – loans and debt securities with remaining maturities or repricing intervals of over five years. Maximum credit exposure – the maximum contractual credit exposure remaining under recourse arrangements and other sellerprovided credit enhancements provided by the reporting bank to securitizations. Mortgage-backed securities – certificates of participation in pools of residential mortgages and collateralized mortgage obligations issued or guaranteed by government-sponsored or private enter prises. Also, see “Securities,” below. Net charge-offs – total loans and leases charged off (removed from balance sheet because of uncollectability), less amounts recovered on loans and leases previously charged off. Net interest margin – the difference between interest and dividends earned on interest-bearing assets and interest paid to depositors and other creditors, expressed as a percentage of average earning assets. No adjustments are made for interest income that is tax exempt. Net loans to total assets – loans and lease financing receivables, net of unearned income, allowance and reserves, as a percent of total assets on a consolidated basis. Net operating income – income excluding discretionary transactions such as gains (or losses) on the sale of investment securities and extraordinary items. Income taxes subtracted from operating income have been adjusted to exclude the portion applicable to securities gains (or losses). Noncurrent assets – the sum of loans, leases, debt securities, and other assets that are 90 days or more past due, or in nonaccrual status. Noncurrent loans & leases – the sum of loans and leases 90 days or more past due, and loans and leases in nonaccrual status. Number of institutions reporting – the number of institutions that actually filed a financial report. New reporters – insured institutions filing quarterly financial reports for the first time. Other borrowed funds – federal funds purchased, securities sold with agreements to repurchase, demand notes issued to the U.S. Treasury, FHLB advances, other borrowed money, mortgage indebtedness, obligations under capitalized leases and trading liabilities, less revaluation losses on assets held in trading accounts. Other real estate owned – primarily foreclosed property. Direct and indirect investments in real estate ventures are excluded. The amount is reflected net of valuation allowances. For institutions that filed a Thrift Financial Report (TFR), the v aluation allowance subtracted also includes allowances for other repossessed assets. Also, for TFR filers the components of other real estate owned are reported gross of valuation allowances. (TFR filers began filing Call Reports effective with the quarter ending March 31, 2012.) Percent of institutions with earnings gains – the percent of institutions that increased their net income (or decreased their losses) compared to the same period a year earlier. FDIC QUARTERLY 29 2021 • Volume 15 • Number 3 “Problem” institutions – federal regulators assign a composite rating to each financial institution, based upon an evaluation of financial and operational criteria. The rating is based on a scale of 1 to 5 in ascending order of supervisory concern. “Problem” institutions are those institutions with financial, operational, or managerial weaknesses that threaten their continued financial viability. Depending upon the degree of risk and supervisory concern, they are rated either a “4” or “5.” The number and assets of “problem” institutions are based on FDIC composite ratings. Prior to March 31, 2008, for institutions whose primary federal regulator was the OTS, the OTS composite rating was used. Recourse – an arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank’s claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Reserves for losses – the allowance for loan and lease losses on a consolidated basis. Restructured loans and leases – loan and lease financing receivables with terms restructured from the original contract. Excludes restructured loans and leases that are not in compliance with the modified terms. Retained earnings – net income less cash dividends on common and preferred stock for the reporting period. Return on assets – bank net income (including gains or losses on securities and extraordinary items) as a percentage of average total (consolidated) assets. The basic yardstick of bank profitability. Return on equity – bank net income (including gains or losses on securities and extraordinary items) as a percentage of average total equity capital. Risk-weighted assets – assets adjusted for risk-based capital definitions which include on-balance-sheet as well as off-balancesheet items multiplied by risk-weights that range from zero to 200 percent. A conversion factor is used to assign a balance sheet equivalent amount for selected off-balance-sheet accounts. Securities – excludes securities held in trading accounts. Banks’ securities portfolios consist of securities designated as “held-tomaturity” (reported at amortized cost (book value)), securities designated as “available-for-sale” (reported at fair (market) value), and equity s ecurities with readily determinable fair values not held for trading. Securities gains (losses) – realized gains (losses) on held-to- maturity and available-for-sale securities, before adjustments for income taxes. Thrift Financial Report (TFR) filers also include gains (losses) on the sales of assets held for sale. (TFR filers began filing Call Reports effective with the quarter ending March 31, 2012.) Seller’s interest in institution’s own securitizations – the reporting bank’s ownership interest in loans and other assets that have been securitized, except an interest that is a form of recourse or other seller-provided credit enhancement. Seller’s interests differ from the securities issued to investors by the securitization structure. The principal amount of a seller’s interest is generally equal to the total principal amount of the pool of assets included in the securitization structure less the principal amount of those assets attributable to investors, i.e., in the form of securities issued to investors. 30 FDIC QUARTERLY Small Business Lending Fund – The Small Business Lending Fund (SBLF) was enacted into law in September 2010 as part of the Small Business Jobs Act of 2010 to encourage lending to small businesses by providing capital to qualified community institutions with assets of less than $10 billion. The SBLF Program is administered by the U.S. Treasury Department (https:// home.treasury.gov/policy-issues/small-business-programs/ small-business-lending-fund). Under the SBLF Program, the Treasury Department purchased noncumulative perpetual preferred stock from qualifying depository institutions and holding companies (other than Subchapter S and mutual institutions). When this stock has been issued by a depository institution, it is reported as “Perpetual preferred stock and related surplus.” For regulatory capital purposes, this noncumulative perpetual preferred stock qualifies as a component of Tier 1 capital. Qualifying Subchapter S corporations and mutual institutions issue unsecured subordinated debentures to the Treasury Department through the SBLF. Depository institutions that issued these debentures report them as “Subordinated notes and debentures.” For regulatory capital purposes, the debentures are eligible for inclusion in an institution’s Tier 2 capital in accordance with their primary federal regulator’s capital standards. To participate in the SBLF Program, an institution with outstanding securities issued to the Treasury Department under the Capital Purchase Program (CPP) was required to refinance or repay in full the CPP securities at the time of the SBLF funding. Any outstanding warrants that an institution issued to the Treasury Department under the CPP remain outstanding after the refinancing of the CPP stock through the SBLF Program unless the institution chooses to repurchase them. Subchapter S corporation – a Subchapter S corporation is treated as a pass-through entity, similar to a partnership, for federal income tax purposes. It is generally not subject to any federal income taxes at the corporate level. This can have the effect of reducing institutions’ reported taxes and increasing their after-tax earnings. Trust assets – market value, or other reasonably available value of fiduciary and related assets, to include marketable securities, and other financial and physical assets. Common physical assets held in fiduciary accounts include real estate, equipment, collectibles, and household goods. Such fiduciary assets are not included in the assets of the financial institution. Unearned income and contra accounts – unearned income for Call Report filers only. Unused loan commitments – includes credit card lines, home equity lines, commitments to make loans for construction, loans secured by commercial real estate, and unused commitments to originate or purchase loans. (Excluded are commitments after June 2003 for originated mortgage loans held for sale, which are accounted for as derivatives on the balance sheet.) Yield on earning assets – total interest, dividend, and fee income earned on loans and investments as a percentage of average earning assets. THE IMPORTANCE OF TECHNOLOGY INVESTMENTS FOR COMMUNITY BANK LENDING AND DEPOSIT TAKING DURING THE PANDEMIC For many community banks and their customers, the pandemic was a crash course in the use of technology in all facets of banking. At the onset of the pandemic, many community banks turned to technology to provide financial services in the face of temporary branch closures and stay-at-home orders.1 As restrictions eased, banks continued to use technology for customers and employees who wished to limit physical contact and for whom digital banking had become part of the new normal. Given the important role of technology during the pandemic, this article examines whether community banks that invested more in technology before 2020 differed from banks that invested less in technology in their core functions of lending and deposit taking. Based on data from Consolidated Reports of Condition and Income (Call Reports) and other available sources, community banks differed in their technology adoption and spending (hereafter referred to as technology investment) in the years leading up to the pandemic. Community banks with greater technology investment reported larger increases in loan growth in 2020, driven primarily by participation in the Paycheck Protection Program (PPP). These community banks originated a greater share of PPP loans on average to borrowers regardless of the loan size, when the loan was made, or the distance of the borrower from the nearest bank branch. Those banks also reported larger increases in deposit growth in 2020 than did banks with less technology investment. Generally the recent deposit growth at those institutions was due to increases in deposit balances of existing customers rather than from new depositors. Data on Technology Investment Are Limited and Must Be Estimated Comprehensive data that directly measure technology investment are not available for all financial institutions, including many community banks. Banks do not report such data on the Call Report, and information available through other regulatory filings is often not comparable for, or is not required of, many entities. However, available data can approximate technology investment in the absence of more refined measures. This article uses three sources of data—the Call Report, the Conference of State Bank Supervisor’s (CSBS) National Survey of Community Banks, and the Aberdeen Technology Data Cloud—to estimate technology adoption and spending by community banks before the pandemic. FDIC-insured institutions must report components of noninterest expense, including data processing expenses exceeding certain thresholds, on the Call Report.2 While not all institutions met the required reporting thresholds for data processing expenses, many did, and many banks reported these expenses despite not meeting the reporting threshold. A total of 3,424 community banks (76 percent of established community banks) that were active as of December 31, 2020, reported their data processing expenses for the fourth quarter of each year from 2016 to 2019.3 For these banks, average annual growth in data processing expenses from 2017 to 2019 was calculated as a measure of technology spending before the pandemic.4 1 This article uses the definition of “community bank” in the Notes to Users of the FDIC’s Quarterly Banking Profile. That definition uses criteria outlined in the FDIC’s 2020 Community Banking Study to identify community banks. The 2020 Community Banking Study is available at https://www.fdic.gov/resources/community-banking/report/2020/2020-cbistudy-full.pdf. 2 Selected items that exceed $100,000 and 7 percent of other noninterest expense must be reported on Schedule RI-E of the Call Report. Before 2018, the reporting threshold was $100,000 and 3 percent of other noninterest expense. There was no noticeable change in the percentage of institutions that reported data processing expenses before and after the reporting change. The analysis included in this article also did not significantly vary when this measure was limited to expenses reported in 2018 and 2019. 3 Established community banks are community banks that have been federally insured for at least five years—those that have been federally insured since December 31, 2015, or earlier. 4 On the Call Report, expenses are reported as the cumulative amount spent during the calendar year (year-to-date). Average annual growth is calculated using fourth quarter data because it is the period for which a bank is most likely to exceed the required reporting threshold. FDIC QUARTERLY 31 2021 • Volume 15 • Number 3 In their annual national survey of community banks, CSBS asked if a bank offered a specific product or service. A total of 717 community banks that were active as of December 31, 2020, participated in one or both of the surveys conducted in 2019 and 2020. The number of technology-enabled products or services that a bank offered from among seven included in the survey was calculated as a measure of technology adoption.5 While this broad measure does not account for differences between the products and services, including the level of adoption among banks, quality, or use by customers, it should provide an estimation of a bank’s level of technology adoption.6 Finally, Aberdeen, now Spiceworks Ziff Davis, provided estimates of the number of personal computers (PCs), number of employees, and annual information technology (IT) spending, specified to the branch level.7 For community banks where sufficient information was identifiable and available, branch data were aggregated and extrapolated to the institution level, resulting in data for 3,652 community banks (81 percent of established community banks) that were active as of December 31, 2020.8 The average number of PCs per employee was calculated as a proxy measure of technology adoption. Annual IT spending as a share of total assets from 2017 to 2019 was calculated as a proxy measure of technology spending. Not surprisingly, the four measures—IT spending to assets, number of PCs per employee, annual growth in data processing expenses, and number of adopted technologies— were positively correlated with each other. These correlations, however, were relatively weak, suggesting that the four measures captured different components of technology investment, as intended. For example, number of PCs per employee and number of adopted technologies were, arguably, proxies for different components of a community bank’s adoption of technology. The number of PCs per employee targeted hardware, while the number of adopted technologies targeted the specific products and services included in the CSBS survey, the adoption of which was more likely driven by software. In the case of IT spending to assets and annual growth in data processing expenses, both were intended to proxy for technology spending; however, data processing expenses included only services performed for the bank by others, while IT spending also included in-house costs, such as IT staff. Community Banks Differed in Their Technology Investment Before the Pandemic Based on the measures above, community banks differed in their technology investment before the pandemic. As indicated by the dotted blue bars at the top of each panel in Chart 1, community banks above the 25th and below the 75th percentiles for each technology investment measure spent between 0.45 percent and 0.83 percent of their assets on IT, had between 1.42 and 1.67 PCs per employee, and grew their data processing expenses between 1.9 percent and 15.1 percent, on average, from 2017 to 2019. While the differences in technology investment may appear small in some cases, they are meaningful. For example, a difference of 0.38 percent in IT spending as a share of assets translates to roughly $820,000 in annual IT spending for a bank with $216 million in assets—the median size of an established community bank at the end of 2019, just before the start of the pandemic. For the median community bank, that difference of $820,000 equaled roughly 8 percent of total revenues in 2019. 5 For institutions that participated in both surveys, only the response from 2020 was used, as that response most likely reflects the status of the bank at the onset of the pandemic. The seven technology-enabled products or services included in the surveys were online loan applications, online loan closure, automated loan underwriting, remote deposit capture, electronic bill payment, mobile banking, and interactive teller machines. 6 For more information on the adoption rate of each technology-enabled product and service and the distribution of adopted technologies, in total, among community banks, see Chart 6.1 and Table 6.1.1 of the FDIC 2020 Community Banking Study at https://www.fdic.gov/resources/community-banking/report/2020/2020-cbi-study-full.pdf. 7 Aberdeen uses web mining of businesses and employee profiles to collect data and redistributes the data for marketing purposes. 8 The Aberdeen data did not include FDIC certificate numbers. Instead, company name, street address, zip code, and website URL from the Aberdeen data were matched with similar information from FDIC Summary of Deposits data. Only community banks with matched data for more than half of its branches in at least two years from 2017 to 2019 were included. 32 FDIC QUARTERLY THE IMPORTANCE OF TECHNOLOGY INVESTMENTS FOR COMMUNITY BANK LENDING AND DEPOSIT TAKING DURING THE PANDEMIC Chart 1 Larger Community Banks Invested More in Technology, While Differences in Location Were Less Important Average Technology Investment From 2017 to 2019, Interquartile Ranges Annual Growth in Data Processing Expenses IT Spending to Assets Number of Personal Computers per Employee Community Banks Community Banks Community Banks Above Median Size Above Median Size Above Median Size At or Below Median Size At or Below Median Size At or Below Median Size Metropolitan Area Metropolitan Area Metropolitan Area Rural Area Rural Area Rural Area High-COVID Case Area High-COVID Case Area High-COVID Case Area Low-COVID Case Area Low-COVID Case Area 0 5 10 Percent 15 20 0.25 Low-COVID Case Area 0.40 0.55 0.70 Percent 0.85 1.00 1.30 1.40 1.50 1.60 1.70 1.80 Sources: FDIC, Aberdeen Data Technology Cloud, and Johns Hopkins University. Note: Shaded bars indicate the interquartile range (25th to 75th percentile). Unshaded areas in the middle of each bar indicate the median. Median size is based on total assets at the end of 2019. Banks in high-COVID case areas were those that had at least half of their branches in a county with cumulative reported cases per 100,000 residents in the upper quartile (75th percentile or greater) as of June 30, 2020. Banks in low-COVID case areas were those that had at least half of their branches in a county with cumulative reported cases per 100,000 residents in the lower quartile (25th percentile or lower) as of June 30, 2020. Established community banks that were larger—above the median asset size of $216 million at the end of 2019—invested more in technology before the pandemic. As shown by the dark blue bars in Chart 1, on average from 2017 to 2019, larger community banks reported faster annual growth in data processing expenses, spent more on IT relative to their assets, and had a greater number of PCs per employee than did smaller community banks at the 25th and 75th percentiles and at the median. Similarly, 56 percent of community banks above the median asset size offered at least four of the seven technology-enabled products and services included in the CSBS survey, compared with 24 percent of community banks at or below the median. Greater technology investment, based on the four technology spending and adoption measures, by larger banks is consistent with the finding in the 2020 FDIC Community Bank Study that community bank size was the strongest indicator of technology adoption as of 2019.9 Technology investment also appeared to vary by a community bank’s location, although results were mixed. Before the pandemic, community banks with a main office in a metropolitan area (urban community banks) generally reported faster growth in data processing expenses and had a higher number of PCs per employee than did banks with a main office in a rural area (rural community banks). This is shown by the medium blue bars in Chart 1. However, the median for IT spending as a share of assets was lower among urban community banks than among rural community banks. Similar patterns were found for community banks that operated at least half of their branches in areas with relatively high or low COVID case rates (light blue bars in Chart 1), using data from Johns Hopkins University.10 While differences in technology investment based on location were not as large as those based on asset size, they are nonetheless important to consider when evaluating any differences in community bank lending and deposit taking during the pandemic. Previous Technology Investment May Have Affected Lending and Deposit Taking During the Pandemic During the pandemic, differences in previous technology investment may have affected community bank core functions of lending and deposit taking. For community bank staff and customers already familiar with different technologies because of previous investments by their institution, temporary branch closures and the required shift to digital banking may have been less disruptive to ongoing banking activities. Compared with banks that invested less in technology before 2020, these banks may have been 9 FDIC, “Technology in Community Banks,” 2020 FDIC Community Banking Study, pp. 6-1 to 6-20, https://www.fdic.gov/ resources/community-banking/report/2020/2020-cbi-study-full.pdf. 10 High-COVID case areas are counties with cumulative cases per 100,000 residents at or above the 75th percentile. Low-COVID case areas are counties with cumulative cases per 100,000 residents at or below the 25th percentile. Both measures are as of June 30, 2020. FDIC QUARTERLY 33 2021 • Volume 15 • Number 3 better‑positioned to grow their deposits and mitigate reductions in loan growth associated with the pandemic. The following sections study the potential impact of previous technology investment by comparing loan growth, including PPP lending, and deposit growth before and during the pandemic, using the measures described above. Community Banks With Greater Technology Investment Before the Pandemic Reported Stronger Loan Growth in 2020 Technology investment may have affected community bank lending during the pandemic in several ways. Banks with greater technology investment may have been better equipped to accept and process online loan applications and the required supporting documentation, mitigating the effect of branch closures and customers’ desire to limit in-person interaction. Community banks with greater technology offerings may have also been more likely to attract customers from nonbanks that curtailed their lending at the start of the pandemic, particularly nonbanks with a large online presence.11 As shown in Chart 2, community banks with greater previous investment in technology (indicated by the dark blue and dotted blue bars) reported stronger loan growth across all four technology measures in 2020 compared with banks with less investment (light blue and dark red bars). This correlation alone, however, is not enough to establish whether any link between technology investment and lending growth strengthened, as anticipated, during the pandemic. It could be that banks with greater technology investment already had stronger loan growth before the pandemic, which continued in 2020. Among community banks in the highest quartiles for number of PCs per employee and average growth in data processing expenses, the medians for average quarterly loan growth from 2017 to 2019 were noticeably higher than the medians for banks in the lowest quartiles. However, Chart 2 also shows that, across all four technology measures, differences in median loan growth between community banks with greater and less investment in technology grew in 2020, relative to the three years before the pandemic. Compared with community banks in the lowest quartile, community banks in the highest quartile reported median average loan growth in 2020 that was · 0.56 percentage points higher for IT spending to total assets (compared with 0.04 percentage points lower from 2017 to 2019) · 0.84 percentage points higher for the number of PCs per employee (compared with 0.37 percentage points higher from 2017 to 2019) · 0.85 percentage points higher for annual growth in data processing expenses (compared with 0.54 percentage points higher from 2017 to 2019) Community banks that adopted four or more of the technologies included in the CSBS survey reported a median quarterly loan growth that was, on average, 0.74 percentage points higher in 2020 than banks that adopted three or fewer technologies (compared with 0.08 percentage points higher from 2017 to 2019). Averaged across the four measures, the difference in the medians for average quarterly loan growth was three times higher in 2020 than the difference in the medians from 2017 to 2019 (0.75 percentage points versus 0.24 percentage points), in favor of community banks with greater previous investment in technology. Given that loans constitute about two-thirds of a community bank’s assets, a half of a percentage point difference in quarterly loan growth would have equaled nearly $3 million in loans for the median-size community bank in 2020. 11 Analysis by Standard & Poor’s, for example, found that origination volume among the major digital lenders for consumers, small and medium businesses, and students fell 36 percent in the first three quarters of 2020, relative to the previous year. See Nimayi Dixit, “U.S. Digital Lender Originations Expected to Rebound Strongly After Painful 2020,” S&P Global Market Intelligence, February 1, 2021, https://www.spglobal.com/marketintelligence/en/news-insights/ research/us-digital-lender-originations-expected-to-rebound-strongly-after-painful-2020. 34 FDIC QUARTERLY THE IMPORTANCE OF TECHNOLOGY INVESTMENTS FOR COMMUNITY BANK LENDING AND DEPOSIT TAKING DURING THE PANDEMIC Chart 2 Community Banks With Greater Technology Investment Reported a Larger Increase in Loan Growth in 2020 Median Average Loan Growth by Previous Technology Investment Percent 2.5 Lowest Quartile 0–3 Technologies Highest Quartile 4–7 Technologies 2.0 1.5 1.0 0.5 0.0 2017–2019 2020 IT Spending to Assets 2017–2019 2020 Number of PCs per Employee 2017–2019 2020 Average Growth in Data Processing Expenses 2017–2019 2020 Number of Adopted Technologies Sources: FDIC, Aberdeen Technology Data Cloud, and Conference of State Bank Supervisors. Note: PCs stands for personal computers. It remains possible that factors other than technology investment may have caused or influenced differences in loan growth in 2020. For example, larger community banks and those in metropolitan areas that tended to invest more in technology may have been more resilient to the effects of the pandemic due to their larger and more geographically diverse customer bases. The widened gap in loan growth shown in Chart 2 may not have resulted from a difference in previous technology investment but instead from bank size and location. Similar trends in lending growth were found among different subsets of community banks based on size and location. Differences in the median for average loan growth by technology investment widened in 2020 for community banks that were above and below the median asset size before the pandemic, for urban and rural community banks, and for community banks in areas with higher and lower COVID case rates. In each case, the gap in the median for average loan growth widened in favor of community banks that invested more in technology before the pandemic. These findings lend support to the argument that previous technology spending and adoption helped banks better serve their customers during the pandemic. The PPP Drove Differences in Loan Growth in 2020 Community banks held just over $150 billion in PPP loans at the end of third quarter 2020 following the conclusion of the second round of the program on August 8.12 This amount represented nearly one-third of PPP loan balances reported by FDIC-insured institutions, despite community banks holding only slightly more than 10 percent of banking industry assets.13 Lending associated with the PPP also appears to be the main reason that the difference in loan growth on the basis of technology investment grew in 2020, relative to the years immediately preceding the pandemic. Excluding PPP loans, the differences in the medians for average loan growth narrowed for all of the technology investment measures, with the average difference across the measures falling from 0.75 percentage points to 0.28 percentage points, or roughly equal to the difference reported before the pandemic. 12 This article focuses on PPP loan data at the end of the third quarter, as these data include all loans made in the first and second rounds of the program and were not affected by loan forgiveness, which had not yet begun. 13 For further analysis of contributions of community banks to the PPP and how factors such as location, specialty, and size affected participation, using data from the Call Report as of June 30, 2020, see Margaret Hanrahan and Angela Hinton, “The Importance of Community Banks in Paycheck Protection Program Lending,” FDIC Quarterly 14, no. 4. (2020): 31–36, https://www.fdic.gov/analysis/quarterly-banking-profile/fdic-quarterly/2020-vol14-4/fdicv14n4-3q2020.pdf. FDIC QUARTERLY 35 2021 • Volume 15 • Number 3 Given that PPP lending widened the gap in loan growth during 2020 in favor of community banks with greater technology investment, it is not a surprise that these banks also held more PPP loans than did banks with less technology investment. As shown in Table 1, for each technology investment measure, a larger share of community banks among those with greater investment before the pandemic reported a nonzero PPP loan balance on their third quarter 2020 Call Report compared with banks with less investment. Averaged across the four measures, the share of community banks that held PPP loans at the end of third quarter 2020 was 10.4 percentage points higher for banks with greater previous technology investment than for banks with less technology investment. Among those banks with a nonzero PPP loan balance, banks that invested more in technology also had a median share of PPP loans to assets that was more than 2 percentage points higher than those that invested less.14 For the median-size community bank, this difference equaled roughly $4.5 million in PPP lending. The association between greater technology investment before the pandemic and a higher share of PPP loans was not solely driven by larger community banks. Table 1 also shows that all but one of the technology measures—annual growth in Table 1 Community Banks That Invested More in Technology Held More PPP Loans PPP Loan Balances by Previous Technology Investment, Third Quarter 2020 Percentage of Community Banks With Nonzero PPP Loan Balances at the End of Third Quarter 2020 Below Median Asset Size All Annual IT Spending to Assets Lowest Quartile Middle Quartiles Highest Quartile Number of PCs per Employee Lowest Quartile Middle Quartiles Highest Quartile Annual Growth in Data Processing Expenses Lowest Quartile Middle Quartiles Highest Quartile Number of Technologies Adopted 0–3 Technologies 4–7 Technologies Average of All Technology Measures Less Technology Investment Greater Technology Investment All Community Banks Median PPP Loan Balance as a Percentage of Assets Below Median Asset Size All 72.1 86.6 90.7 63.1 79.6 81.9 2.3 4.1 5.1 1.2 2.6 3.2 76.2 86.3 87.7 71.8 77.1 78.2 2.7 4.3 4.7 2.0 2.4 2.7 84.6 85.9 87.3 78.0 77.2 76.5 3.9 4.5 5.1 2.6 2.9 2.7 87.5 96.1 82.9 90.8 4.0 6.4 2.9 5.3 80.1 90.5 84.4 74.0 81.9 76.1 3.2 5.3 4.0 2.2 3.5 2.4 Sources: FDIC, Aberdeen Technology Data Cloud, and Conference of State Bank Supervisors. Note: PPP = Paycheck Protection Program. Given the strong association between asset size and technology investment, quartiles for each technology investment measure were recalculated for community banks below the median asset size. 14 Total assets held by community banks grew 14.2 percent in 2020, compared with 1.2 percent in 2017, 2.2 percent in 2018, and –1.2 percent in 2019. This article measured PPP lending as a share of assets using total assets reported by the bank at the end of 2019, rather than third quarter 2020 when PPP lending was reported. This approach prevents other effects that technology investment may have had on asset growth in 2020, unrelated to participation in the PPP, from influencing the measure. 36 FDIC QUARTERLY THE IMPORTANCE OF TECHNOLOGY INVESTMENTS FOR COMMUNITY BANK LENDING AND DEPOSIT TAKING DURING THE PANDEMIC data processing expenses—were positively related to PPP lending among community banks at or below the median asset size. Averaged across the four technology measures, greater technology investment among these smaller banks was associated with an 8 percentage point increase in the share of banks holding PPP loans as well as a 1.3 percentage point increase in PPP loans as a share of assets relative to those with less technology investment. Beyond the reasons previously discussed, other reasons unique to the PPP and the environment in which it was implemented could explain why technology investment may have facilitated faster loan growth. Some possible explanations include limited funding, strong demand, and a restricted ability and limited desire for borrowers and lenders to use nondigital processes. Some, but Not All, of the Difference in PPP Lending by Technology Investment Stemmed From Larger Loans At the aggregate level, measuring PPP lending based on PPP loans as a share of assets does not fully address whether a community bank served more or different PPP borrowers during the pandemic. A smaller loan, for example, had less impact on lending as a share of assets than a larger loan, despite affecting the same number of borrowers. Applied to the findings above, it could be that community banks with greater previous investment in technology reported a greater share of PPP loans because they made larger loans, and not because they served more borrowers. Based on total PPP loan volume and number of PPP loans as reported on the third quarter 2020 Call Report, the median for average PPP loan size among community banks with greater technology investment was, on average across the four measures, about $13,500 greater than the median for banks with less technology investment. This difference at least partly explains the higher share of PPP lending for banks with greater technology investment. Further analysis of loan size is not possible using Call Report data; however, the Small Business Administration (SBA) released individual loan-level data, which included approved loan amounts and identifying lender information.15 Chart 3 uses that data to compare PPP lending by previous technology investment, broken down by loan size. The largest difference in the average share of PPP loans (by volume) to assets was for PPP loans with an initial approved amount of more than $1 million. For loans of this size, community Chart 3 Community Banks That Invested More in Technology Originated a Greater Share of PPP Lending for All Loan Size Categories Average PPP Loan Volume as a Share of Assets by Loan Size Percent of Assets 3.0 Banks With Less Technology Investment Banks With Greater Technology Investment 2.5 2.0 1.5 1.0 0.5 0.0 Less Than 10 10 to 25 25 to 50 50 to 100 100 to 250 Loan Size (in Thousands of Dollars) 250 to 500 500 to 1,000 More Than 1,000 Sources: FDIC, Small Business Administration, Aberdeen Technology Data Cloud, and Conference of State Bank Supervisors. Note: PPP = Paycheck Protection Program. Loan approvals based on initial approved amounts. Approvals as a share of assets by week were calculated for each measure and then averaged across the four technology investment measures. 15 Several versions of PPP data have been released by the SBA since the program’s inception. This analysis uses data downloaded from the SBA website as of February 2021. The SBA data did not include FDIC certificate numbers. Matching techniques were used to link individual loans to FDIC-insured institutions, when applicable. See https://data.sba.gov/ dataset/ppp-foia. FDIC QUARTERLY 37 2021 • Volume 15 • Number 3 banks with greater technology investment (indicated by the dark blue bars in Chart 3) originated a volume that was 0.35 percentage points higher, as a share of assets, than banks with less investment. This finding is consistent with the argument that community banks with greater previous investment in technology made larger loans. However, Chart 3 also shows that community banks with greater technology investment originated a greater share of PPP loans in smaller size categories than did banks with less investment. This suggests that banks with greater technology investment made a larger share of loans of all sizes through the PPP, and that the association between greater technology investment and a higher share of PPP lending did not stem solely from larger loans. Community Banks With Greater Previous Investment in Technology Also Approved More PPP Loans Across Time and Distance Beyond loan size, community banks with greater investment in technology before the pandemic may have been able to originate more PPP loans than did banks with less investment because their speed of approval was faster or because they had easier access to borrowers outside of their local geographic market and vice versa. Previous technology investment may have accelerated the loan approval process to the extent that it allowed lenders to accept applications and the required supporting documentation online and automated the submission process. On the other hand, the impact of technology investment may have been reduced by the unique nature of the PPP, last-minute changes to SBA policy, and reports of difficulties connecting with E-Tran, the SBA’s loan servicing portal. Speed of approval may have been particularly important for PPP borrowers, given that funding for the program, while unprecedented in size, was ultimately limited by borrower demand. The first round of funding—$342 billion—was exhausted within two weeks. The second round of funding—$317 billion—remained available for almost 15 weeks (see box below). The PPP’s limited funding and time frame arguably gave an advantage to financial institutions with a faster approval process. As indicated by the sizes of the dark blue and light blue bars in Chart 4, the gap in PPP loan volume as a share of assets was largest during the early weeks of the program, with community banks that invested more in technology before the pandemic approving a larger share of loans than did banks with less investment. While this does not necessarily indicate a difference in approval times, the largest difference in the share of PPP loans by volume in favor of banks with greater technology investment occurred during the first week of the program. During that week, PPP loans as a share of assets was 25 percent higher for those banks with higher technology investment than for banks with less technology investment. This difference was larger than in any other week during which more than 1 percent of loans were approved, and provides some evidence that banks with greater previous investment in technology were faster out of the gate in approving PPP loans. The Paycheck Protection Program in 2020 In the first months of the pandemic, Congress provided $659 billion to the U.S. Small Business Administration (SBA) to guarantee loans to small businesses to pay up to 24 weeks of eligible employee salaries, payroll costs, and benefits, as well as other qualified expenses such as mortgage interest, rent, and utilities, and to pay banks for the forgiven loans and accrued interest. Lenders received an origination fee of 1 to 5 percent, depending upon the size of the loan. Applications for the first round of funding were accepted from April 3, 2020, through April 16, 2020, and for the second round of funding from April 27, 2020, through August 8, 2020. During both rounds, more than 5.2 million loans were approved for a total of $525 billion.a a SBA, “PPP Report: Approvals Through 08/08/2020,” (August 2020). 38 FDIC QUARTERLY THE IMPORTANCE OF TECHNOLOGY INVESTMENTS FOR COMMUNITY BANK LENDING AND DEPOSIT TAKING DURING THE PANDEMIC Chart 4 The Advantage in PPP Lending for Community Banks That Invested More in Technology Was Most Relevant During the Early Weeks of the Program Average PPP Loan Volume as a Share of Assets by Week Percent of Assets 10.0 Week 1 Week 2 Week 3 Beyond Week 3 8.0 6.0 4.0 2.0 0.0 Banks With Less Technology Investment Banks With Greater Technology Investment Sources: FDIC, Small Business Administration, Aberdeen Technology Data Cloud, and Conference of State Bank Supervisors. Note: PPP = Paycheck Protection Program. Loan approvals based on initial approved amounts. Approvals as a share of assets by week were calculated for each measure and then averaged across the four technology investment measures. Times exclude a period of 11 days following the conclusion of the first round and before the beginning of the second round of the program. The difference in PPP lending in favor of community banks with greater technology investment was not limited to the early weeks of the program, however. Throughout all but one week of the program, community banks with greater technology investment originated more PPP loans when measured as a share of their assets than did community banks with less investment. Similar to the findings for loan size, speed of approval was not likely the only reason why community banks with greater technology investment originated a greater share of PPP lending. Another way in which technology may have aided community banks is through easier access to PPP borrowers outside of their geographic market. Some community banks, regardless of previous technology investment, may have viewed the PPP as a low-risk opportunity to test and develop new lending relationships outside of their market area, given that the loans were fully guaranteed by the SBA. Greater previous investment in technology, however, may have helped these banks better reach and target new customers—for example, through social media as well as marketing using data and machine learning. Technology-enabled services, such as online loan applications and servicing portals and chatbots, may have also allowed customers that were located far from a branch to more easily apply for a loan and navigate the loan process. The same SBA data used to analyze the size and timing of PPP loans also included data on borrowers, which was used to approximate the distance between PPP borrowers and their lenders.16 As shown in Figure 1, the share of PPP loans originated by community banks for borrowers located more than 100 miles from a bank branch was higher for banks with greater technology investment than for those with less technology investment, as expected. However, the largest difference in PPP lending on the basis of technology investment was for “local” PPP loans—loans made to borrowers located within five miles of a bank branch. Community banks with greater technology investment approved local PPP loans totaling 4.5 percent of their assets, on average, compared with an average of 3.7 percent for banks with less technology investment. For a community bank with the median asset size of $216 million, this difference of 0.8 percent of assets equaled about $1.7 million in PPP loans. 16 Data on the latitude and longitude of PPP borrowers were obtained from Geocodio and are available at https://www.geocod.io/geocoded-ppp-loan-data/. These data were used to calculate the distance from each borrower to the nearest branch of the community bank lender, using the latitude and longitude of bank branches from FDIC Summary of Deposits data. FDIC QUARTERLY 39 2021 • Volume 15 • Number 3 Figure 1 Community Banks That Invested More in Technology Originated a Greater Share of PPP Loans Regardless of a Borrower’s Proximity to a Bank Branch Average PPP Loan Volume as a Share of Assets by Distance From Borrower to Lender Percent of Assets 3.5 2 Miles Banks With Less Technology Investment 5 Miles 10 Miles Banks With Greater Technology Investment 25 Miles 100 Miles 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Distance From Borrower to Lender (Nearest Branch) Sources: FDIC, Small Business Administration, Aberdeen Technology Data Cloud, and Conference of State Bank Supervisors. Note: PPP = Paycheck Protection Program. Loan approvals based on initial approved amounts. Approvals as a share of assets were calculated for each measure and then averaged across the four technology investment measures. Generally, community banks made most of their PPP loans to borrowers within five miles of their branch network consistent with research indicating that local bank relationships strongly predicted PPP credit.17 Table 2 examines how technology may have differently affected community banks that entered the pandemic with relatively larger shares of commercial and industrial (C&I) loans—a likely indicator of strong existing relationships with local businesses. For banks with C&I loans at or above the 75th percentile (highest quartile) for all established community banks at the end of 2019, the difference in local PPP loans to assets on the basis of technology investment was 1.1 percentage points. For banks with C&I loans at or below the 25th percentile (lowest quartile), the difference was 0.6 percentage points. The larger difference in local PPP lending by technology investment among banks with larger shares of C&I loans leading into the pandemic suggests that greater previous investment in technology may have contributed to additional PPP lending, in part, by facilitating loans to existing borrowers. Overall, several factors likely drove the relationship between PPP lending and technology investment before the pandemic in favor of community banks with greater investment. Community banks with greater technology investment made larger PPP loans, but also made more PPP loans of all sizes, during all stages of the program, and both inside and outside of their local geographic market. Table 2 The Advantage in PPP Lending Associated With Greater Investment in Technology Was Higher for Community Banks With More Business Loans Previous Technology Investment C&I Loans to Assets Banks With Less Investment Banks in Lowest Quartile Banks in Highest Quartile All Community Banks Banks With Greater Investment 3.3 % 4.4 % 3.7 % 3.9 % 5.5 % 4.5 % Sources: FDIC, Small Business Administration, Aberdeen Technology Data Cloud, and Conference of State Bank Supervisors. Note: PPP = Paycheck Protection Program. C&I = Commercial and Industrial. Local PPP loans defined as PPP loans made to borrowers located within five miles of a lending bank branch. C&I loans to assets based on amounts reported at the end of 2019, before the onset of the pandemic. Loan approvals based on initial approved amounts. Approvals as a share of assets were calculated for each measure and averaged across the four technology investment measures. 17 Lei Li and Philip Strahan, “Who Supplies PPP Loans (And Does it Matter)? Banks, Relationships, and the COVID Crisis,” (Working Paper, no. 28286, National Bureau of Economic Research, December 2020), https://www.nber.org/papers/w28286. 40 FDIC QUARTERLY THE IMPORTANCE OF TECHNOLOGY INVESTMENTS FOR COMMUNITY BANK LENDING AND DEPOSIT TAKING DURING THE PANDEMIC Community Banks With Greater Technology Investment Before the Pandemic Reported Larger Deposit Growth in 2020 Bank deposits increased significantly at the onset of the pandemic, growing 17.8 percent over the first three quarters of 2020. Among community banks, deposits grew 11.4 percent. This growth likely stemmed from multiple factors such as lower consumption and higher savings by consumers, credit line drawdowns, expansionary monetary policy, and increased spending by the federal government, including direct payments to individuals. The PPP also likely influenced deposit growth to the extent that borrowers (and others for whom the loan proceeds were intended, including employees) directed loan funds into deposit accounts. Previous investment in technology might have affected deposit growth during the pandemic to the extent that it facilitated remote deposit capture, remote payments, and other functionality that enabled customers to conduct deposit transactions at a time when face-to-face interactions were more difficult or not possible. If technology investment attracted more PPP borrowers, as previously indicated, faster deposit growth may also have resulted from those borrowers depositing the proceeds of the loan into the same institution. Chart 5 Deposit Growth Before and During the Pandemic by Technology Investment Median Average Loan Growth by Previous Technology Investment Percent 5.0 Lowest Quartile 0–3 Technologies Highest Quartile 4–7 Technologies 4.0 3.0 2.0 1.0 0.0 2017–2019 2020 IT Spending to Assets 2017–2019 2020 Number of PCs per Employee 2017–2019 2020 Average Growth in Data Processing Expenses 2017–2019 2020 Number of Adopted Technologies Sources: FDIC, Aberdeen Technology Data Cloud, and Conference of State Bank Supervisors. Note: PCs stands for personal computers. As shown by the differences between the light blue and dark blue bars and the difference between the dark red and dotted blue bars in Chart 5, during the three years before the pandemic, greater technology investment was associated with higher average deposit growth across all four measures. The differences ranged in magnitude from 0.11 percentage points (for IT spending to assets) to 0.60 percentage points (for number of PCs per employee), with an average of 0.38 percentage points across the four measures. In 2020, differences in the median for average deposit growth widened for three out of the four technology investment measures. Averaged across the measures, community banks with greater previous investment in technology reported a median average deposit growth that was 0.66 percentage points higher than the median for banks with less previous investment. The larger difference in deposit growth by previous technology investment for 2020 likely stemmed from higher average account sizes rather than an increase in the number of accounts. Median growth in the number of nonretirement deposit accounts was, on average, 31 basis points higher for community banks with greater technology investment than for banks with less technology investment, from 2017 to 2019. During 2020, the difference declined to 23 basis points, indicating that the increased difference in deposit growth on the basis of technology investment reported during the pandemic was not likely caused by an increased inflow of depositors. FDIC QUARTERLY 41 2021 • Volume 15 • Number 3 Technology Will Continue to Be Important to Community Banks Beyond the Pandemic This article provides compelling evidence that community banks with more technology investment before the pandemic were better able to serve their customers as a lender and deposit-taker amid the challenges of the pandemic. Further data and research are needed to better understand the ways that technology may have assisted banks during the pandemic, and whether the advantage in loan and deposit growth enjoyed by community banks that invested more in technology during 2020 will become part of the new normal. Differences in loan growth and potentially deposit growth can be sustained if new relationships created through the PPP lead to non-PPP lending and deposits after the pandemic. Given the rising use of digital banking channels before and during the pandemic, it appears likely that an effective approach to technology and technology investment will continue to be important for community banks in the future. Author: Daniel Hoople Financial Economist Division of Insurance and Research 42 FDIC QUARTERLY