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FDIC Quarterly Quarterly Banking Profile: Third Quarter 2013 Community Bank Developments in 2012 2013, Volume 7, Number 4 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 Martin J. Gruenberg Director, Division of Insurance and Research Diane Ellis Executive Editors Richard A. Brown Maureen E. Sweeney Managing Editors Matthew Green Jack Reidhill Philip A. Shively Editors Peggi Gill Frank Solomon Publication Manager Lynne Montgomery Media Inquiries (202) 898-6993 FDIC Quarterly 2013, Volume 7, Number 4 Quarterly Banking Profile: Third Quarter 2013 FDIC-insured institutions reported aggregate net income of $36 billion in the third quarter of 2013, a $1.5 billion (3.9 percent) decline from the $37.5 billion in profits that the industry reported a year earlier. This is the first time in 17 quarters—since the second quarter of 2009—that earnings registered a year-overyear decline. The earnings decline was mainly attributable to a $4 billion increase in litigation expenses at one institution. Lower revenue from reduced mortgage activity and lower gains on asset sales also contributed to the reduction in earnings. Half of the 6,891 insured institutions reporting had year-over-year growth in earnings, while half reported declines. The proportion of banks that were unprofitable fell to 8.6 percent, from 10.7 percent a year earlier. See page 1. Insurance Fund Indicators Estimated insured deposit growth was flat in the third quarter of 2013. The DIF reserve ratio was 0.68 percent at September 30, 2013, up from 0.64 percent at June 30, 2013, and 0.35 percent at September 30, 2012. Six FDIC-insured institutions failed during the quarter. See page 15. Community Bank Developments in 2012 This paper updates the 2012 FDIC Community Banking Study to reflect developments in the structure and performance of U.S. community banks through the end of 2012. It finds that while the community banking sector changed little in structural terms during the year, community banks showed continued improvement in financial performance following the disruptions associated with the recent financial crisis. Problem loans and failures declined among community banks in 2012, while their pretax profitability was the highest since 2007. While community banks hold just 14 percent of industry assets, they make up almost 95 percent of all U.S. banking organizations. The sector continues to hold nearly half of the industry’s small loans to farms and businesses, as well as the majority of deposits in U.S. rural and micropolitan counties. See page 27. 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. Quarterly Banking Profile Third Quarter 2013 INSURED INSTITUTION PERFORMANCE Quarterly Net Income Posts First Year-Over-Year Decline in Over 4 Years ■ Litigation Expense, Lower Revenues Contribute to Earnings Decline ■ Net Charge-Offs Fall to 6-Year Low; Loan-Loss Provisions Drop to 14-Year Low ■ Mortgage Lending Declines After Rise in Interest Rates ■ Earnings Are $1.5 Billion Lower Than a Year Ago Higher Interest Rates Lead to Revenue Decline Lower revenue from mortgage banking and a large expense for litigation reserves combined to limit the net income of FDIC-insured institutions to $36 billion in the third quarter. This is $1.5 billion (3.9 percent) less than banks earned a year earlier, and represents the first time since second quarter 2009 that the industry has reported a year-over-year decline in quarterly earnings. The increase in medium- and long-term interest rates in second quarter 2013 lowered the market values of some fixed-rate assets. The higher rates reduced demand for mortgage refinancings, leading to a drop in mortgage origination and sales activity in the third quarter. Lower values and reduced origination volume were reflected in a decline in income from loan sales. Realized gains on investment securities were also well below year-ago levels. Net interest margins benefited from the wider gap between short-term and longer-term interest rates, but average margins and total net interest income were still lower than in third quarter 2012. Net operating revenue—the sum of total noninterest income and net interest income—declined by $6.1 billion (3.6 percent) from third quarter 2012. Noninterest income was $4.7 billion (7.4 percent) lower, as income from sale, securitization, and servicing of 1-to-4 family mortgage loans at major mortgage lenders fell by $4 billion (45.2 percent).1 Noninterest income from changes in the fair values of financial instruments was $2.2 billion (54.6 percent) lower than a year ago. Net interest income was $1.3 billion (1.3 percent) lower than in third quarter 2012, as interest income declined more rapidly than interest expense. However, net interest income was $714 million (0.7 percent) higher than in second quarter 2013, only the second time in the last seven quarters that there has been a consecutivequarter increase. Noninterest expenses were $2 billion Chart 1 Chart 2 Billions of Dollars Quarterly information on origination and sales activity is reported by insured institutions with more than $1 billion in assets and by smaller institutions with quarterly origination volumes greater than $10 million or quarter-end mortgages held for sale in excess of $10 million. 1 Quarterly Revenue and Loan-Loss Provision Quarterly Net Income Billions of Dollars $180 $50 $40 35.2 $30 17.4 $20 $10 -$20 28.7 28.5 21.4 34.8 34.4 40.3 34.5 38.1 36.0 $140 25.3 $120 -12.6 -$30 $80 $60 Securities and Other Gains/Losses, Net Net Operating Income $40 $20 -$40 -$50 Quarterly Net Operating Revenue* $100 -1.7 -6.1 Quarterly Loan-Loss Provision $160 2.1 $0 -$10 20.9 23.8 37.5 $0 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2012 2010 2009 2013 2011 FDIC Quarterly 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2011 2012 2013 2009 2010 * Net operating revenue = net interest income + noninterest income. 1 2013, Volume 7, No. 4 (1.9 percent) higher than a year ago, as one large institution reported a $4 billion year-over-year increase in litigation expenses. Premises and fixed asset expenses fell by $182 million (1.6 percent), and salary and benefit expenses were only $55 million (0.1 percent) higher than a year ago. The one significant positive contribution to third-quarter earnings came from lower loan-loss provisions. Banks set aside $5.8 billion in provisions in the quarter, down $8.8 billion (60.4 percent) from third quarter 2012. This is the smallest quarterly loss provision reported by the industry since third quarter 1999. Residential Real Estate Loans Post Large Decline in Noncurrent Balances The amount of loans and leases that were noncurrent— 90 days or more past due or in nonaccrual status— declined by $18.3 billion (7.7 percent) between June 30 and September 30. Noncurrent levels improved across all major loan categories. Noncurrent 1-to-4 family residential real estate loans fell by $13.2 billion (7.9 percent) during the quarter, noncurrent nonfarm nonresidential real estate loans declined by $2.3 billion (9 percent), and noncurrent construction and development loans fell by $2 billion (16.4 percent). Loan Losses Decline by Almost One-Half Decline in Noncurrent Loan Balances Outpaces Reserve Reductions Net charge-offs totaled $11.7 billion in the quarter, down $10.5 billion (47.4 percent) from third quarter 2012. This is the lowest quarterly total for charge-offs since third quarter 2007. All major loan categories had year-over-year declines in charge-offs. Net charge-offs of 1-to-4 family residential real estate loans fell by $7.1 billion (72.5 percent), with charge-offs on home equity lines of credit declining by $3 billion (72.5 percent), and other 1-to-4 family residential real estate chargeoffs falling by $4.1 billion (72.5 percent). Banks reduced their loan-loss reserves by $6.5 billion (4.3 percent) in the third quarter, as net charge-offs of $11.7 billion took more out of reserves than the $5.8 billion in provisions that banks put into their reserves. This is the 14th quarter in a row that loss reserves have declined. At the end of the quarter, reserves represented 1.83 percent of total loans and leases, the lowest level since mid-year 2008, and well below the peak of 3.51 percent at the end of first quarter 2010. Reserve coverage of noncurrent loans increased for the fourth quarter in a row—from 62.3 percent to 64.5 percent—as a result of the $18.3 billion decline in noncurrent loan balances. Chart 3 Chart 4 Quarterly Noninterest Income From Sale, Securitization, and Servicing of 1-to-4 Family Residential Mortgage Loans* Billions of Dollars $10 $8 7.1 4.7 $4 5.0 8.8 8.1 7.9 8.1 7.3 6.2 5.6 4.7 4.4 4.3 4.7 3.7 3.6 3.7 3.2 4.0 3.5 3.0 4.8 1.7 1.2 1.50.9 0.9 $2 1.51.2 $0 -$2 2.5 Assets < $1 Billion 2.0 Assets $1 Billion - $10 Billion 1.5 Assets > $100 Billion Assets $10 Billion - $100 Billion All Insured Institutions 1.0 -0.8 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2008 2009 2011 2007 2010 2012 2013 0.5 0.0 *Beginning in Q4 2008, includes income from HELOCs. Call Reporters only, subject to de minimis reporting conditions. FDIC Quarterly Quarterly Net Interest Margins 4.5 8.0 $6 Percent 2 2007 2008 2009 2010 2011 2012 2013 2013, Volume 7, No. 4 Quarterly Banking Profile (3.3 percent), and loans to states and municipalities increased by $7.5 billion (7.3 percent). In contrast, home equity lines of credit fell by $10.9 billion (2.1 percent), while balances of other 1-to-4 family residential real estate loans declined by $13.7 billion (0.7 percent). At major mortgage lenders, originations of 1-to-4 family residential real estate loans were $136.8 billion (30.1 percent) lower than in in the previous quarter, while sales were down $114.7 billion (23.8 percent). Banks reported a $204.7 billion (21.7 percent) increase in balances due from Federal Reserve banks. These balances now exceed $1.1 trillion, and represent 7.9 percent of industry assets. Equity Capital Resumes Growth After Drop in Second Quarter Equity capital increased by $13.9 billion (0.9 percent), after declining by $18.1 billion in the previous quarter, as retained earnings contributed $13.1 billion to equity growth. Insured institutions declared $22.9 billion in dividends in the quarter, an increase of $2.4 billion (11.9 percent) compared with third quarter 2012. A decline in unrealized gains on securities held for sale reduced equity by $1.9 billion, much less than the $32.6 billion reduction in equity that lower unrealized gains produced in second quarter 2012. At the end of the quarter, almost 98 percent of all insured institutions, representing 99.8 percent of total industry assets, met or exceeded the requirements for the highest regulatory capital category, as defined for Prompt Corrective Action purposes. Large Denomination Deposits Register Strong Increase Deposits increased by $247.8 billion (2.3 percent). Most of the growth—$235.6 billion—occurred in accounts with balances greater than $250,000. Deposits in foreign offices increased by $43.6 billion (3.1 percent). Noninterest-bearing deposits accounted for $103.1 billion of the $204.2 billion increase in domestic deposits. At the end of the quarter, deposits funded 75.6 percent of industry assets, the highest level since mid-year 1993. Nondeposit liabilities declined by $70.6 billion (3.5 percent) as banks reduced their securities sold under repurchase agreements by $30 billion (7.9 percent). Loan Balances Rise by $69.7 Billion Assets increased by $191.1 billion (1.3 percent) in the quarter. Loan and lease balances rose for the 8th time in the last ten quarters, increasing by $69.7 billion (0.9 percent). Apart from 1-to-4 family residential real estate loans, all major loan categories registered growth in the quarter. Auto loans increased by $10.6 billion (3.2 percent), while credit card balances rose by $6.8 billion (1 percent). Real estate loans secured by multifamily residential properties increased by $8.1 billion Chart 5 Chart 6 Noncurrent Loan Rate and Quarterly Net Charge-Off Rate Year-Over-Year Change in Quarterly Loan-Loss Provisions Percent 6 Billions of Dollars $0 Noncurrent Loan Rate 5 -$5 -$10 -8.8 4 -$15 3 -$20 2 -$25 -$30 -$35 1 -30.7 1 FDIC Quarterly 2 3 2011 4 1 2 3 2012 4 1 2 Quarterly Net Charge-Off Rate 0 3 2013 2006 3 2007 2008 2009 2010 2011 2012 2013 2013, Volume 7, No. 4 “problem” banks fell from $192.5 billion to $174.2 billion. This is the 10th consecutive quarter that the number of “problem” banks has fallen. Insured institutions reported 2,080,371 full-time equivalent employees, down from 2,097,284 in second quarter 2013 and 2,105,843 in third quarter 2012. Trend in Bank Failures Continues to Improve The number of insured commercial banks and savings institutions reporting quarterly financial results fell to 6,891, from 6,940 in the previous quarter. During the third quarter, 43 insured institutions were absorbed in mergers, while six insured institutions failed. One new reporting institution was added as a credit union converted to an FDIC-insured cooperative savings bank. The number of banks on the FDIC’s “Problem List” declined from 553 to 515, and total assets of Author: Chart 7 Ross Waldrop, Senior Banking Analyst Division of Insurance and Research (202) 898-3951 Chart 8 Quarterly Change in Loan Balances Reserve Coverage Ratio* Billions of Dollars $450 Coverage Ratio (Percent) $400 Billions of Dollars Percent 180 Noncurrent Loans & Leases ($ Billions) 160 $300 $300 120 $250 100 $200 80 $100 $100 $0 2007 2008 2009 2010 2011 * Loan-loss reserves to noncurrent loans & leases. 2012 -116 -109 -140 -$150 -$200 2013 Chart 9 -37 -126 -210 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2012 2013 2007 2009 2011 2010 2008 Chart 10 Originations of Closed-End 1-to-4 Family Residential Mortgages for Sale* Quarterly Activity (Billions of Dollars) $600 Quarterly Changes in the Number of Troubled Institutions 200 Total Originations 175 Total Sales 50 150 $500 $400 100 $300 75 $200 25 50 0 $100 -25 1 2 3 2010 4 1 2 3 2011 4 1 2 3 2012 4 1 *Beginning in Q1 2012, data include new Call Report filers that previously filed Thrift Financial Reports (TFRs). FDIC Quarterly 45 Quarterly Failures Net Quarterly Change in Number of Problem Banks 24 125 $0 -133 -107 *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. 0 $0 2006 -7 -14 -63 -$100 -$250 73 70 65 24 -6 -$50 20 $50 28 118 102 67 61 $50 43 40 Loan-Loss Reserves ($ Billions) 134 $150 60 $150 221* 203 189 $200 140 $350 237 $250 41 12 9 21 2 54 81 53 2 27 14 111 136 45 150 41 73 54 30 31 24 26 22 26 18 16 15 12 8 4 12 6 4 -23 -21 -31 -38 -38 -39 -40 -43 -41 -59 -50 2 3 2013 -75 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2008 2009 2010 2011 2012 2013 2013, Volume 7, No. 4 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������������������������������������������������������������������������������������������ Number of assisted institutions�������������������������������������������������������������������������������������� 2013** 1.06 9.45 9.40 1.75 0.72 2.62 3.26 10.67 6,891 5,937 954 7.95 515 $174 22 0 2012** 1.02 9.02 9.28 2.37 1.14 2.98 3.45 12.52 7,181 6,168 1,013 10.79 694 $262 43 0 2012 1.00 8.91 9.15 2.20 1.10 4.02 3.42 17.78 7,083 6,096 987 10.93 651 $233 51 0 2011 0.88 7.79 9.07 2.61 1.55 4.30 3.60 43.58 7,357 6,291 1,066 16.22 813 $319 92 0 2010 0.65 5.85 8.89 3.11 2.55 1.77 3.76 1594.70 7,658 6,530 1,128 22.15 884 $390 157 0 2009 -0.08 -0.73 8.60 3.37 2.52 -5.45 3.49 -155.98 8,012 6,840 1,172 30.84 702 $403 140 8 2008 0.03 0.35 7.47 1.91 1.29 6.19 3.16 -90.71 8,305 7,087 1,218 24.89 252 $159 25 5 * Excludes insured branches of foreign banks (IBAs). ** Through September 30, ratios annualized where appropriate. Asset growth rates are for 12 months ending September 30. TABLE II-A. Aggregate Condition and Income Data, All FDIC-Insured Institutions 3rd Quarter 2013 6,891 2,080,371 2nd Quarter 2013 6,940 2,097,284 3rd Quarter 2012 7,181 2,105,843 %Change 12Q3-13Q3 -4.0 -1.2 $14,596,235 4,053,172 1,841,445 1,092,487 206,145 517,749 1,571,822 1,331,685 677,074 67,996 779,222 1,857 7,802,040 142,572 7,659,468 2,957,637 31,823 367,113 3,580,194 $14,405,155 4,046,909 1,855,188 1,083,287 202,506 528,652 1,563,440 1,310,292 670,289 65,072 748,474 1,831 7,732,356 149,042 7,583,314 2,945,331 32,615 367,077 3,476,817 $14,223,318 4,087,033 1,889,348 1,058,001 210,435 567,481 1,454,634 1,295,525 668,309 65,451 677,339 1,925 7,578,057 167,010 7,411,046 2,986,431 41,038 364,142 3,420,660 2.6 -0.8 -2.5 3.3 -2.0 -8.8 8.1 2.8 1.3 3.9 15.0 -3.6 3.0 -14.6 3.4 -1.0 -22.5 0.8 4.7 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������������������������������������������������������������������������������������������� 14,596,235 11,028,212 9,599,681 1,428,531 1,311,801 108,673 510,648 1,636,901 1,622,084 14,405,154 10,780,396 9,395,455 1,384,942 1,328,796 113,621 559,300 1,623,041 1,608,225 14,223,318 10,504,236 9,060,211 1,444,025 1,355,877 112,096 613,478 1,637,631 1,619,234 2.6 5.0 6.0 -1.1 -3.3 -3.1 -16.8 0.0 0.2 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��������������������������������������������������������������������������������������� 73,138 221,070 100,713 1,668,561 12,928,881 372,904 6,101,722 19,065,513 761,130 242,915,692 75,327 239,397 102,113 1,678,439 12,704,592 368,408 5,995,431 18,008,962 765,363 236,525,673 86,955 293,102 104,752 1,732,775 12,470,382 318,120 5,812,660 17,260,345 991,017 229,460,777 -15.9 -24.6 -3.9 -3.7 3.7 17.2 5.0 10.5 -23.2 5.9 (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 loan and lease 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 Three Qtrs 2013 $352,438 41,086 311,352 25,185 192,292 314,671 3,977 52,900 168 115,033 114,468 41,578 58,153 56,315 112,026 First Three Qtrs 2012 $367,713 50,876 316,837 42,826 185,346 314,005 8,216 46,178 -55 107,335 106,823 63,962 60,916 45,907 101,225 FDIC Quarterly %Change -4.2 -19.2 -1.7 -41.2 3.8 0.2 -51.6 14.6 N/M 7.2 7.2 -35 -4.5 22.7 10.7 3rd Quarter 2013 $117,676 13,369 104,307 5,798 59,015 106,493 540 15,684 259 36,146 36,008 11,677 22,861 13,147 35,529 3rd Quarter 2012 $121,734 16,092 105,643 14,642 63,736 104,475 2,717 15,316 -44 37,618 37,485 22,199 20,447 17,038 35,556 %Change 12Q3-13Q3 -3.3 -16.9 -1.3 -60.4 -7.4 1.9 -80.1 2.4 N/M -3.9 -3.9 -47.4 11.8 -22.8 -0.1 N/M - Not Meaningful 5 2013, Volume 7, No. 4 TABLE III-A. Third Quarter 2013, All FDIC-Insured Institutions Asset Concentration Groups* THIRD QUARTER All Insured (The way it is...) Institutions Number of institutions reporting����������������������� 6,891 Commercial banks������������������������������������� 5,937 Savings institutions����������������������������������� 954 Total assets (in billions)������������������������������������ $14,596.2 Commercial banks������������������������������������� 13,537.7 Savings institutions����������������������������������� 1,058.6 Total deposits (in billions)��������������������������������� 11,028.2 Commercial banks������������������������������������� 10,219.7 Savings institutions����������������������������������� 808.5 Bank net income (in millions)��������������������������� 36,008 Commercial banks������������������������������������� 33,145 Savings institutions����������������������������������� 2,863 Credit Card International Agricultural Commercial Banks Banks Banks Lenders 17 4 1,536 3,434 14 4 1,516 3,099 3 0 20 335 $596.2 $3,721.7 $243.9 $4,774.5 522.7 3,721.7 238.4 4,418.5 73.5 0.0 5.5 356.0 335.8 2,630.5 202.1 3,756.9 285.7 2,630.5 198.9 3,494.6 50.0 0.0 3.3 262.3 5,022 4,791 756 11,721 4,069 4,791 724 11,032 952 0 32 688 Mortgage Consumer Lenders Lenders 596 47 165 36 431 11 $553.9 $149.3 227.3 70.6 326.7 78.7 412.9 126.9 173.2 59.9 239.6 67.0 1,287 393 774 202 512 191 Other Specialized All Other <$1 Billion <$1 Billion 400 791 361 688 39 103 $63.9 $137.9 59.1 114.3 4.9 23.7 51.9 116.1 48.4 96.8 3.5 19.4 319 293 206 269 114 24 All Other >$1 Billion 66 54 12 $4,354.9 4,165.2 189.7 3,395.2 3,231.7 163.5 11,426 11,076 350 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�������������������������������������������������� % of unprofitable institutions���������������������������� % of institutions with earnings gains���������������� 3.67 0.42 3.26 1.63 2.94 0.16 0.98 1.43 0.99 8.92 0.60 10.24 0.71 9.53 4.47 5.84 2.04 3.38 5.36 3.38 22.57 2.91 2.82 0.46 2.35 1.61 2.92 0.01 0.51 0.73 0.52 5.88 0.86 4.24 0.55 3.70 0.66 2.51 0.10 1.25 1.47 1.25 11.35 0.09 4.00 0.44 3.56 1.31 2.98 0.16 0.98 1.35 0.99 8.35 0.35 3.79 0.70 3.09 1.02 2.47 0.10 0.90 1.36 0.92 8.19 0.30 3.81 0.51 3.30 1.41 2.39 0.43 1.12 1.66 1.04 11.04 0.68 3.07 0.44 2.63 5.07 4.62 0.08 2.01 2.73 1.99 14.57 0.41 4.08 0.55 3.53 0.91 3.00 0.12 0.85 1.04 0.85 7.51 0.31 3.02 0.25 2.77 1.72 2.59 0.03 1.03 1.55 1.06 8.96 0.42 49.66 64.14 8.59 50.02 89.71 42.57 0.00 76.47 2.73 79.18 0.00 50.00 164.91 61.22 3.26 45.44 68.88 65.65 9.99 55.18 55.15 62.78 13.93 38.59 94.06 51.08 2.13 46.81 66.11 61.44 12.00 48.25 70.69 71.99 8.34 46.02 16.10 61.16 1.52 45.45 Structural Changes New reporters�������������������������������������������� Institutions absorbed by mergers������������� Failed institutions�������������������������������������� 1 43 6 0 0 0 0 0 0 0 10 0 0 28 6 1 1 0 0 0 0 0 0 0 0 1 0 0 3 0 PRIOR THIRD QUARTERS (The way it was...) Return on assets (%)��������������������������������2012 ��������������������������������������2010 ������������������������������������� 2008 1.06 0.72 0.03 3.19 2.04 0.36 0.98 0.63 0.49 1.36 1.08 1.01 0.92 0.35 -0.13 0.75 0.70 -1.34 1.67 1.52 0.94 1.42 1.94 0.12 1.04 0.89 0.61 1.01 0.93 0.27 Net charge-offs to loans & leases (%)�����2012 ��������������������������������������2010 ������������������������������������� 2008 1.18 2.38 1.43 3.53 8.94 6.24 1.74 2.05 1.44 0.23 0.58 0.43 0.74 1.96 1.23 0.76 1.33 1.02 1.26 1.97 2.04 0.42 0.98 0.43 0.49 0.52 0.38 1.07 1.64 1.11 * See Table V-A (page 10) for explanations. Note: Blue font identifies data that are also presented in the prior quarters’ data at bottom of table. FDIC Quarterly 6 2013, Volume 7, No. 4 Quarterly Banking Profile TABLE III-A. Third Quarter 2013, All FDIC-Insured Institutions Asset Size Distribution THIRD QUARTER All Insured (The way it is...) Institutions Number of institutions reporting����������������������������� 6,891 Commercial banks������������������������������������������� 5,937 Savings institutions����������������������������������������� 954 Total assets (in billions)������������������������������������������ $14,596.2 Commercial banks������������������������������������������� 13,537.7 Savings institutions����������������������������������������� 1,058.6 Total deposits (in billions)��������������������������������������� 11,028.2 Commercial banks������������������������������������������� 10,219.7 Savings institutions����������������������������������������� 808.5 Bank net income (in millions)��������������������������������� 36,008 Commercial banks������������������������������������������� 33,145 Savings institutions����������������������������������������� 2,863 Geographic Regions* Less Than $100 $1 Billion Greater $100 Million to to Than Million $1 Billion $10 Billion $10 Billion New York 2,117 4,106 561 107 854 1,875 3,523 450 89 466 242 583 111 18 388 $123.6 $1,245.4 $1,453.1 $11,774.2 $2,876.9 110.1 1,041.6 1,175.7 11,210.3 2,414.5 13.5 203.8 277.4 563.9 462.4 104.7 1,041.7 1,135.0 8,746.8 2,132.5 94.0 877.9 926.0 8,321.7 1,794.8 10.7 163.8 209.0 425.1 337.8 224 2,856 4,193 28,735 7,603 213 2,445 3,613 26,873 6,895 11 411 580 1,862 708 Atlanta 875 788 87 $2,981.8 2,896.3 85.4 2,305.0 2,240.4 64.7 6,991 6,850 140 Chicago 1,480 1,227 253 $3,399.3 3,285.3 114.0 2,452.2 2,366.3 85.9 4,488 4,191 298 Kansas City 1,675 1,600 75 $3,158.9 3,098.9 60.0 2,417.6 2,369.5 48.1 9,748 9,639 109 San Dallas Francisco 1,454 553 1,355 501 99 52 $864.0 $1,315.4 761.3 1,081.3 102.7 234.1 716.6 1,004.2 631.9 816.8 84.7 187.4 2,280 4,898 1,950 3,620 330 1,278 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�������������������������������������������������������� % of unprofitable institutions���������������������������������� % of institutions with earnings gains���������������������� 3.67 0.42 3.26 1.63 2.94 0.16 0.98 1.43 0.99 8.92 0.60 4.26 0.55 3.71 1.02 3.41 0.15 0.72 0.86 0.73 6.16 0.28 4.26 0.57 3.70 1.11 3.17 0.18 0.92 1.16 0.92 8.51 0.34 4.35 0.50 3.85 1.22 3.07 0.16 1.17 1.50 1.17 9.90 0.31 3.52 0.39 3.13 1.74 2.89 0.16 0.97 1.45 0.98 8.87 0.68 4.00 0.45 3.55 1.53 2.79 0.36 1.06 1.53 1.06 8.84 0.81 3.67 0.35 3.32 1.63 3.07 0.11 0.90 1.37 0.94 7.66 0.55 2.88 0.35 2.53 1.76 3.21 -0.02 0.52 0.79 0.53 5.82 0.46 3.90 0.50 3.40 1.50 2.62 0.15 1.25 1.74 1.25 11.62 0.75 4.01 0.39 3.62 1.43 3.20 0.12 1.07 1.40 1.06 9.77 0.29 4.22 0.49 3.73 1.97 2.87 0.35 1.48 2.25 1.51 11.67 0.50 49.66 64.14 8.59 50.02 94.37 77.20 13.93 46.72 83.07 69.99 6.72 50.78 77.96 64.17 3.57 56.33 45.23 63.38 0.93 53.27 84.00 58.21 10.19 45.08 34.02 67.32 12.34 57.83 -8.32 80.04 9.59 44.93 36.83 56.61 5.85 48.96 70.12 67.09 6.12 52.06 113.39 52.38 12.30 56.78 Structural Changes New reporters�������������������������������������������������� Institutions absorbed by mergers������������������� Failed institutions�������������������������������������������� 1 43 6 0 13 2 0 28 3 1 2 1 0 0 0 1 4 1 0 7 1 0 1 1 0 13 0 0 11 2 0 7 1 PRIOR THIRD QUARTERS (The way it was…) Return on assets (%)��������������������������������������2012 ��������������������������������������������2010 ������������������������������������������� 2008 1.06 0.72 0.03 0.79 0.39 0.27 0.87 0.34 -0.02 1.02 0.27 -0.60 1.09 0.83 0.12 1.02 0.77 0.01 0.72 0.58 0.22 0.95 0.61 0.10 1.28 0.99 0.50 1.16 0.78 0.18 1.68 0.74 -0.59 Net charge-offs to loans & leases (%)�����������2012 ��������������������������������������������2010 ������������������������������������������� 2008 1.18 2.38 1.43 0.38 0.87 0.44 0.58 1.16 0.71 0.79 1.74 1.11 1.33 2.70 1.63 1.15 3.05 1.49 1.33 2.31 1.28 1.04 1.94 1.36 1.54 2.77 1.61 0.52 1.20 0.85 0.83 2.28 1.80 * See Table V-A (page 11) for explanations. Note: Blue font identifies data that are also presented in the prior quarters’ data at bottom of table. FDIC Quarterly 7 2013, Volume 7, No. 4 TABLE IV-A. First Three Quarters 2013, All FDIC-Insured Institutions Asset Concentration Groups* FIRST THREE QUARTERS All Insured (The way it is...) Institutions Number of institutions reporting����������������������� 6,891 Commercial banks������������������������������������� 5,937 Savings institutions����������������������������������� 954 Total assets (in billions)������������������������������������ $14,596.2 Commercial banks������������������������������������� 13,537.7 Savings institutions����������������������������������� 1,058.6 Total deposits (in billions)��������������������������������� 11,028.2 Commercial banks������������������������������������� 10,219.7 Savings institutions����������������������������������� 808.5 Bank net income (in millions)��������������������������� 114,468 Commercial banks������������������������������������� 106,136 Savings institutions����������������������������������� 8,332 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�������������������������������������������������� % of unprofitable institutions���������������������������� % of institutions with earnings gains���������������� Credit Card International Agricultural Commercial Banks Banks Banks Lenders 17 4 1,536 3,434 14 4 1,516 3,099 3 0 20 335 $596.2 $3,721.7 $243.9 $4,774.5 522.7 3,721.7 238.4 4,418.5 73.5 0.0 5.5 356.0 335.8 2,630.5 202.1 3,756.9 285.7 2,630.5 198.9 3,494.6 50.0 0.0 3.3 262.3 14,555 22,810 2,177 32,143 12,033 22,810 2,090 29,848 2,521 0 87 2,294 Mortgage Consumer Lenders Lenders 596 47 165 36 431 11 $553.9 $149.3 227.3 70.6 326.7 78.7 412.9 126.9 173.2 59.9 239.6 67.0 4,068 1,440 2,263 767 1,805 672 Other Specialized All Other <$1 Billion <$1 Billion 400 791 361 688 39 103 $63.9 $137.9 59.1 114.3 4.9 23.7 51.9 116.1 48.4 96.8 3.5 19.4 850 909 521 829 329 81 All Other >$1 Billion 66 54 12 $4,354.9 4,165.2 189.7 3,395.2 3,231.7 163.5 35,517 34,975 543 3.69 0.43 3.26 1.78 2.90 0.23 1.03 1.55 1.06 9.45 0.72 10.13 0.74 9.39 4.29 5.71 2.05 3.27 5.14 3.26 21.90 3.21 2.87 0.46 2.41 1.83 2.65 0.09 0.80 1.21 0.83 9.38 1.03 4.15 0.56 3.59 0.67 2.50 0.10 1.17 1.40 1.20 10.78 0.11 4.01 0.47 3.54 1.36 3.04 0.21 0.89 1.29 0.91 7.63 0.44 3.74 0.71 3.03 1.10 2.42 0.14 0.94 1.42 0.98 8.70 0.37 3.74 0.52 3.22 1.63 2.29 0.43 1.27 2.03 1.28 13.80 0.77 3.01 0.45 2.55 4.58 4.44 0.11 1.71 2.41 1.74 12.52 0.59 4.06 0.57 3.48 0.98 3.01 0.14 0.84 1.07 0.88 7.66 0.32 3.04 0.27 2.77 1.98 2.67 0.14 1.07 1.62 1.09 9.25 0.51 60.57 60.54 7.95 52.46 81.79 42.63 0.00 82.35 26.25 66.85 0.00 75.00 156.59 62.36 2.60 45.57 71.11 64.21 9.55 59.23 60.99 61.10 12.75 41.44 85.34 47.51 0.00 55.32 68.54 63.82 10.50 43.50 83.50 71.62 7.59 48.29 55.65 58.84 3.03 53.03 88.58 92.17 87.02 92.27 89.29 93.38 96.30 91.47 92.12 87.40 1.83 64.49 3.73 325.13 2.44 82.09 1.50 132.46 1.61 77.01 1.34 43.62 1.21 132.73 1.88 87.81 1.55 79.36 1.52 34.16 1.75 11.11 9.40 13.09 14.97 69.45 52.48 65.77 0.90 14.89 13.09 15.12 17.39 133.52 75.19 52.55 1.13 8.82 7.56 12.07 14.38 47.72 33.73 42.36 0.98 11.01 10.45 14.80 15.94 74.02 61.34 82.88 1.81 11.81 10.18 12.81 14.46 84.26 66.30 77.52 2.16 11.40 10.49 20.66 21.80 80.22 59.79 74.40 0.66 9.64 9.60 13.78 14.61 79.89 67.91 84.99 0.96 13.71 13.22 29.91 30.90 33.84 27.49 80.50 1.55 11.34 11.26 19.48 20.65 63.98 53.87 84.19 2.37 11.77 9.26 12.70 14.62 62.33 48.60 71.18 Structural Changes New reporters�������������������������������������������� Institutions absorbed by mergers������������� Failed institutions�������������������������������������� 1 159 22 0 0 0 0 0 0 0 27 0 0 106 20 1 6 0 0 0 0 0 1 0 0 11 2 0 8 0 PRIOR FIRST THREE QUARTERS (The way it was...) Number of institutions������������������������������2012 ��������������������������������������2010 ������������������������������������� 2008 7,181 7,761 8,384 17 22 26 5 5 4 1,539 1,583 1,588 3,576 4,172 4,810 706 725 827 53 81 100 397 320 298 818 789 691 70 64 40 Total assets (in billions)����������������������������2012 ��������������������������������������2010 ������������������������������������� 2008 $14,223.3 13,372.7 13,572.5 $580.5 695.1 467.9 $3,774.2 3,278.1 3,263.3 $223.9 194.0 168.1 $4,125.4 4,442.5 6,077.4 $821.8 789.5 1,060.5 $116.9 102.9 71.0 $63.4 44.5 36.0 $142.6 131.6 93.8 $4,374.5 3,694.6 2,334.6 Return on assets (%)��������������������������������2012 ��������������������������������������2010 ������������������������������������� 2008 1.02 0.64 0.32 3.14 1.47 2.42 0.83 0.79 0.31 1.30 1.04 1.12 0.90 0.28 0.23 0.82 0.70 -0.35 1.62 1.42 1.01 1.25 1.58 1.57 1.01 0.71 0.88 1.01 0.74 0.36 Net charge-offs to loans & leases (%)�����2012 ��������������������������������������2010 ������������������������������������� 2008 1.14 2.63 1.18 3.81 11.94 5.64 1.53 2.27 1.28 0.22 0.53 0.29 0.75 1.89 0.98 0.78 1.22 0.74 1.44 2.20 1.84 0.33 0.81 0.43 0.42 0.51 0.30 0.98 1.96 0.88 Noncurrent assets plus OREO to assets (%)��������������������������2012 ��������������������������������������2010 ������������������������������������� 2008 2.37 3.24 1.55 1.10 1.97 1.73 1.47 2.36 1.17 1.26 1.70 1.15 2.52 3.84 1.93 2.26 3.13 2.30 1.45 1.05 0.80 1.10 1.06 0.28 1.65 1.96 0.92 3.30 3.78 0.85 Equity capital ratio (%)�����������������������������2012 ��������������������������������������2010 ������������������������������������� 2008 11.38 11.18 9.62 14.82 14.62 20.85 9.17 9.06 7.13 11.68 11.40 11.07 11.87 11.38 10.66 10.83 10.11 7.95 9.96 10.59 9.14 15.04 17.17 19.61 11.86 11.41 11.25 12.44 12.33 8.61 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 ���������������������������� 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�������������������� * See Table V-A (page 10) for explanations. Note: Blue font identifies data that are also presented in the prior years’ data at bottom of table. FDIC Quarterly 8 2013, Volume 7, No. 4 Quarterly Banking Profile TABLE IV-A. First Three Quarters 2013, All FDIC-Insured Institutions Asset Size Distribution FIRST THREE QUARTERS All Insured (The way it is...) Institutions Number of institutions reporting����������������������������� 6,891 Commercial banks������������������������������������������� 5,937 Savings institutions����������������������������������������� 954 Total assets (in billions)������������������������������������������ $14,596.2 Commercial banks������������������������������������������� 13,537.7 Savings institutions����������������������������������������� 1,058.6 Total deposits (in billions)��������������������������������������� 11,028.2 Commercial banks������������������������������������������� 10,219.7 Savings institutions����������������������������������������� 808.5 Bank net income (in millions)��������������������������������� 114,468 Commercial banks������������������������������������������� 106,136 Savings institutions����������������������������������������� 8,332 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�������������������������������������������������������� % of unprofitable institutions���������������������������������� % of institutions with earnings gains���������������������� Geographic Regions* Less Than $100 $1 Billion Greater $100 Million to to Than Million $1 Billion $10 Billion $10 Billion New York 2,117 4,106 561 107 854 1,875 3,523 450 89 466 242 583 111 18 388 $123.6 $1,245.4 $1,453.1 $11,774.2 $2,876.9 110.1 1,041.6 1,175.7 11,210.3 2,414.5 13.5 203.8 277.4 563.9 462.4 104.7 1,041.7 1,135.0 8,746.8 2,132.5 94.0 877.9 926.0 8,321.7 1,794.8 10.7 163.8 209.0 425.1 337.8 704 8,548 12,642 92,575 17,530 651 7,321 10,549 87,615 15,734 54 1,227 2,093 4,960 1,797 Atlanta 875 788 87 $2,981.8 2,896.3 85.4 2,305.0 2,240.4 64.7 23,220 22,767 453 Chicago 1,480 1,227 253 $3,399.3 3,285.3 114.0 2,452.2 2,366.3 85.9 22,874 21,884 990 Kansas City 1,675 1,600 75 $3,158.9 3,098.9 60.0 2,417.6 2,369.5 48.1 29,136 28,764 372 San Dallas Francisco 1,454 553 1,355 501 99 52 $864.0 $1,315.4 761.3 1,081.3 102.7 234.1 716.6 1,004.2 631.9 816.8 84.7 187.4 7,221 14,487 6,093 10,895 1,128 3,593 3.69 0.43 3.26 1.78 2.90 0.23 1.03 1.55 1.06 9.45 0.72 4.20 0.57 3.63 1.03 3.33 0.14 0.73 0.89 0.75 6.34 0.31 4.23 0.59 3.64 1.13 3.16 0.18 0.89 1.16 0.92 8.45 0.35 4.30 0.52 3.78 1.30 3.06 0.18 1.16 1.55 1.18 10.05 0.38 3.54 0.40 3.14 1.91 2.85 0.25 1.04 1.59 1.06 9.52 0.82 3.99 0.46 3.52 1.57 3.00 0.39 0.79 1.33 0.82 6.74 0.97 3.66 0.37 3.29 1.83 3.01 0.21 1.00 1.51 1.03 8.42 0.69 2.91 0.37 2.54 1.97 2.89 0.07 0.88 1.27 0.91 9.99 0.50 3.96 0.49 3.47 1.68 2.69 0.26 1.25 1.79 1.26 11.59 0.91 3.96 0.40 3.55 1.45 3.09 0.14 1.11 1.48 1.12 10.35 0.33 4.23 0.51 3.72 2.04 2.89 0.36 1.49 2.28 1.52 11.61 0.58 60.57 60.54 7.95 52.46 83.30 76.64 12.33 47.99 84.65 70.41 6.50 53.14 73.58 63.66 3.03 62.21 58.23 58.98 2.80 63.55 76.16 58.12 10.66 48.01 53.09 63.26 13.14 62.74 29.94 68.19 8.78 49.12 53.17 55.37 4.36 49.43 70.85 65.32 5.23 53.03 102.39 52.33 11.39 59.67 88.58 91.37 91.97 91.02 87.89 88.77 86.86 87.94 88.36 91.03 92.59 1.83 64.49 1.71 87.42 1.66 83.86 1.63 70.68 1.88 61.92 1.80 90.60 1.71 45.46 1.95 66.90 2.07 59.23 1.57 75.10 1.60 110.66 1.75 11.11 9.40 13.09 14.97 69.45 52.48 65.77 1.83 11.82 11.74 19.19 20.31 65.67 55.63 84.71 1.98 10.83 10.64 15.79 16.98 74.45 62.27 83.59 1.95 11.76 10.67 15.01 16.21 81.58 63.72 77.73 1.70 11.06 9.08 12.53 14.56 67.33 50.02 62.21 1.20 12.00 9.84 14.02 15.71 71.26 52.82 65.00 2.48 12.30 9.52 12.81 14.59 74.39 57.51 74.08 1.54 9.13 7.93 11.65 13.79 60.67 43.77 59.45 2.08 10.66 9.28 12.37 14.57 67.90 51.97 56.90 1.73 10.87 10.00 14.53 15.88 71.45 59.26 82.52 1.03 12.84 11.86 16.11 17.45 78.05 59.59 75.22 Structural Changes New reporters�������������������������������������������������� Institutions absorbed by mergers������������������� Failed institutions�������������������������������������������� 1 159 22 0 58 12 0 87 9 1 12 1 0 2 0 1 15 1 0 16 8 0 33 4 0 36 1 0 34 3 0 25 5 PRIOR FIRST THREE QUARTERS (The way it was…) Number of institutions������������������������������������2012 ��������������������������������������������2010 ������������������������������������������� 2008 7,181 7,761 8,384 2,287 2,682 3,240 4,235 4,414 4,470 551 556 560 108 109 114 891 961 1,027 918 1,041 1,197 1,529 1,609 1,721 1,738 1,841 1,943 1,513 1,637 1,719 592 672 777 Total assets (in billions)����������������������������������2012 ��������������������������������������������2010 ������������������������������������������� 2008 $14,223.3 13,372.7 13,572.5 $132.4 151.1 174.9 $1,278.3 1,315.7 1,338.2 $1,424.4 1,400.5 1,474.7 $11,388.3 10,505.3 10,584.7 $2,927.6 2,724.5 2,689.0 $2,942.9 2,957.1 3,427.5 $3,231.4 2,948.0 3,324.7 $3,059.1 1,649.5 1,009.2 $845.8 788.4 770.8 $1,216.4 2,305.2 2,351.4 Return on assets (%)��������������������������������������2012 ��������������������������������������������2010 ������������������������������������������� 2008 1.02 0.64 0.32 0.72 0.40 0.47 0.84 0.37 0.44 1.18 0.27 0.18 1.02 0.73 0.33 0.94 0.72 0.59 0.76 0.36 0.30 0.91 0.62 0.31 1.13 0.79 0.93 1.10 0.74 0.56 1.79 0.80 -0.22 Net charge-offs to loans & leases (%)�����������2012 ��������������������������������������������2010 ������������������������������������������� 2008 1.14 2.63 1.18 0.39 0.73 0.31 0.60 1.02 0.49 0.75 1.71 0.88 1.29 3.07 1.37 1.26 3.77 1.31 1.23 2.51 0.98 0.93 2.04 1.15 1.44 3.02 1.36 0.55 1.22 0.65 0.88 2.35 1.49 Noncurrent assets plus OREO to assets (%)��������������������������������2012 ��������������������������������������������2010 ������������������������������������������� 2008 2.37 3.24 1.55 2.20 2.42 1.40 2.61 3.42 1.82 2.70 3.70 2.03 2.30 3.17 1.46 1.53 2.18 0.98 3.66 4.04 1.67 2.13 3.06 1.56 2.51 4.59 1.90 2.27 3.28 1.63 1.56 2.72 1.85 Equity capital ratio (%)�����������������������������������2012 ��������������������������������������������2010 ������������������������������������������� 2008 11.38 11.18 9.62 12.13 12.18 13.14 11.10 10.36 10.18 11.88 11.22 10.87 11.35 11.26 9.32 12.38 12.48 10.92 12.31 11.55 10.14 9.18 9.06 8.56 11.04 11.55 9.66 11.03 10.76 9.87 13.70 11.76 8.79 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 ����������������������������������� 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��������������������������� * See Table V-A (page 11) for explanations. Note: Blue font identifies data that are also presented in the prior years’ data at bottom of table. FDIC Quarterly 9 2013, Volume 7, No. 4 TABLE V-A. Loan Performance, All FDIC-Insured Institutions Asset Concentration Groups* September 30, 2013 All Insured Institutions Credit Card Banks International Agricultural Commercial Mortgage Banks Banks Lenders Lenders Consumer Lenders Other All Other All Other Specialized <$1 >$1 <$1 Billion Billion 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������������������������������������������������������ 1.20 0.78 0.50 0.33 0.77 1.95 0.30 1.40 1.29 1.51 0.15 0.94 0.13 0.00 0.00 0.00 0.00 0.14 0.90 1.26 1.25 1.41 0.23 1.22 1.62 0.62 0.37 0.11 1.08 2.61 0.25 1.43 1.38 1.51 0.14 0.97 0.67 0.68 0.57 0.53 0.62 1.39 0.95 1.50 1.21 1.52 0.31 0.66 0.78 0.66 0.50 0.34 0.62 1.31 0.29 1.23 1.27 1.23 0.21 0.67 1.07 0.94 0.42 0.27 0.77 1.21 0.66 1.55 1.93 1.19 0.11 1.03 0.60 0.50 1.16 1.61 0.54 0.57 0.09 0.85 0.69 0.90 0.14 0.75 1.27 1.76 0.84 0.67 0.48 1.72 1.17 1.63 1.54 1.64 0.59 1.26 1.37 1.02 1.14 0.57 0.71 1.66 1.09 2.00 1.11 2.02 0.45 1.34 1.84 1.23 0.49 0.60 0.79 2.73 0.25 1.86 1.49 1.93 0.10 1.26 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������������������������������������������������������ 4.77 4.89 2.18 0.96 2.70 7.66 0.72 1.04 1.21 0.87 0.29 2.83 0.85 0.00 4.04 0.00 0.00 0.75 0.91 1.17 1.18 0.99 0.17 1.15 6.80 1.82 1.55 0.63 3.58 11.50 0.71 1.20 1.24 1.14 0.24 2.97 1.42 3.01 2.09 1.46 1.00 1.40 1.46 0.60 0.32 0.63 0.35 1.13 2.90 5.21 2.13 1.05 1.58 4.16 0.81 0.94 1.39 0.87 0.45 2.08 3.32 4.61 2.05 0.94 2.02 3.68 1.72 1.13 1.70 0.58 0.23 3.07 2.01 2.79 2.95 0.99 2.98 1.42 0.13 0.66 1.04 0.53 0.13 0.91 2.62 7.07 2.80 1.08 1.09 1.91 1.39 0.64 0.95 0.62 0.69 2.14 2.21 5.10 2.69 2.26 0.89 1.91 1.89 0.94 0.51 0.95 0.54 1.96 8.14 4.32 2.43 0.94 3.57 12.09 0.51 0.91 1.21 0.85 0.20 4.45 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������������������������������������������������������ 0.52 0.64 0.28 0.10 1.14 0.55 0.32 2.17 3.44 0.82 0.09 0.72 0.06 0.00 0.00 0.00 2.15 -0.02 3.10 3.25 3.30 1.95 0.00 3.21 0.95 2.54 0.15 0.01 1.20 1.21 0.27 3.02 4.01 1.33 0.10 1.03 0.10 0.28 0.15 -0.08 0.09 0.15 0.22 0.31 0.58 0.29 0.00 0.11 0.45 0.68 0.32 0.15 0.75 0.53 0.32 1.00 3.72 0.58 0.15 0.44 0.36 0.42 0.34 0.08 1.12 0.32 0.53 0.85 0.80 0.88 0.10 0.37 0.85 1.68 0.56 0.16 1.67 0.42 0.09 0.80 2.16 0.34 0.16 0.77 0.58 1.34 0.44 0.36 3.37 0.33 0.40 0.54 2.43 0.41 1.31 0.59 0.27 0.71 0.29 0.17 0.43 0.23 0.61 0.52 1.26 0.51 0.00 0.32 0.55 0.23 0.17 0.01 1.50 0.44 0.16 1.34 3.35 0.90 0.02 0.51 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)�������������� $4,053.2 206.1 1,092.5 252.3 517.7 1,841.4 1,571.8 1,331.7 677.1 654.6 847.2 7,803.9 $0.2 0.0 0.0 0.0 0.0 0.2 35.0 427.0 410.6 16.4 3.5 465.7 $478.6 6.2 36.2 46.6 92.8 239.9 273.5 254.4 161.8 92.6 280.7 1,287.2 $90.1 4.4 25.0 2.5 1.7 23.4 18.7 6.5 0.5 6.0 36.6 151.9 $1,985.4 148.0 777.8 157.2 204.3 663.8 740.3 267.9 35.3 232.7 224.6 3,218.3 $300.4 6.1 28.5 12.4 17.8 234.2 9.4 12.3 6.1 6.2 13.7 335.8 $21.9 0.3 1.1 0.2 6.9 13.4 5.9 74.5 18.1 56.4 0.4 102.7 $12.7 0.9 4.6 0.4 0.5 5.7 2.2 2.0 0.1 1.9 1.0 17.9 $57.4 $1,106.3 3.1 37.1 14.2 205.1 1.4 31.6 2.4 191.4 32.3 628.5 6.5 480.5 6.3 280.8 0.1 44.4 6.1 236.4 5.3 281.3 75.5 2,149.0 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�������������������������������������������������������������������� GNMA properties������������������������������������������������������ 31,823.3 9,327.7 7,650.0 832.5 6,791.1 300.6 6,862.5 0.1 0.0 0.0 0.0 0.1 0.0 0.0 2,783.9 3.2 32.2 6.0 711.6 0.0 1,974.0 663.9 233.0 254.0 16.3 112.8 47.2 0.7 18,902.2 7,400.0 5,784.3 660.2 3,679.7 221.7 1,156.3 1,609.9 335.0 199.0 31.5 617.5 2.5 424.3 43.5 8.9 16.5 0.0 17.3 0.8 0.0 221.8 91.2 81.5 1.3 44.6 3.3 0.0 640.0 197.6 206.4 13.8 207.1 14.9 0.2 6,958.0 1,058.9 1,076.2 103.5 1,400.5 10.1 3,306.9 *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. FDIC Quarterly 10 2013, Volume 7, No. 4 Quarterly Banking Profile TABLE V-A. Loan Performance, All FDIC-Insured Institutions Asset Size Distribution September 30, 2013 Geographic Regions* Less Than $100 $1 Billion Greater All Insured $100 Million to to Than Institutions Million $1 Billion $10 Billion $10 Billion 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��������������������������������������������� 1.20 0.78 0.50 0.33 0.77 1.95 0.30 1.40 1.29 1.51 0.15 0.94 1.33 1.12 1.06 0.99 0.90 1.87 1.21 1.97 1.68 1.98 0.40 1.24 0.84 0.85 0.65 0.49 0.66 1.20 0.69 1.76 1.58 1.77 0.30 0.83 0.76 0.70 0.49 0.31 0.62 1.25 0.43 1.57 1.92 1.44 0.23 0.74 1.38 0.78 0.42 0.30 0.79 2.19 0.25 1.37 1.27 1.50 0.14 0.98 0.82 0.65 0.53 0.31 0.52 1.26 0.39 1.21 1.08 1.59 0.14 0.79 1.43 0.81 0.49 0.66 0.90 2.15 0.27 2.08 2.01 2.11 0.09 1.12 1.11 0.56 0.54 0.22 0.92 1.75 0.32 1.22 1.06 1.27 0.26 0.84 1.73 1.38 0.54 0.55 0.74 2.91 0.22 1.48 1.42 1.56 0.09 1.15 0.99 0.61 0.53 0.39 0.57 1.75 0.43 0.97 0.67 1.13 0.27 0.83 0.66 0.68 0.35 0.15 0.44 1.10 0.27 1.08 1.28 0.89 0.20 0.65 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��������������������������������������������� 4.77 4.89 2.18 0.96 2.70 7.66 0.72 1.04 1.21 0.87 0.29 2.83 2.28 5.07 2.83 2.53 1.36 2.08 2.13 0.92 0.77 0.92 0.50 1.96 2.17 5.26 2.12 1.47 1.09 1.95 1.77 0.97 0.98 0.97 0.60 1.98 2.83 5.44 2.28 1.11 1.25 3.73 1.19 0.98 1.65 0.73 0.46 2.31 5.87 4.43 2.13 0.80 2.95 9.29 0.58 1.05 1.19 0.88 0.26 3.04 3.06 6.56 2.43 0.70 1.95 4.03 0.88 1.03 1.06 0.95 0.19 1.98 6.44 5.66 2.18 1.14 3.41 9.76 0.55 1.09 1.60 0.83 0.24 3.75 5.04 4.74 2.39 1.13 2.77 8.33 0.71 0.91 1.17 0.83 0.18 2.91 6.33 3.95 2.15 1.28 2.88 10.68 0.77 1.30 1.28 1.32 0.39 3.49 2.81 3.15 1.95 1.67 2.02 3.99 1.01 0.65 1.01 0.47 0.60 2.09 2.18 4.86 1.69 0.69 1.10 2.82 0.64 0.85 1.24 0.47 0.56 1.44 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��������������������������������������������� 0.52 0.64 0.28 0.10 1.14 0.55 0.32 2.17 3.44 0.82 0.09 0.72 0.29 0.61 0.43 0.32 0.35 0.24 0.54 0.43 2.18 0.41 0.08 0.31 0.31 0.82 0.29 0.18 0.42 0.27 0.50 0.77 3.77 0.58 0.15 0.35 0.30 0.49 0.25 0.21 0.49 0.31 0.34 1.37 3.50 0.55 0.17 0.38 0.63 0.62 0.29 0.05 1.25 0.64 0.31 2.26 3.44 0.86 0.08 0.82 0.46 0.91 0.36 0.05 0.65 0.51 0.58 2.59 3.16 1.02 0.07 0.97 0.65 1.31 0.41 0.10 1.55 0.48 0.27 1.94 3.92 0.82 0.08 0.69 0.52 0.64 0.35 0.18 1.00 0.50 0.28 1.28 3.32 0.62 0.03 0.50 0.72 0.22 0.10 0.08 1.41 0.93 0.22 2.91 4.11 1.30 0.12 0.91 0.25 0.24 0.20 0.25 0.92 0.22 0.24 1.07 2.03 0.57 0.23 0.33 0.16 -0.31 0.12 0.01 0.37 0.25 0.44 1.65 2.98 0.38 0.13 0.58 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)����� $4,053.2 206.1 1,092.5 252.3 517.7 1,841.4 1,571.8 1,331.7 677.1 654.6 847.2 7,803.9 $48.5 2.8 13.8 1.5 1.3 21.4 8.5 4.5 0.0 4.5 8.5 70.0 $607.2 49.3 243.1 31.2 28.3 215.9 102.7 35.2 2.1 33.1 44.0 789.0 $671.4 50.6 277.4 56.6 44.4 226.5 150.3 72.8 20.1 52.7 47.1 941.7 $2,726.1 103.3 558.2 163.0 443.8 1,377.6 1,310.3 1,219.2 654.9 564.4 747.6 6,003.2 $801.3 38.8 247.4 85.7 90.9 333.6 233.9 375.0 275.7 99.4 137.7 1,547.9 $935.7 47.8 228.3 30.0 136.1 484.5 393.8 234.7 78.5 156.2 180.4 1,744.7 $786.8 32.8 183.4 70.5 131.9 348.9 323.0 193.2 47.0 146.2 214.4 1,517.4 $808.4 31.4 163.3 22.7 111.7 391.8 339.4 290.9 166.5 124.4 238.1 1,676.7 $329.2 38.6 127.3 10.4 19.0 120.8 107.8 51.3 17.4 33.9 32.1 520.4 $391.8 16.6 142.8 33.0 28.1 161.9 174.0 186.6 92.0 94.6 44.5 796.9 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����������������������������������������������������������� GNMA properties��������������������������������������������� 31,823.3 9,327.7 7,650.0 832.5 6,791.1 300.6 6,862.5 883.8 287.1 307.7 39.3 230.7 17.8 1.1 8,896.2 4,034.8 2,929.9 253.2 1,523.7 152.2 2.5 6,571.6 2,774.6 2,145.4 216.5 1,277.4 92.0 65.7 15,471.8 2,231.2 2,267.0 323.5 3,759.2 38.6 6,793.2 3,658.3 836.9 1,053.9 205.8 1,226.5 25.1 310.2 8,127.8 2,678.2 1,607.1 111.8 1,773.0 74.1 1,883.5 7,648.0 1,333.4 1,592.4 190.2 1,788.1 55.4 2,688.5 6,464.1 1,868.9 1,480.2 159.4 949.7 48.6 1,898.2 3,953.1 1,766.6 1,283.7 109.6 648.8 79.7 64.6 1,972.1 843.7 632.7 55.7 405.0 17.6 17.4 * 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 2013, Volume 7, No. 4 Table VI-A. Derivatives, All FDIC-Insured Call Report Filers Asset Size Distribution 3rd Quarter 2013 2nd Quarter 2013 1st Quarter 2013 4th Quarter 2012 3rd Quarter 2012 (dollar figures in millions; notional amounts unless otherwise indicated) ALL DERIVATIVE HOLDERS Number of institutions reporting derivatives����������������� 1,420 1,409 1,398 1,363 1,365 Total assets of institutions reporting derivatives���������� $12,893,020 $12,689,398 $12,688,502 $12,662,780 $12,420,451 Total deposits of institutions reporting derivatives������� 9,671,930 9,409,428 9,427,223 9,383,383 9,074,347 Total derivatives������������������������������������������������������������� 242,915,548 236,525,669 232,753,745 224,271,474 229,460,777 % Change Less $100 $1 Billion 12Q3Than $100 Million to to $10 13Q3 Million $1 Billion Billion 874 366 $356,921 $1,049,670 294,689 834,916 19,982 79,885 Greater Than $10 Billion 4.0 3.8 6.6 5.9 84 $6,200 5,241 204 96 $11,480,229 8,537,084 242,815,477 Derivative Contracts by Underlying Risk Exposure Interest rate�������������������������������������������������������������������� 195,486,177 188,302,678 185,029,694 179,126,476 181,573,620 Foreign exchange*�������������������������������������������������������� 31,199,117 31,485,719 30,329,231 28,600,020 30,098,397 Equity����������������������������������������������������������������������������� 2,093,955 2,079,940 2,043,789 1,952,110 2,208,326 Commodity & other (excluding credit derivatives)�������� 1,287,651 1,275,103 1,449,766 1,402,392 1,582,317 Credit������������������������������������������������������������������������������ 12,848,648 13,382,229 13,901,264 13,190,476 13,998,117 Total�������������������������������������������������������������������������������� 242,915,548 236,525,669 232,753,745 224,271,474 229,460,777 7.7 3.7 -5.2 -18.6 -8.2 5.9 203 0 0 1 0 204 18,116 1,642 102 3 118 19,982 73,458 195,394,399 4,855 31,192,619 620 2,093,233 560 1,287,087 393 12,848,137 79,885 242,815,477 Derivative Contracts by Transaction Type Swaps���������������������������������������������������������������������������� 150,157,095 141,708,887 138,360,564 134,929,637 135,584,411 Futures & forwards�������������������������������������������������������� 41,732,945 43,358,478 45,677,282 43,579,398 44,143,779 Purchased options��������������������������������������������������������� 17,618,486 17,640,959 16,632,038 15,660,030 16,596,610 Written options��������������������������������������������������������������� 17,681,296 17,761,600 17,149,678 15,985,091 16,819,969 Total�������������������������������������������������������������������������������� 227,189,821 220,469,924 217,819,562 210,154,157 213,144,770 10.7 -5.5 6.2 5.1 6.6 37 70 14 83 204 7,398 6,811 684 4,950 19,843 48,666 15,976 4,591 10,054 79,287 150,100,994 41,710,088 17,613,197 17,666,208 227,090,487 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����������������������������������� 64,826 -10,390 -1,928 1,180 27,246 -22,673 61,166 -5,177 1,396 1,319 -8,729 13,886 67,451 -6,644 -2,588 -2,530 -20,833 25,372 96,554 -5,822 -2,029 -2,467 -40,693 42,352 98,516 -13,618 -264 -2,590 -84,508 87,900 -34.2 N/M N/M N/M N/M N/M 0 0 0 0 0 0 45 0 12 0 0 2 35 -2 19 0 1 -23 64,745 -10,388 -1,959 1,180 27,245 -22,651 Derivative Contracts by Maturity** Interest rate contracts����������������������������� < 1 year ������������������������������������������ 1-5 years ������������������������������������������ > 5 years Foreign exchange contracts������������������� < 1 year ������������������������������������������ 1-5 years ������������������������������������������ > 5 years Equity contracts��������������������������������������� < 1 year ������������������������������������������ 1-5 years ������������������������������������������ > 5 years Commodity & other contracts����������������� < 1 year ������������������������������������������ 1-5 years ������������������������������������������ > 5 years 91,851,951 32,987,747 21,753,211 18,966,399 2,870,025 1,503,977 706,604 311,790 88,294 375,292 175,069 16,142 88,194,834 30,698,073 20,837,725 19,249,542 2,734,201 1,455,297 660,945 271,219 80,891 424,514 163,094 15,300 86,868,881 29,342,123 20,313,256 18,647,264 2,738,365 1,389,930 648,510 255,625 74,515 480,077 179,413 21,538 83,065,281 30,502,104 21,448,563 18,347,400 2,868,426 1,442,901 627,310 262,230 81,851 391,393 242,068 28,823 84,190,445 30,961,899 21,990,686 18,781,964 2,894,870 1,453,914 638,274 290,474 85,427 460,565 247,795 25,053 9.1 6.5 -1.1 1.0 -0.9 3.4 10.7 7.3 3.4 -18.5 -29.3 -35.6 53 19 41 0 0 0 0 0 0 0 0 0 5,005 3,382 3,929 1,221 0 0 4 11 28 3 0 0 17,669 23,553 20,634 2,817 88 0 146 117 16 179 58 0 91,829,223 32,960,793 21,728,607 18,962,361 2,869,937 1,503,977 706,454 311,662 88,250 375,111 175,011 16,142 27.1 62.5 30.5 62.8 32.6 62.1 35.9 62.8 37.2 66.4 0.1 0.1 0.4 0.2 0.7 0.5 30.9 71.5 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 (%)�������������������������������������������������� 89.6 93.3 94.7 98.7 103.6 0.2 0.6 1.2 102.4 Credit losses on derivatives***���������������������������������� 181.0 145.0 84.0 230.0 157.0 15.3 0.0 0.0 2.0 178.0 HELD FOR TRADING Number of institutions reporting derivatives����������������� Total assets of institutions reporting derivatives���������� Total deposits of institutions reporting derivatives������� 242 10,414,708 7,805,746 243 10,170,206 7,533,623 240 10,138,207 7,538,266 247 10,122,382 7,513,330 248 9,955,537 7,270,076 -2.4 4.6 7.4 12 941 779 88 42,673 35,351 79 275,535 217,228 63 10,095,559 7,552,388 181,197,435 175,375,827 177,664,476 28,425,810 26,892,025 26,858,878 2,030,592 1,939,747 2,194,867 1,433,289 1,386,727 1,559,924 213,087,127 205,594,326 208,278,145 7.9 2.5 -5.3 -18.0 6.9 51 0 0 1 52 2,395 2 0 0 2,397 -30.9 -51.1 -54.6 N/M -12.3 0 0 0 0 0 2 0 0 0 2 27 -1 0 0 25 3,052 500 230 656 4,438 0.0 0.0 0.4 1.8 0.8 4.0 4.0 21.4 Derivative Contracts by Underlying Risk Exposure Interest rate�������������������������������������������������������������������� 191,708,900 184,309,887 Foreign exchange���������������������������������������������������������� 27,526,399 28,055,673 Equity����������������������������������������������������������������������������� 2,078,451 2,065,640 Commodity & other�������������������������������������������������������� 1,278,658 1,264,349 Total�������������������������������������������������������������������������������� 222,592,408 215,695,549 17,640 191,688,814 2,583 27,523,814 220 2,078,231 60 1,278,598 20,502 222,569,457 Trading Revenues: Cash & Derivative Instruments Interest rate�������������������������������������������������������������������� Foreign exchange���������������������������������������������������������� Equity����������������������������������������������������������������������������� Commodity & other (including credit derivatives)�������� Total trading revenues��������������������������������������������������� 3,080 499 230 656 4,465 2,762 3,139 922 452 7,275 2,216 3,190 830 1,252 7,488 4,155 759 136 -683 4,367 4,458 1,020 507 -892 5,093 Share of Revenue Trading revenues to gross revenues (%)���������������������� Trading revenues to net operating revenues (%)���������� 3.9 20.7 6.0 31.2 6.2 29.0 3.7 19.9 4.3 22.4 HELD FOR PURPOSES OTHER THAN TRADING Number of institutions reporting derivatives����������������� Total assets of institutions reporting derivatives���������� Total deposits of institutions reporting derivatives������� 1,283 12,598,451 9,438,733 1,269 12,298,101 9,102,437 1,262 12,355,323 9,167,823 1,219 12,318,101 9,111,173 1,213 11,985,731 8,728,198 5.8 5.1 8.1 73 5,332 4,526 794 319,579 263,463 327 945,164 750,780 89 11,328,376 8,419,963 Derivative Contracts by Underlying Risk Exposure Interest rate�������������������������������������������������������������������� Foreign exchange���������������������������������������������������������� Equity����������������������������������������������������������������������������� Commodity & other�������������������������������������������������������� Total notional amount���������������������������������������������������� 3,777,277 795,639 15,504 8,992 4,597,413 3,992,791 756,530 14,300 10,754 4,774,375 3,832,259 870,503 13,197 16,477 4,732,435 3,750,650 781,154 12,363 15,664 4,559,831 3,909,144 921,630 13,458 22,393 4,866,625 -3.4 -13.7 15.2 -59.8 -5.5 152 0 0 0 153 15,722 1,620 101 3 17,446 55,818 2,067 400 500 58,785 3,705,586 791,953 15,002 8,489 4,521,030 All line items are reported on a quarterly basis. N/M - Not Meaningful * Include 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. ** Derivative contracts subject to the risk-based capital requirements for derivatives. *** The reporting of credit losses on derivatives is applicable to all banks filing the FFIEC 031 report form and to those banks filing the FFIEC 041 report form that have $300 million or more in total assets. FDIC Quarterly 12 2013, Volume 7, No. 4 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 3rd Quarter 2013 2nd Quarter 2013 1st Quarter 2013 4th Quarter 2012 3rd Quarter 2012 % Change Less Than $100 $1 Billion Greater 12Q3$100 Million to to $10 Than $10 13Q3 Million $1 Billion Billion Billion 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������������������������������������������������������������������������������������������ 82 88 97 159 168 -51.2 1 30 19 32 $626,737 44 17,115 4,708 4,790 3,941 104,897 762,231 $634,882 46 17,945 3,860 4,938 4,467 99,224 765,363 $636,300 47 18,832 4,505 5,155 4,025 142,783 811,646 $641,236 49 18,942 4,684 5,083 1,839 199,968 871,800 $754,730 51 18,423 4,311 5,226 3,373 204,902 991,017 -17.0 -13.7 -7.1 9.2 -8.3 16.8 -48.8 -23.1 $0 0 0 0 0 0 0 0 $3,724 1 273 0 3 11 3,356 7,367 $14,255 0 0 0 0 1 5,314 19,570 $608,758 43 16,842 4,708 4,787 3,929 96,227 735,294 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��� 2,927 0 554 0 168 20 1,729 5,397 121 3,086 0 557 0 168 33 1,861 5,705 121 3,254 0 588 0 185 41 2,438 6,506 121 3,368 0 605 0 200 7 2,280 6,460 130 3,581 0 666 0 206 14 2,317 6,785 125 -18.3 0.0 -16.8 0.0 -18.4 42.9 -25.4 -20.5 -3.2 0 0 0 0 0 0 0 0 0 7 0 109 0 0 0 2 117 0 39 0 0 0 0 0 0 39 0 2,881 0 445 0 168 20 1,727 5,241 121 4.1 10.7 1.0 0.6 5.4 0.0 1.1 3.6 4.3 9.5 0.8 0.4 6.0 0.0 1.2 3.8 4.0 11.5 0.8 0.3 4.9 0.0 1.2 3.4 4.5 12.5 0.8 0.4 6.2 0.0 0.9 3.6 4.1 12.2 0.9 0.4 5.5 0.0 1.1 3.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 1.6 0.0 0.0 0.0 0.6 0.9 7.4 0.0 0.0 0.0 0.0 0.0 0.5 5.5 4.0 10.8 0.9 0.6 5.4 0.0 1.2 3.6 3.7 34.4 0.6 0.0 7.1 0.0 8.9 4.3 4.2 32.3 0.4 0.0 6.3 0.0 10.2 4.9 4.7 31.7 0.4 0.0 6.8 0.0 8.7 5.2 5.0 29.6 0.3 0.0 6.9 0.1 7.8 5.5 4.8 29.1 0.3 0.0 5.6 0.0 8.0 5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 1.7 0.0 0.0 6.6 0.7 0.9 7.7 0.0 0.0 0.0 0.0 60.8 1.2 6.0 3.6 34.8 0.5 0.0 7.1 0.0 9.6 4.3 0.7 0.3 1.9 0.1 0.7 0.0 0.6 0.7 0.5 0.2 1.3 0.1 0.4 0.0 0.5 0.5 0.3 0.3 0.6 0.0 0.2 0.0 0.1 0.3 1.5 1.6 2.6 0.1 1.0 0.0 0.5 1.3 1.0 1.3 2.1 0.1 0.7 0.0 0.3 0.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 4.4 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.3 1.9 0.1 0.7 0.0 0.6 0.7 0 13,451 0 0 13,076 0 0 11,868 0 0 14,514 0 0 13,291 0 0.0 1.2 0.0 0 0 0 0 321 0 0 0 0 0 13,130 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 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�������������������������������������������������������������������������������� Home equity, credit card receivables, auto, and other consumer loans��������� Commercial and industrial loans����������������������������������������������������������������������� All other loans, leases, and other assets���������������������������������������������������������� Total sold and not securitized����������������������������������������������������������������������������������� 1,065 1,063 1,058 1,025 1,007 5.8 162 693 163 47 48,266 802 64 62,143 111,275 49,471 829 71 63,988 114,359 51,539 852 74 64,769 117,234 52,099 857 76 64,999 118,031 55,384 863 46 63,170 119,463 -12.9 -7.1 39.1 -1.6 -6.9 1,482 0 1 2 1,485 14,356 7 16 47 14,427 10,218 7 40 423 10,688 22,210 788 7 61,670 84,674 Maximum Credit Exposure by Asset Type 1-4 family residential loans�������������������������������������������������������������������������������� Home equity, credit card receivables, auto, and other consumer loans��������� Commercial and industrial loans����������������������������������������������������������������������� All other loans, leases, and other assets���������������������������������������������������������� Total credit exposure������������������������������������������������������������������������������������������������� 11,580 156 29 15,316 27,081 12,164 151 34 15,360 27,709 13,077 167 36 15,216 28,496 13,146 173 42 15,043 28,403 15,884 164 38 14,438 30,524 -27.1 -4.9 -23.7 6.1 -11.3 110 0 1 2 114 2,766 7 16 20 2,809 3,757 4 12 66 3,838 4,947 146 1 15,228 20,321 Support for Securitization Facilities Sponsored by Other Institutions Number of institutions reporting securitization facilities sponsored by others������� Total credit exposure������������������������������������������������������������������������������������������������� 153 44,841 158 45,095 167 48,946 166 57,798 172 61,957 -11.0 -27.6 13 13 90 213 31 375 19 44,240 Total unused liquidity commitments������������������������������������������������������������������������� 923 828 673 779 776 18.9 0 0 0 923 5,184,983 5,349,564 5,500,385 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 (%)**������������������������������������������������������������� 4,771,558 4,872,943 -13.3 6,148 139,532 13,050 8,267 7,875 8,372 8,009 62.9 5 0 231,872 4,394,007 3 13,042 40,363 3,407 352 5.9 51,893 5,174 273 6.0 63,355 4,225 394 6.5 68,619 4,497 430 7.3 70,886 2,802 509 7.8 -43.1 21.6 -30.8 0 8 0 0.9 0 186 15 2.4 1,032 181 3 2.8 39,332 3,031 334 6.9 *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 2013, Volume 7, No. 4 Quarterly Banking Profile INSURANCE FUND INDICATORS Insured Deposit Growth Flat ■ DIF Reserve Ratio Rises 4 Basis Points to 0.68 Percent ■ Six Institutions Fail During Third Quarter ■ Total assets of the 6,891 FDIC-insured institutions increased by 1.3 percent ($191.1 billion) during the third quarter of 2013. Total deposits increased by 2.3 percent ($247.8 billion), domestic office deposits increased by 2.2 percent ($204.2 billion), and foreign office deposits increased by 3.1 percent ($43.6 billion). Domestic noninterest-bearing deposits increased by 4.2 percent ($103.1 billion) and savings deposits and interest-bearing checking accounts increased by 2.4 percent ($123.9 billion), while domestic time deposits decreased by 1.4 percent ($22.8 billion). For the 12 months ending September 30, total domestic deposits grew by 6 percent ($539.5 billion), with interest-bearing deposits increasing by 5.6 percent ($371.4 billion) and noninterest-bearing deposits rising by 7 percent ($168.1 billion).1 Foreign deposits fell by 1.1 percent, other borrowed money increased by 3.8 percent, and securities sold under agreements to repurchase declined by 18 percent over the same 12-month period.2 The aggregate amount exceeding the $250,000 limit in noninterest-bearing transaction deposits increased by $56 billion, or less than 4 percent, since the end of 2012. Table 1 shows the distribution of noninterestbearing transaction accounts larger than $250,000 by institution asset size. Total estimated insured deposits increased by 0.1 percent in the third quarter of 2013.4 For institutions existing at the start and the end of the most recent quarter, insured deposits increased during the quarter at 3,025 institutions (44 percent), decreased at 3,841 institutions (56 percent), and remained unchanged at 29 institutions. Excluding those deposit amounts that received temporary insurance coverage through the end of 2012, estimated insured deposits increased by 3.7 percent over the 12 months ending September 30, 2013. The condition of the Deposit Insurance Fund (DIF) continues to improve. The DIF increased by $2.9 billion during the third quarter to $40.8 billion (unaudited). Assessment income of $2.3 billion and a negative provision for insurance losses of $539 million were primarily responsible for the increase. Investment income, realized and unrealized gains on securities, and all other miscellaneous income net of expenses added another $307 million. Operating expenses reduced the fund balance by $298 million. The DIF’s reserve ratio was 0.68 percent on September 30, up from 0.64 percent at June 30, 2013, and 0.35 percent four quarters ago. For the first nine months of 2013, 22 insured institutions, with combined assets of $5.9 billion, failed at a current estimated cost to the DIF of $1.2 billion. At the end of the third quarter, domestic deposits funded 65.8 percent of industry assets, the largest share since the fourth quarter of 1993, when domestic deposits funded 67.9 percent of assets. Insured institutions held $2.6 trillion in domestic noninterest-bearing deposits on September 30, 2013, 71 percent ($1.8 trillion) of which was in noninterest-bearing transaction accounts larger than $250,000. Of the $1.8 trillion, $1.6 trillion exceeded the $250,000 insurance limit. The expiration of the unlimited deposit insurance coverage for noninterest-bearing transaction accounts at the end of 2012 appeared to have no significant impact on deposit levels during the first nine months of 2013.3 Throughout the insurance fund discussion, FDIC-insured institutions include insured commercial banks and savings associations and, except where noted, exclude insured branches of foreign banks. 2 Other borrowed money includes FHLB advances, term federal funds, mortgage indebtedness, and other borrowings. 3 The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) enacted on July 21, 2010, provided temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts from December 31, 2010, through December 31, 2012, regardless of the balance in the account and the ownership capacity of the funds. The unlimited coverage was available to all depositors, including consumers, businesses, and government entities. The coverage was separate from, and in addition to, the insurance coverage provided for a depositor’s other accounts held at an FDIC-insured bank. 1 FDIC Quarterly Effective April 1, 2011, the deposit insurance assessment base changed to average consolidated total assets minus average tangible equity.5 Revisions to insurance assessment rates and risk-based pricing rules for large banks (banks with assets greater than $10 billion) also became effective on that date. The Fourth Quarter Figures for estimated insured deposits in this discussion include insured branches of foreign banks, in addition to insured commercial banks and savings institutions. 5 There is an additional adjustment to the assessment base for banker’s banks and custodial banks, as permitted under Dodd-Frank. 4 15 2013, Volume 7, No. 4 Table 1 Insured Commercial Banks and Savings Institutions as of September 30, 2013 Distribution of Noninterest-Bearing Domestic Deposits by Asset Size Asset Size Less Than $1 Billion $1 - $10 Billion $10 - $50 Billion $50 - $100 Billion Over $100 Billion Total Number of Institutions 6,223 561 71 17 19 6,891 Total Assets ($ Bil.) $1,369.0 1,453.1 1,461.3 1,344.0 8,968.9 14,596.2 June 30, 2013 March 31, 2013 December 31, 2012 September 30, 2012 June 30, 2012 March 31, 2012 December 31, 2011 September 30, 2011 June 30, 2011 March 31, 2011 December 31, 2010 6,940 7,019 7,083 7,181 7,245 7,308 7,357 7,437 7,513 7,574 7,658 14,405.2 14,424.5 14,450.7 14,223.3 14,031.3 13,926.0 13,892.1 13,811.9 13,602.6 13,414.3 13,318.9 Domestic Noninterest-Bearing Transaction Accounts Larger Than $250,000* Other NoninterestAmount Above Average Average Bearing the $250,000 Account Number of Total Coverage Limit Size Accounts per Deposits** ($ Bil.) ($ Bil.) ($ Bil.) ($ Thou.) Institution $78.7 $49.9 $682 19 $129.2 117.4 84.4 890 235 114.5 120.7 96.7 1,260 1,349 91.4 157.6 139.9 2,217 4,182 48.5 1,345.4 1,227.6 2,855 24,804 356.9 1,819.8 1,598.5 2,055 128 740.5 1,697.1 1,678.7 1,753.5 1,693.5 1,567.3 1,496.5 1,577.3 1,385.3 1,207.1 1,047.1 1,010.0 1,486.3 1,472.1 1,542.3 1,491.7 1,374.7 1,309.9 1,395.5 1,209.7 1,040.8 888.7 854.2 2,013 2,031 2,075 2,098 2,034 2,004 2,169 1,972 1,815 1,653 1,621 121 118 119 112 106 102 99 94 89 84 81 760.1 766.0 787.9 698.7 730.5 735.8 688.0 708.1 705.3 699.9 679.5 * The Dodd-Frank Act provided temporary unlimited coverage through 12/31/2012, after which these accounts are not insured above the basic $250,000 coverage limit. ** Includes noninterest-bearing transaction accounts smaller than $250,000 and noninterest-bearing deposits not classified as transaction accounts. Table 2 Distribution of the Assessment Base for FDIC-Insured Institutions* by Asset Size Data as of September 30, 2013 Asset Size Less Than $1 Billion $1 - $10 Billion $10 - $50 Billion $50 - $100 Billion Over $100 Billion Total Number of Institutions 6,223 561 71 17 19 6,891 Percent of Assessment Base** Total Institutions ($ Bil.) 90.3 $1,214.4 8.1 1,285.0 1.0 1,303.9 0.2 1,129.4 0.3 7,555.9 100.0 12,488.6 Percent of Base 9.7 10.3 10.4 9.0 60.5 100.0 * Excludes insured U.S. branches of foreign banks. ** Average consolidated total assets minus average tangible equity, with adjustments for banker’s banks and custodial banks. 2010 Quarterly Banking Profile includes a more detailed explanation of these changes. Table 2 shows the distribution of the assessment base as of September 30 by institution asset size category. would have been 0.33 percent using the new assessment base (compared to 0.68 percent using estimated insured deposits), and the 2 percent DRR using estimated insured deposits would have been 0.95 percent using the new assessment base. Dodd-Frank requires that, for at least five years, the FDIC must make available to the public the reserve ratio and the Designated Reserve Ratio (DRR) using both estimated insured deposits and the new assessment base. As of September 30, 2013, the FDIC reserve ratio FDIC Quarterly Author: 16 Kevin Brown, Senior Financial Analyst Division of Insurance and Research (202) 898-6817 2013, Volume 7, No. 4 Quarterly Banking Profile Table I-B. Insurance Fund Balances and Selected Indicators (dollar figures in millions) Beginning Fund Balance����� Deposit Insurance Fund* 3rd 2nd 1st 4th Quarter Quarter Quarter Quarter 2012 2012 2012 2011 $22,693 $15,292 $11,827 $7,813 3rd Quarter 2013 $37,871 2nd Quarter 2013 $35,742 1st Quarter 2013 $32,958 4th Quarter 2012 $25,224 2,339 2,526 2,645 2,937 2,833 2,933 3,694 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����� 3rd Quarter 2011 $3,916 2nd Quarter 2011 -$1,023 1st Quarter 2011 -$7,352 4th Quarter 2010 -$8,009 3rd Quarter 2010 -$15,247 3,209 3,642 3,163 3,484 3,498 3,592 34 54 -9 66 -8 81 20 33 30 37 28 39 40 156 298 0 439 0 436 0 469 0 442 0 407 0 460 0 334 0 433 0 463 0 395 0 452 0 414 -539 -33 -499 -3,344 -84 -807 12 1,533 -763 -2,095 -3,089 2,446 -3,763 46 51 55 1,878 57 4,095 63 2,599 83 80 66 48 94 71 2,887 -96 2,129 30 2,784 -22 7,734 7 2,531 -108 7,401 160 3,465 40 4,014 -188 3,897 27 4,939 57 6,329 -30 657 163 7,238 Ending Fund Balance����������� Percent change from four quarters earlier��������� 40,758 37,871 35,742 32,958 25,224 22,693 15,292 11,827 7,813 3,916 -1,023 -7,352 -8,009 61.58 66.88 133.73 178.67 222.85 479.49 NM NM NM NM NM NM NM Reserve Ratio (%)����������������� 0.68 0.64 0.59 0.44 0.35 0.32 0.22 0.17 0.12 0.06 -0.02 -0.12 -0.15 5,969,177 5,963,323 6,010,216 7,406,652 7,250,062 7,083,433 7,032,875 6,524,750 6,380,407 6,302,329 5,421,425 6.19 7.31 8.56 10.23 10.67 8,937,725 8,848,706 8,782,134 Estimated Insured Deposits**������������������������������ Percent change from four quarters earlier��������� -17.67 Domestic Deposits��������������� 9,630,395 Percent change from four quarters earlier��������� 6.01 Number of Institutions Reporting������������������������ 6,900 -15.81 -14.54 9,424,433 9,454,580 9,474,581 9,084,803 6,974,690 6,756,302 16.59 16.54 1.98 8,526,713 8,244,900 8,006,898 24.62 7,887,733 7,753,409 5.45 6.85 7.88 6.55 8.40 10.51 11.34 9.97 7.34 3.95 2.37 2.54 6,949 7,028 7,092 7,190 7,254 7,317 7,366 7,446 7,522 7,583 7,667 7,770 Deposit Insurance Fund Balance and Insured Deposits ($ Millions) DIF Reserve Ratios Percent of Insured Deposits 0.59 0.64 0.68 0.44 0.32 -0.15 -0.12 -0.02 9/10 3/11 0.06 20.00 0.12 9/11 0.17 0.35 0.22 3/12 9/12 3/13 9/13 DIF Balance DIF-Insured Deposits 9/10 -$8,009 $5,421,425 12/10 -7,352 6,302,329 3/11 -1,023 6,380,407 6/11 3,916 6,524,750 9/11 7,813 6,756,302 12/11 11,827 6,974,690 3/12 15,292 7,032,875 6/12 22,693 7,083,433 9/12 25,224 7,250,062 12/12 32,958 7,406,652 3/13 35,742 6,010,216 6/13 37,871 5,963,323 9/13 40,758 5,969,177 Table II-B. Problem Institutions and Failed/Assisted Institutions (dollar figures in millions) Problem Institutions Number of institutions������������������������������������������������������������ Total assets����������������������������������������������������������������������������� 2013*** 515 $174,188 2012*** 694 $262,154 2012 651 $232,701 2011 813 $319,432 2010 884 $390,017 2009 702 $402,782 2008 252 $159,405 Failed Institutions 157 140 Number of institutions������������������������������������������������������������ 22 43 51 92 25 $92,085 $169,709 Total assets****����������������������������������������������������������������������� $5,860 $9,465 $11,617 $34,923 $371,945 Assisted Institutions***** 0 8 Number of institutions������������������������������������������������������������ 0 0 0 0 5 $0 $1,917,482 $0 $0 $0 $0 Total assets����������������������������������������������������������������������������� $1,306,042 * Quarterly financial statement results are unaudited. NM - Not meaningful ** Beginning in the third quarter of 2009, estimates of insured deposits are based on a $250,000 general coverage limit. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) temporarily provided unlimited coverage for noninterest-bearing transaction accounts for two years beginning December 31, 2010, and ending December 31, 2012. *** Through September 30. **** Total assets are based on final Call Reports submitted by failed institutions. *****Assisted institutions represent five institutions under a single holding company that received assistance in 2008, and eight institutions under a different single holding company that received assistance in 2009. FDIC Quarterly 17 2013, Volume 7, No. 4 Table III-B. Estimated FDIC-Insured Deposits by Type of Institution (dollar figures in millions) September 30, 2013 Commercial Banks and Savings Institutions Number of Institutions Total Assets Domestic Deposits* Est. Insured Deposits FDIC-Insured Commercial Banks����������������������������������������������� FDIC-Supervised������������������������������������������������������������������� OCC-Supervised�������������������������������������������������������������������� Federal Reserve-Supervised������������������������������������������������� 5,937 3,907 1,184 846 $13,537,669 2,143,271 9,396,946 1,997,452 $8,791,210 1,663,188 5,833,476 1,294,546 $5,253,915 1,255,179 3,285,919 712,816 FDIC-Insured Savings Institutions���������������������������������������������� OCC-Supervised Savings Institutions����������������������������������� FDIC-Supervised Savings Institutions����������������������������������� 954 515 439 1,058,566 712,555 346,011 808,471 547,435 261,036 687,372 468,783 218,588 Total Commercial Banks and Savings Institutions���������������������� 6,891 14,596,235 9,599,681 5,941,287 Other FDIC-Insured Institutions U.S. Branches of Foreign Banks������������������������������������������������� 9 68,807 30,714 27,891 Total FDIC-Insured Institutions���������������������������������������������������� .. 6,900 14,665,042 9,630,395 5,969,177 * Excludes $1.4 trillion in foreign office deposits, which are uninsured. Table IV-B. Distribution of Institutions and Assessment Base by Assessment Rate Range Quarter Ending June 30, 2013 (dollar figures in billions) Number of Annual Rate in Basis Points Institutions 2.50-5.00 1,370 5.01-7.50 2,716 7.51-10.00 1,501 10.01-15.00 765 15.01-20.00 39 20.01-25.00 461 25.01-30.00 9 30.01-35.00 83 greater than 35.00 5 Percent of Total Institutions 19.72 39.08 21.60 11.01 0.56 6.63 0.13 1.19 0.07 Amount of Assessment Base* $818 4,491 6,084 739 59 223 35 22 13 Percent of Total Assessment Base 6.55 35.97 48.74 5.92 0.48 1.79 0.28 0.17 0.10 * 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 18 2013, Volume 7, No. 4 Quarterly Banking Profile Notes to Users accounting requirements of the FFIEC Call Reports. (TFR filers began filing Call Reports effective with the quarter ending March 31, 2012.) All asset and liability figures used in calculating performance ratios represent average amounts for the period (beginning-ofperiod amount plus end-of-period amount plus any interim periods, divided by the total number of periods). For “poolingof-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. 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, e.g., institutions can move their home offices between regions, and savings institutions can convert to commercial banks or commercial banks may convert to savings institutions. 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 V-A of the FDIC Quarterly Banking Profile is aggregated for all FDICinsured institutions, both commercial banks and s avings institutions. Tables VI-A (Derivatives) and VII-A (Servicing, Securitization, and Asset Sales Activities) aggregate information only for insured commercial banks and state-chartered savings banks that file quarterly Call Reports. Table VIII-A (Trust Services) aggregates Trust asset and income information collected annually from all FDIC-insured 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. ACCOUNTING CHANGES Indemnification Assets and Accounting Standards Update No. 201206 – In October 2012, the FASB issued Accounting Standards Update (ASU) No. 2012-06, “Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution,” to address the subsequent measurement of an indemnification asset recognized in an acquisition of a financial institution that includes an FDIC loss-sharing agreement. This ASU amends ASC Topic 805, Business Combinations (formerly FASB Statement No. 141 (revised 2007),”Business Combinations”), which includes guidance applicable to FDICassisted acquisitions of failed institutions. Under the ASU, when an institution experiences a change in the cash flows expected to be collected on an FDIC loss-sharing indemnification asset because of a change in the cash flows expected to be collected on the assets covered by the loss-sharing agreement, the institution should account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in the value of the indemnification asset should be limited to the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2012. For institutions with a calendar year fiscal year, the ASU takes effect January 1, 2013. Early adoption of the ASU is permitted. The ASU’s provisions should be applied prospectively to any new indemnification assets acquired after the date of adoption and to indemnification assets existing as of the date of adoption arising from an FDIC-assisted acquisition of a financial institution. Institutions with indemnification assets arising from FDIC loss-sharing agreements are expected to adopt ASU 2012-06 for Call Report purposes in accordance with the effective date of this standard. For additional information, refer to ASU 2012-06, available at http:// www.fasb.org/jsp/FASB/ Page/SectionPage&cid=1176156316498. Tables I-B through IV-B. A separate set of tables (Tables I-B through IV-B) provides comparative quarterly data related to the Deposit Insurance Fund (DIF), problem institutions, failed/assisted institutions, estimated FDIC-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 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 double-counting of subsidiary data. Additionally, certain adjustments are made to the OTS Thrift Financial Reports to provide closer conformance with the reporting and FDIC Quarterly 19 2013, Volume 7, No. 4 ed accounting principles, institutions may not record the effect of this tax change in their balance sheets and income statements for financial and regulatory reporting purposes until the period in which the law was enacted, i.e., the first quarter of 2009. Troubled Debt Restructurings and Current Market Interest Rates – Many institutions are restructuring or modifying the terms of loans to provide payment relief for those borrowers who have suffered deterioration in their financial condition. Such loan restructurings may include, but are not limited to, reductions in principal or accrued interest, reductions in interest rates, and extensions of the maturity date. Modifications may be executed at the original contractual interest rate on the loan, a current market interest rate, or a below-market interest rate. Many of these loan modifications meet the definition of a troubled debt restructuring (TDR). The TDR accounting and reporting standards are set forth in ASC Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors (formerly FASB Statement No. 15, “Accounting by Debtors and Creditors for Troubled Debt Restructurings,” as amended). This guidance specifies that a restructuring of a debt constitutes a TDR if, at the date of restructuring, the creditor for economic or legal reasons related to a debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider. In the Call Report, until a loan that is a TDR is paid in full or otherwise settled, sold, or charged off, it must be reported in the appropriate loan category, as well as identified as a performing TDR loan, if it is in compliance with its modified terms. If a TDR is not in compliance with its modified terms, it is reported as a past-due and nonaccrual loan in the appropriate loan category, as well as distinguished from other past due and nonaccrual loans. To be considered in compliance with its modified terms, a loan that is a TDR must not be in nonaccrual status and must be current or less than 30 days past due on its contractual principal and interest payments under the modified repayment terms. A loan restructured in a TDR is an impaired loan. Thus, all TDRs must be measured for impairment in accordance with ASC Subtopic 310-10, Receivables – Overall (formerly FASB Statement No. 114, “Accounting by Creditors for Impairment of a Loan,” as amended), and the Call Report Glossary entry for “Loan Impairment.” Consistent with ASC Subtopic 310-10, TDRs may be aggregated and measured for impairment with other impaired loans that share common risk characteristics by using historical statistics, such as average recovery period and average amount recovered, along with a composite effective interest rate. The outcome of such an aggregation approach must be consistent with the impairment measurement methods prescribed in ASC Subtopic 310-10 and Call Report instructions for loans that are “individually” considered impaired instead of the measurement method prescribed in ASC Subtopic 450-20, Contingencies – Loss Contingencies (formerly FASB Statement No. 5, “Accounting for Contin gencies”) for loans not individually considered impaired that are collectively evaluated for impairment. When a loan not previously considered individually impaired is restructured and determined to be a TDR, absent a partial charge-off, it generally is not appropriate for the impairment estimate on the loan to decline as a result of the change from the impairment measurement method prescribed in ASC Subtopic 450-20 to the methods prescribed in ASC Subtopic 310-10. Goodwill Impairment Testing – In September 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-08, “Testing Goodwill for Impairment,” to address concerns about the cost and complexity of the existing goodwill impairment test in ASC Topic 350, Intangibles-Goodwill and Other (formerly FASB Statement No. 142, “Goodwill and Other Intangible Assets”). The ASU’s amendments to ASC Topic 350 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 (i.e., for annual or interim tests performed on or after January 1, 2012, for institutions with a calendar year fiscal year). Early adoption of the ASU was permitted. Under ASU 2011-08, an institution has the option of first assessing qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test described in ASC Topic 350. If, after considering all relevant events and circumstances, an institution determines it is unlikely (that is, a likelihood of 50 percent or less) that the fair value of a reporting unit is less than its carrying amount (including goodwill), then the institution does not need to perform the two-step goodwill impairment test. If the institution instead concludes that the opposite is true (that is, it is likely that the fair value of a reporting unit is less than its carrying amount), then it is required to perform the first step and, if necessary, the second step of the two-step goodwill impairment test. Under ASU 2011-08, an institution may choose to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. Extended Net Operating Loss Carryback Period – The Worker, Homeownership, and Business Assistance Act of 2009, which was enacted on November 6, 2009, permits banks and other businesses, excluding those banking organizations that received capital from the U.S. Treasury under the Troubled Asset Relief Program, to elect a net operating loss carryback period of three, four, or five years instead of the usual carryback period of two years for any one tax year ending after December 31, 2007, and beginning before January 1, 2010. For calendar-year banks, this extended carryback period applies to either the 2008 or 2009 tax year. The amount of the net operating loss that can be carried back to the fifth carryback year is limited to 50 percent of the available taxable income for that fifth year, but this limit does not apply to other carryback years. Under generally accepted accounting principles, banks may not record the effects of this tax change in their balance sheets and income statements for financial and regulatory reporting purposes until the period in which the law was enacted, i.e., the fourth quarter of 2009. Therefore, banks should recognize the effects of this fourth quarter 2009 tax law change on their current and deferred tax assets and liabilities, including valuation allowances for deferred tax assets, in their Call Reports for December 31, 2009. Banks should not amend their Call Reports for prior quarters for the effects of the extended net operating loss carryback period. The American Recovery and Reinvestment Act of 2009, which was enacted on February 17, 2009, permits qualifying small businesses, including FDIC-insured institutions, to elect a net operating loss carryback period of three, four, or five years instead of the usual carryback period of two years for any tax year ending in 2008 or, at the small business’s election, any tax year beginning in 2008. Under generally acceptFDIC Quarterly 20 2013, Volume 7, No. 4 Quarterly Banking Profile Troubled Debt Restructurings and Accounting Standards Update No. 2011-02 – In April 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-02, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring,” to provide additional guidance to help creditors determine whether a concession has been granted to a borrower and whether a borrower is experiencing financial difficulties. The guidance is also intended to reduce diversity in practice in identifying and reporting TDRs. This ASU was effective for public companies for interim and annual periods beginning on or after June 15, 2011, and should have been applied retrospectively to the beginning of the annual period of adoption for purposes of identifying TDRs. The measurement of impairment for any newly identified TDRs resulting from retrospective application should have been applied prospectively in the first interim or annual period beginning on or after June 15, 2011. (For most public institutions, the ASU takes effect July 1, 2011, but retrospective application begins as of January 1, 2011.) Nonpublic companies should apply the new guidance for annual periods ending after December 15, 2012, including interim periods within those annual periods. (For most nonpublic institutions, the ASU took effect January 1, 2012.) Early adoption of the ASU was permitted for both public and nonpublic entities. Nonpublic entities that adopt early are subject to a retrospective identification requirement. For additional information, refer to ASU 201102, available at http://www.fasb.org/jsp/FASB/Page/ SectionPage&cid=1176156316498. Accounting for Loan Participations – Amended ASC Topic 860 (formerly FAS 166) modified the criteria that must be met in order for a transfer of a portion of a financial asset, such as a loan participation, to qualify for sale accounting. These changes apply to transfers of loan participations on or after the effective date of amended ASC Topic 860 (January 1, 2010, for banks with calendar year fiscal year), including advances under lines of credit that are transferred on or after the effective date of amended ASC Topic 860 even if the line of credit agreements were entered into before this effective date. Therefore, banks with a calendar-year fiscal year must account for transfers of loan participations on or after January 1, 2010, in accordance with amended ASC Topic 860. In general, loan participations transferred before the effective date of amended ASC Topic 860 are not affected by this new accounting standard. Under amended ASC Topic 860, if a transfer of a portion of an entire financial asset meets the definition of a “participating interest,” then the transferor (normally the lead lender) must evaluate whether the transfer meets all of the conditions in this accounting standard to qualify for sale accounting. Other-Than-Temporary Impairment – When the fair value of an investment in an individual available-for-sale or held-tomaturity security is less than its cost basis, the impairment is either temporary or other-than-temporary. The amount of the total other-than-temporary impairment related to credit loss must be recognized in earnings, but the amount of total impairment related to other factors must be recognized in other comprehensive income, net of applicable taxes. To determine whether the impairment is other-than-temporary, an institution must apply the applicable accounting guidance – refer to previously published Quarterly Banking Profile notes: http://www2.fdic.gov/qbp/2011mar/qbpnot.html. FDIC Quarterly ASC Topic 805 (formerly Business Combinations and Noncontrolling (Minority) Interests) – In December 2007, the FASB issued Statement No. 141 (Revised), Business Combinations FAS 141(R)), and Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements (FAS 160). Under FAS 141(R), all business combinations, including combinations of mutual entities, are to be accounted for by applying the acquisition method. FAS 160 defines a noncontrolling interest, also called a minority interest, as the portion of equity in an institution’s subsidiary not attributable, directly or indirectly, to the parent institution. FAS 160 requires an institution to clearly present in its consolidated financial statements the equity ownership in and results of its subsidiaries that are attributable to the noncontrolling ownership interests in these subsidiaries. FAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Similarly, FAS 160 is effective for fiscal years beginning on or after December 15, 2008. Thus, for institutions with calendar-year fiscal years, these two accounting standards take effect in 2009. Beginning in March 2009, Institution equity capital and Noncontrolling interests are separately reported in arriving at Total equity capital and Net income. ASC Topic 820 (formerly FASB Statement No. 157 Fair Value Measurements issued in September 2006) and ASC Topic 825 (formerly FASB Statement No. 159 The Fair Value Option for Financial Assets and Financial Liabilities) issued in February 2007 – both are effective in 2008 with early adoption permitted in 2007. FAS 157 defines fair value and establishes a framework for developing fair value estimates for the fair value measurements that are already required or permitted under other standards. FASB FSP 157-4, issued in April 2009, provides additional guidance for estimating fair value in accordance with FAS 157 when the volume and level of activity for the asset or liability have significantly decreased. The FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. The FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Fair value continues to be used for derivatives, trading securities, and available-for-sale securities. Changes in fair value go through earnings for trading securities and most derivatives. Changes in the fair value of available-for-sale securities are reported in other comprehensive income. Available-for-sale securities and held-to-maturity debt securities are written down to fair value if impairment is other than temporary and loans held for sale are reported at the lower of cost or fair value. FAS 159 allows institutions to report certain financial assets and liabilities at fair value with subsequent changes in fair value included in earnings. In general, an institution may elect the fair value option for an eligible financial asset or liability when it first recognizes the instrument on its balance sheet or enters into an eligible firm commitment. ASC Topic 715 (formerly FASB Statement No. 158 Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans) – refer to previously published Quarterly Banking Profile notes: http://www2.fdic.gov/qbp/2011mar/qbpnot.html. ASC Topic 860 (formerly FASB Statement No. 156 Accounting for Servicing of Financial Assets) – refer to previously published Quarterly Banking Profile notes: http://www2.fdic.gov/ qbp/2011mar/qbpnot.html. 21 2013, Volume 7, No. 4 ASC Topic 815 (formerly FASB Statement No. 155 Accounting for Certain Hybrid Financial Instruments) – refer to previously published Quarterly Banking Profile notes: http://www2.fdic.gov/ qbp/2011mar/qbpnot.html. GNMA Buy-back Option – If an issuer of GNMA securities has the option to buy back the loans that collateralize the GNMA securities, when certain delinquency criteria are met, ASC Topic 860 (formerly FASB Statement No. 140) requires that loans with this buy-back option must be brought back on the issuer’s books as assets. The rebooking of GNMA loans is required regardless of whether the issuer intends to exercise the buy-back option. The banking agencies clarified in May 2005 that all GNMA loans that are rebooked because of delinquency should be reported as past due according to their contractual terms. ASC Topics 860 & 810 (formerly FASB Statements 166 & 167) – In June 2009, the FASB issued Statement No. 166, Accounting for Transfers of Financial Assets (FAS 166), and Statement No. 167, Amendments to FASB Interpretation No. 46(R) (FAS 167), which change the way entities account for securitizations and special purpose entities. FAS 166 revised FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, by eliminating the concept of a “qualifying specialpurpose entity,” creating the concept of a “participating interest,” changing the requirements for derecognizing financial assets, and requiring additional disclosures. FAS 167 revised FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, by changing how a bank or other company determines when an entity that is insufficiently capitalized or is not controlled through voting or similar rights, i.e., a “variable interest entity” (VIE), should be consolidated. Under FAS 167, a bank must perform a qualitative assessment to determine whether its variable interest or interests give it a controlling financial interest in a VIE. If a bank’s variable interest or interests provide it with the power to direct the most significant activities of the VIE, and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, the bank is the primary beneficiary of, and therefore must consolidate, the VIE. Both FAS 166 and FAS 167 take effect as of the beginning of each bank’s first annual reporting period that begins after November 15, 2009, for interim periods therein, and for interim and annual reporting periods thereafter (i.e., as of January 1, 2010, for banks with a calendar year fiscal year). Earlier application is prohibited. Banks are expected to adopt FAS 166 and FAS 167 for Call Report purposes in accordance with the effective date of these two standards. Also, FAS 166 has modified the criteria that must be met in order for a transfer of a portion of a financial asset, such as a loan participation, to qualify for sale accounting. These changes apply to transfers of loan participations on or after the effective date of FAS 166. Therefore, banks with a calendar year fiscal year must account for transfers of loan participations on or after January 1, 2010, in accordance with FAS 166. In general, loan participations transferred before the effective date of FAS 166 (January 1, 2010, for calendar year banks) are not affected by this new accounting standard and pre-FAS 166 participations that were properly accounted for as sales under FASB Statement No. 140 will continue to be reported as having been sold. FDIC Quarterly ASC Topic 740 (formerly FASB Interpretation No. 48 on Uncertain Tax Positions) – refer to previously published Quarterly Banking Profile notes: http://www2.fdic.gov/qbp/2011mar/qbpnot.html. ASC Topic 718 (formerly FASB Statement No. 123 (Revised 2004) and Share-Based Payments – refer to previously published Quarterly Banking Profile notes: http://www2.fdic.gov/ qbp/2008dec/qbpnot.html. ASC Topic 815 (formerly FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities) – refer to previously published Quarterly Banking Profile notes: http://www2. fdic.gov/qbp/2008dec/qbpnot.html. Accounting Standards Codification – refer to previously published Quarterly Banking Profile notes: http://www2.fdic.gov/ qbp/2011sep/qbpnot.html. 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 has 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 DIF deposits (deposits insured by the FDIC Deposit Insurance Fund) in banks’ domestic offices with certain adjustments. 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-publicly-traded bank stock are classified in a bank’s balance sheet as “Other liabilities.” 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 eligible 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. 22 2013, Volume 7, No. 4 Quarterly Banking Profile 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 credit exposure based on the notional amount, the remaining maturity and type of the contract. 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 noninterestbearing transaction accounts as a new temporary deposit insurance account category. All funds held in noninterestbearing 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 balance sheet—including trading assets and liabilities, available-for-sale securities, loans held for sale, assets and liabilities 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. Goodwill and other intangibles – intangible assets include servicing rights, purchased credit card relationships, and other 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 seller-provided 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 enterprises. Also, see “Securities,” below. Net charge-offs – total loans and leases charged off (removed from balance sheet because of uncollectibility), less amounts recovered on loans and leases previously charged off. 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 (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. FDIC Quarterly 23 2013, Volume 7, No. 4 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 file a Thrift Financial Report (TFR), the valuation 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. “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. FDIC Quarterly 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 aver age 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-based capital groups – definition: (Percent) Tier 1 Risk-Based Capital* Total Risk-Based Capital* Well-capitalized ≥10 ≥6 and and Tier 1 Leverage Tangible Equity ≥5 – Adequately capitalized ≥8 and ≥4 and ≥4 – Undercapitalized ≥6 and ≥3 and ≥3 – Significantly undercapitalized <6 or <3 or <3 Critically undercapitalized – – and >2 ≤2 – * As a percentage of risk-weighted assets. Risk Categories and Assessment Rate Schedule – The current risk categories became effective January 1, 2007. Capital ratios and supervisory ratings distinguish one risk category from another. Effective April 1, 2011, risk categories for large institutions (generally those with at least $10 billion in assets) are eliminated. The following table shows the relationship of risk categories (I, II, III, IV) for small institutions to capital and supervisory groups as well as the initial base assessment rates (in basis points) for each risk category. Supervisory Group A generally includes institutions with CAMELS composite ratings of 1 or 2; Supervisory Group B generally includes institutions with a CAMELS composite rating of 3; and Supervisory Group C generally includes institutions with CAMELS composite ratings of 4 or 5. For purposes of risk-based assessment capital groups, undercapitalized includes institutions that are significantly or critically undercapitalized. Supervisory Group Capital Category A 1. Well Capitalized I 5–9 bps 2. Adequately Capitalized 3. Undercapitalized II 14 bps B C II 14 bps III 23 bps III 23 bps IV 35 bps Effective April 1, 2011, the initial base assessment rates are 5 to 35 basis points. An institution’s total assessment rate may be less than or greater than its initial base assessment rate as a result of additional risk adjustments. 24 2013, Volume 7, No. 4 Quarterly Banking Profile The base assessment rates for small institutions in Risk Category I are based on a combination of financial ratios and CAMELS component ratings (the financial ratios method). As required by Dodd-Frank, the calculation of risk-based assessment rates for large institutions no longer relies on longterm debt issuer ratings. Rates for large institutions are based on CAMELS ratings and certain forward-looking 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). In general, a highly complex institution is an institution (other than a credit card bank) with more than $500 billion in total assets that is controlled by a parent or intermediate parent company with more than $500 billion in total assets or a processing bank or trust company with total fiduciary assets of $500 billion or more. The FDIC retains its ability to take additional information into account to make a limited adjustment to an institution’s total score (the large bank adjustment), which will be used to determine an institution’s initial base assessment rate. Effective April 1, 2011, the three possible adjustments to an institution’s initial base assessment rate are as follows: (1) Unsecured Debt Adjustment: An institution’s rate may decrease 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 5 basis points would have a maximum unsecured debt adjustment of 2.5 basis points and could not have a total base assessment rate lower than 2.5 basis points. (2) Depository Institution Debt Adjustment: For institutions that hold longterm 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 small institutions that are not in Risk Category I and 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. After applying all possible adjustments (excluding the Depository Institution Debt Adjustment), minimum and maximum total base assessment rates for each risk category are as follows: Beginning in 2007, 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. Special Assessment – On May 22, 2009, the FDIC board approved a final rule that imposed a 5 basis point special assessment as of June 30, 2009. The special assessment was levied on each insured depository institution’s assets minus its Tier 1 capital as reported in its report of condition as of June 30, 2009. The special assessment was collected September 30, 2009, at the same time that the risk-based assessment for the second quarter of 2009 was collected. The special assessment for any institution was capped at 10 basis points of the institution’s assessment base for the second quarter of 2009 risk-based assessment. Prepaid Deposit Insurance Assessments – In November 2009, the FDIC Board of Directors adopted a final rule requiring insured depository institutions (except those that are exempted) to prepay their quarterly risk-based deposit insurance assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012, on December 30, 2009. For regulatory capital purposes, an institution may assign a zero-percent risk weight to the amount of its prepaid deposit assessment asset. As required by the FDIC’s regulation establishing the prepaid deposit insurance assessment program, this program ended with the final application of prepaid assessments to the quarterly deposit insurance assessments payable March 29, 2013. The FDIC issued refunds of any unused prepaid deposit insurance assessments on June 28, 2013. Risk-weighted assets – assets adjusted for risk-based capital definitions which include on-balance-sheet as well as off- balance-sheet 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-balancesheet accounts. Securities – excludes securities held in trading accounts. Banks’ securities portfolios consist of securities designated as “held-to-maturity,” which are reported at amortized cost (book value), and securities designated as “available-for-sale,” reported at fair (market) value. Securities gains (losses) – realized gains (losses) on held-tomaturity 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. Total Base Assessment Rates* Large and Risk Risk Risk Risk Highly Category Category Category Category Complex I II III IV Institutions Initial base assessment rate 5–9 14 23 35 5–35 Unsecured debt adjustment -4.5–0 -5–0 -5–0 -5–0 -5–0 Brokered deposit adjustment — 0–10 0–10 0–10 0–10 Total Base Assessment rate 2.5–9 9–24 18–33 30–45 2.5–45 * 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. FDIC Quarterly 25 2013, Volume 7, No. 4 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 (http://www.treasury.gov/resource-center/ sb-programs/Pages/Small-Business-Lending-Fund.aspx). 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. FDIC Quarterly 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 & 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. 26 2013, Volume 7, No. 4 Feature Article: Community Bank Developments in 2012 U.S. counties—almost 20 percent of the total—in 2011 where the only FDIC-insured banking facilities in operation were those run by community banks. Introduction In December 2012, the FDIC published the FDIC Community Banking Study, a comprehensive report on trends in U.S. community banking over the 27-year period from year-end 1984 through 2011.1 Developing a new research definition of community banks, and addressing topics such as structural change, geography, financial performance, lending specialties, and capital formation, the Study showed that community banks continue to play a central role in the U.S. economy and in local communities across the country. At the same time, the Study highlighted a number of important long-term trends that have dramatically reshaped the community banking sector over time. The analysis of comparative financial performance in the Study also highlighted a combination of challenges and success stories for community banks. As measured by pretax return on assets (ROA), noncommunity banks outperformed community banks by an average of 38 basis points per year in the 15 years leading up to the financial crisis that began in 2007. While community banks generally held the advantage in terms of provisions for loan losses, overhead expenses, and net interest income, noncommunity banks were much more successful at deriving noninterest income from offbalance-sheet activities. Moreover, the advantage that community banks have traditionally enjoyed in generating net interest income, which accounted for 81 percent of their total revenue stream in 2005, has waned over time. The Study showed that more than 70 percent of the deterioration in the community bank efficiency ratio between 1998 and 2011 could be attributed to a squeeze on net interest income, which has intensified during the zero-interest-rate period that began in 2008.3 One such trend is consolidation: The total number of federally insured bank and thrift charters declined by 59 percent between 1984 and 2011 to 7,357. This decline was driven not only by the failures that occurred in two major banking crises, but also by the voluntary mergers and intra-company consolidations that followed the dismantling of geographic restrictions in banking some two decades ago. All of the net consolidation that took place during this period was accounted for by the disappearance of the smallest banks—those with assets less than $100 million. The number of FDIC-insured institutions with assets between $100 million and $1 billion—almost all of which met the FDIC’s research definition of a community bank—actually increased over this period. The Study failed to find systematic evidence that community banks are predisposed to be less profitable than larger, noncommunity institutions. Among charters that operated continuously between 1984 and 2011, community banks were actually a bit more profitable on average than were noncommunity banks. Analysis of average costs showed that economies of scale among community banks—where they existed at all—were mostly realized at a relatively modest asset size of $100 million to $300 million.4 More than 60 percent of community banks in 2011 operated in one of three lending specialty groups—agricultural lending, mortgage lending, or diversified nonspecialty lending— This consolidation had little net effect on the relative number of community bank organizations and charters, both of which continued to exceed 90 percent of the total in 2011. Nevertheless, it led to a two-thirds decline in the share of industry assets held by community banks, which was just 14 percent by year-end 2011. Even so, at the end of the period, community banks continued to hold 46 percent of the industry’s small loans to U.S. farms and businesses as well as the majority of banking deposits at bank branches located in rural and micropolitan counties.2 The Study identified 627 The efficiency ratio compares the level of overhead costs (total noninterest expense) to net operating revenues (the sum of net interest income and total noninterest income). A higher efficiency ratio actually suggests inefficiency, because it indicates that the bank is less productive in converting expenditures into revenue. 4 Stefan Jacewitz and Paul Kupiec, “Community Bank Efficiency and Economies of Scale” (Federal Deposit Insurance Corporation, December 2012), http://www.fdic.gov/regulations/resources/cbi/report/ cbi-eff.pdf. 3 FDIC Community Banking Study, 2012, http://www.fdic.gov/ regulations/resources/cbi/study.html. 2 Micropolitan counties are those centered on an urban core with a population between 10,000 and 50,000 people. There were 694 micropolitan counties in the United States in 2010, out of a total of 3,238. 1 FDIC Quarterly 27 2013, Volume 7, No. 4 that generally enjoyed high and stable earnings and low rates of failure during the study period. It was this type of steady earnings performance that enabled community banks to generate almost half of all the new equity capital they added during the study period through retained earnings. updated for this report using year-end 2012 data. Designating at the level of the bank holding company, the definition is applied in two steps: (1) excluding banks that do not engage in certain basic banking activities, and (2) including banks that meet minimum requirements for lending and core deposit funding and that conform to limits on the number and size of their banking offices and the number of states and large metropolitan areas in which they operate.6 The requirements and limits of item (2) are waived for those institutions with assets below a certain time-indexed size threshold ($1.12 billion in 2012), which are automatically considered to be community banks.7 As instructive as these long-term results are, they merely set the stage for a more pressing question: How will community banks fare in the post-crisis environment? This paper seeks to answer this question by extending the results of the Study. It applies the community bank definition from the Study to year-end 2012 data, and recapitulates key elements of the analysis for 2012. Consistent with the previous Study, it focuses on recent trends in industry structure, balance sheet composition, geography, earnings, and capital formation. Although size remains one factor in our definition of a community bank, it is not the only factor, as has been the case in much of the previous research on this topic. Moreover, where size-based metrics are employed in the FDIC definition, they have been indexed over time to adjust for increases in banking industry assets as well as increases in the nominal level of economic activity.8 Establishing the definition in this way allows for meaningful distinctions between community and noncommunity banks across a 28-year period. It is also worth noting that the FDIC’s community bank designations for previous years have been updated to reflect annual revisions to historical data; however, the changes to historical designations as a result of data revisions were relatively inconsequential. For example, of the 6,721 banking organizations reporting at year-end 2011, only one had its community bank designation changed as a result of revisions to historical data during 2012. Trends observed in 2012 suggest a positive outlook for the community banking sector. Overall, FDIC-insured institutions have seen problem loans decline from the peak levels of 2009. Net income has recently exceeded pre-crisis levels even if profitability—as measured by ROA—has not.5 The Study and other FDIC analyses show that smaller institutions have tended to lag larger ones in this respect, owing in part to their greater dependence on loans secured by real estate. Community banks continue to hold a majority of deposits in rural and micropolitan areas, and remain an important source of credit in many sectors. Community bank earnings improved substantially in 2012 primarily because of lower loss provisions and higher noninterest income. Higher earnings, in turn, led to greater capital formation through retained earnings, which has traditionally been the most consistent source of new capital for community banks. While the recovery of the community banking sector remains incomplete, and in some respects continues to lag that of noncommunity banks, 2012 represented the best year for community banks since the onset of the financial crisis in 2007. Table 1 depicts changes in the designations of community and noncommunity institutions between 2011 and 2012. The number of community bank charters fell by 255 (3.8 percent) during the year, while the number of noncommunity bank charters fell by 19 (3.4 percent). The following section explores structural change during 2012 in more detail. Defining the Community Bank For a complete description of the community bank definition d eveloped for the FDIC Community Banking Study, see Appendix A of the Study: http://www.fdic.gov/regulations/resources/cbi/report/ CBSI-A.pdf. 7 Analysis of these institutions shows that 92 percent of them would have conformed to all of the requirements for inclusion as a community bank at year-end 2012 even if they had not been automatically designated as community banks because of their size. 8 Between 1984 and 2012, both total assets of FDIC-insured institutions and nominal U.S. GDP rose by an approximate factor of four. 6 The FDIC Community Banking Study was conducted using a definition of a community bank that emphasized both traditional banking activities and a limited geographic scope of operations. This definition has been Industry net income peaked at $215 billion in 2006. Industry net income was $201 billion in 2012, the second-highest level on record. 5 FDIC Quarterly 28 2013, Volume 7, No. 4 Community Bank Developments in 2012 Table 1 Designation of Community Banking Organizations Using FDIC Research Criteria 2011 2012 6,357 6,141 organizations designated as “community institutions”out of 6,721 banking organizations 2011 Asset Size Threshold: $4.2 trillion in assets $1.06 billion 83 small organizations excluded $18.9 billion in assets 249 organizations $7.7 trillion in assets 27 large organizations excluded $8.1 trillion in assets $4.3 trillion in assets $655 billion in assets 314 organizations $630 billion in assets Size 32 large organizations excluded organizations designated as “community institutions” out of 6,501 banking organizations 6,043 organizations $1.3 trillion in assets 250 organizations 297 organizations 83 small organizations excluded 2012 Asset Size Threshold: $1.12 billion 5,844 organizations $1.4 trillion in assets $20.1 billion in assets 6,544 community bank charters out of 7,083 total FDIC-insured banking charters 6,799 community bank charters out of 7,357 total FDIC-insured banking charters Source: FDIC. Structural Change Chart 1 The banking industry continued to experience a net consolidation of charters during 2012, but at a slower pace than that experienced in 2010 or 2011. The total number of federally insured banks and thrifts fell by 274 (3.7 percent) during the year (see Chart 1), compared with a 4.4 percent decline in 2010 and a 3.9 percent decline in 2011. Meanwhile, the number of community bank charters fell by 255 (3.8 percent) in 2012, compared with 3.2 percent in 2010 and 3.1 percent in 2011. The Banking Industry Experienced Net Consolidation in Every Year Since 1985 Year-Over-Year Percent Change in the Number of Bank and Thrift Charters 2% 1% -3.7% 0% -1% -2% -3% 1985–2012 Average: -3.3% -4% Although the pace of industry consolidation has slowed for two consecutive years, it continues at a rate that is slightly higher than the historical average. Between 1984 and 2012, the number of insured institutions fell at an average annual rate of 3.3 percent (Chart 1), while the number of community bank charters fell at an average rate of 3.1 percent. Net consolidation of banking charters has taken place in every year since 1985, but slowed somewhat around 2000 before increasing again during the recent financial crisis. As the effects of the crisis recede, it remains to be seen whether charter consolidation will continue at an above-average pace or slow to the historically low rates experienced in the precrisis years. The answer depends on future trends in the various components of charter consolidation, namely FDIC Quarterly -5% -6% 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: FDIC. failures, intercompany mergers, intracompany consolidations, voluntary liquidations, and new charters. The number of bank failures continued to fall in 2012, but was still elevated compared with pre-crisis levels (see Chart 2). A total of 51 institutions, all of which were community banks, failed in 2012. This is down from 88 community bank failures in 2011, and down from a cyclical peak of 144 failures in 2010. The community bank failure rate, defined as the number of community 29 2013, Volume 7, No. 4 Chart 2 Chart 3 Failure Rates Have Moderated The Number of Bank Failures Continues to Decline Annual Number of Bank Failures Failed Institutions as a Percent of All Institutions Reporting at the Prior Year-End 180 5% 160 Community Banks Community Banks 140 4% Noncommunity Banks Noncommunity Banks 120 3% 100 80 2% 60 40 1% 0.75% 20 0 0.00% 0% 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: FDIC. Source: FDIC. bank failures as a percent of all community banks at the end of the previous year, fell to 0.75 percent in 2012 from 1.25 percent in 2011 (see Chart 3). Chart 4 As has been the case throughout much of the post-crisis period, most of the community banks that failed in 2012 were commercial real estate (CRE) lending specialists.9 A total of 33 CRE specialist community banks failed during the year, representing 64 percent of all community bank failures (see Chart 4). This is down from 79 CRE specialist community bank failures, 90 percent of total community bank failures, in 2011. The high rate of failure among community bank CRE specialists since 2008 illustrates both the shift of community banks toward CRE lending after 2000 and the vulnerability of this line of business to the downturn in U.S. real estate prices associated with the crisis. CRE prices as measured by the Moody’s/Real Capital Analytics Commercial Property Price Index bottomed out in 2009, while residential home prices, as measured by the Standard and Poor’s/Case-Shiller U.S. National Home Price Index, hit a cyclical low in 2012. Through the end of 2012, FDIC-insured institutions had charged off $33 billion in CRE loans, and failures had begun to moderate. These trends suggest that bank failures will contribute less to the pace of industry consolidation in the near future. 100% CRE Specialists Accounted for the Majority of Community Bank Failures in Recent Years Percent of Community Bank Failures No Specialty 80% Agricultural Specialists 60% C&I Specialists 40% CRE Specialists 20% MultiSpecialists 0% Mortgage Specialists 2008 2009 2010 2011 2012 Source: FDIC. Lending specialty groups are defined on page 5-3 of the FDIC Community Banking Study. Note: No community bank consumer lending specialists have failed since 2008. After slowing in the post-crisis years, voluntary closings picked up again in 2011 and 2012.10 Chart 5 and Chart 6 show that the number of voluntary charter closings among community banks, which averaged 243 per year between 2003 and 2008, reached a low of 102 in 2010. A total of 188 community bank charters closed through voluntary deals in 2012, up from 148 in 2011. Of these 188 closings, 142 were intercompany mergers, 35 were intracompany consolidations, and 11 were voluntary liquidations. CRE loans are composed of loans secured by multifamily residential properties, construction and development loans, and loans secured by nonfarm nonresidential properties. CRE lending specialists are institutions that either hold construction and development loans greater than 10 percent of assets or hold total CRE loans greater than 30 percent of assets, and that do not meet any of the other single-specialty lender criteria. Detailed community bank lending specialty group definitions are available on page 5-3 of the FDIC Community Banking Study. 9 FDIC Quarterly Transactions in which a charter exits the industry without failing are referred to as voluntary charter consolidations. Voluntary charter consolidations comprise intercompany mergers, intracompany charter consolidations, and voluntary liquidations. The number of voluntary liquidations is typically small, averaging seven per year since 1985. 10 30 2013, Volume 7, No. 4 Community Bank Developments in 2012 Chart 5 Chart 7 The Number of Voluntary Community Bank Closings Increased in 2012 No New Institutions Were Chartered in 2012 Annual Number of New Charters Annual Number of Voluntary Closings 400 250 Community Banks 350 Community Banks 200 Noncommunity Banks Noncommunity Banks 300 250 150 200 100 150 100 50 50 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: FDIC. Voluntary closings include intracompany consolidations, intercompany mergers, and voluntary liquidations. Chart 6 absence of any new banking charters. Chart 7 shows how chartering activity—always cyclical in nature— declined markedly after the onset of the crisis, and ceased altogether in 2012.11 A number of factors may have contributed to the steep drop-off in new charters in this cycle, including the availability to investors of hundreds of failed bank charters and the ongoing low interest rate environment that has squeezed net interest margins and profitability at many community banks (see Comparative Financial Performance: Community Versus Noncommunity Banks below). The Voluntary Closure Rate Among Community Banks Rose in 2012 Voluntarily Closed Institutions as a Percent of All Institutions Reporting at the Prior Year-End 25% Community Banks Noncommunity Banks 20% 15% 10% 6.3% 5% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: FDIC. To the extent that temporary factors have been important in the cyclical decline in new chartering, it seems likely that chartering activity will pick back up once these factors begin to abate. As of November 2013, there were two pending applications for deposit insurance by new community banks. In addition, the credit quality of bank balance sheets continued to improve, as evidenced by the decline in noncurrent loan rates for virtually every loan type in 2012. As the number of community bank failures has fallen by 65 percent from its peak in 2010, the availability of charters through failed bank acquisitions has been reduced. 2.8% 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: FDIC. Voluntary closings include intracompany consolidations, intercompany mergers, and voluntary liquidations. Chart 5 shows that the number of voluntary deals among community banks in 2012 was lower than in any of the pre-crisis years between 2003 and 2008. During those years, a vibrant market for voluntary mergers— many transacted at a premium to book value—was viewed by many as a sign of the high value of the community bank franchise. Chart 6 shows that the rate of voluntary closure among community banks has always been lower than that among noncommunity banks, and this trend continued in 2012. Community banks exited through this route at less than half the rate of noncommunity banks in 2012. Chart 6 also shows that the share of community banks exiting through voluntary closure recovered in 2010 and 2011 to a level more consistent with pre-crisis norms. For now, signs point to slowing in the pace of consolidation among community banks and the banking industry as a whole. Table 2 provides a summary of the factors contributing to net consolidation during 2012. As described above, failures are on the way down, voluntary deals are on the way up, and there appears to be greater interest in new banking charters. While gradual charter Perhaps the most important factor contributing to the net consolidation of the industry in 2012 was the FDIC Quarterly Two of the new charters issued in 2011 were “shelf charters,” used at their inception to acquire failed banks. 11 31 2013, Volume 7, No. 4 Table 2 Change in the Number of Community and Noncommunity Banks Charters in 2012 Community Noncommunity Banks Banks All Institutions Number of Institutions at Year-End 2011 Failures Intercompany Mergers Intracompany Consolidations Other Closings All Closings New Charters Net Reclassifications to/from Community Bank Status Number of Institutions at Year-End 2012 6,799 -51 -142 -35 -11 -239 0 -16 6,544 558 0 -10 -21 -4 -35 0 16 539 7,357 -51 -152 -56 -15 -274 0 0 7,083 Source: FDIC. Chart 8 consolidation has been prevalent among community banks since the mid-1980s, the direction and pace of future industry consolidation are far from clear. Community Bank Assets Grew by 2.4 Percent in 2012 Billions of Dollars $2,500 Community Bank Balance Sheet $2,000 Even as the number of FDIC-insured institutions declined in 2012, the total assets of both community and noncommunity banks increased during the year. Community bank assets grew by $47 billion (2.4 percent) to $2 trillion in 2012 (see Chart 8), while noncommunity bank assets grew by $512 billion (4.3 percent) to $12.4 trillion. $1,500 $299 +4.7% Other Assets $313 $450 +3.0% Securities $464 $1,224 +1.6% Net Loans and Leases $1,000 $500 Net loans and leases held by community banks grew by 1.6 percent in 2012. While this reversed the net decline in community bank lending observed in 2011, it remained below the 3.8 percent loan growth seen at noncommunity banks in 2012. Community banks saw expansion in agricultural, commercial and industrial (C&I), and consumer lending in 2012, and they continued to play a disproportionate role in providing credit to local farms and businesses. Community banks held 14 percent of industry assets at year-end 2012, but held 46 percent of small loans to businesses, shares that are unchanged from 2011.12 $0 Source: FDIC. 2011 $1,243 2012 offs tend to reduce outstanding loan balances, but high volumes of noncurrent loans tend to discourage banks from extending new credit while they are busy remediating problem loans. The magnitude of the boom and subsequent bust in community bank CRE balances can be seen by comparing their total CRE loan growth between 2002 and 2008 (+72 percent) and the rate of growth between 2008 and 2012 (–14 percent). The relationship between high levels of problem loans and slow or negative growth in community bank loan balances is best illustrated by C&D loans. As has been the case in recent years, C&D loan balances showed the highest percentage decline of any community bank loan category in 2012 (–9.5 percent, see Table 3), while they continued to show the highest rate of remaining noncurrent loans at year-end 2012 (7.8 percent, see Table 4). The progress that has been made to date in addressing these credit problems can be seen in the volume of total Meanwhile, community banks saw another substantial decline in their holdings of commercial real estate loans, especially construction and development (C&D) loans. It is in these portfolios that community banks have experienced the highest levels of noncurrent loans and the highest volumes of net loan charge-offs in the years following the financial crisis. Not only do chargeSmall loans to businesses include loans secured by nonfarm nonresidential properties and C&I loans in amounts under $1 million, and farmland and agricultural production loans in amounts under $500,000. 12 FDIC Quarterly 2012 Community Bank Asset Growth: +2.4% 32 2013, Volume 7, No. 4 Community Bank Developments in 2012 Table 3 Changes in the Community Bank Balance Sheet, 2011–2012 Loan or Asset Category Mortgage Loans* Consumer Loans Commercial Real Estate (CRE) Loans** Construction and Development (C&D) Loans Commercial and Industrial (C&I) Loans Agricultural Loans*** Other Loans and Leases Less: Loan Loss Provisions and Unearned Income Net Loans and Leases Securities Other Assets Total Assets Year-End 2011 Dollars in Percent of Billions Total Assets $400.3 20.3% $53.0 2.7% $523.8 26.6% Year-End 2012 Dollars in Percent of Billions Total Assets $404.6 20.0% $54.4 2.7% $517.2 25.6% Change 2011–2012 Dollars in Percent Billions Change $4.4 1.1% $1.3 2.5% -$6.5 -1.2% $83.8 $163.5 $85.5 $21.4 4.2% 8.3% 4.3% 1.1% $75.9 $171.0 $92.5 $25.7 3.8% 8.5% 4.6% 1.3% -$8.0 $7.5 $7.0 $4.3 -9.5% 4.6% 8.2% 19.9% $23.5 $1,223.9 $450.2 $298.5 $1,972.6 1.2% 62.0% 22.8% 15.1% 100.0% $22.3 $1,243.1 $463.5 $312.5 $2,019.1 1.1% 61.6% 23.0% 15.5% 100.0% -$1.2 $19.2 $13.4 $14.0 $46.5 -5.2% 1.6% 3.0% 4.7% 2.4% Source: FDIC. * Mortgage loans include home equity lines of credit, junior liens, and other loans secured by residential real estate. ** CRE loans include construction and development loans, loans secured by multifamily properties, and loans secured by nonfarm, nonresidential real estate. *** Agricultural loans include production loans and loans secured by farm real estate. Table 4 Community Bank Noncurrent Rates, 2011–2012 Loan Category Mortgage Loans* Consumer Loans Commercial Real Estate (CRE) Loans** Construction and Development (C&D) Loans Commercial and Industrial (C&I) Loans Agricultural Loans*** All Loans and Leases 2011 Noncurrent Rate 2.5% 0.9% 4.4% 11.2% 2.1% 1.0% 3.0% 2012 Noncurrent Rate 2.3% 0.9% 3.3% 7.8% 1.7% 0.8% 2.4% Change in Noncurrent Rate 2011–2012 -0.2% 0.0% -1.1% -3.4% -0.4% -0.2% -0.6% Source: FDIC. * Mortgage loans include home equity lines of credit, junior liens, and other loans secured by residential real estate. ** CRE loans include construction and development loans, loans secured by multifamily properties, and loans secured by nonfarm, nonresidential real estate. *** Agricultural loans include production loans and loans secured by farm real estate. C&D loan charge-offs that community banks have made since 2007 ($21 billion) and the fact that their noncurrent loan rate for C&D loans has declined by more than 40 percent from its peak in the first quarter of 2010. historical levels, 1-to-4 family residential loan performance at community banks was better than that at noncommunity banks. The 1-to-4 family noncurrent rate at noncommunity banks actually rose to 8.9 percent in 2012 from 8.7 percent in 2011. Other community bank loan categories also continue to display elevated levels of problem loans, even as noncurrent rates continue to recede. Some 2.3 percent of 1-to-4 family residential mortgage loans held by community banks were noncurrent at year-end 2012. Although this represents a decline from 2.5 percent in 2011, the noncurrent rate for community bank 1-to-4 family residential mortgage loans never exceeded 1.6 percent between 1990 and 2008. While noncurrent rates for many loan categories are high relative to The condition of balance sheets is not the only factor that influences loan volumes at community banks. Loan demand also declined sharply during and after the recession of 2007–2009, and has been slow to recover since the recession ended. The Federal Reserve Senior Loan Officer Opinion Survey showed that the net percent of banks reporting stronger demand for commercial loans on the part of small firms was consistently negative during a 13-quarter period that extended from the end of 2006 through the end of FDIC Quarterly 33 2013, Volume 7, No. 4 Table 5 Community Bank Share of Banking Offices and Total Deposits Located in Metro, Micro, and Rural Counties Year 1992 2002 2012 Community Bank Share of Banking Offices, by County Type (Percent) Metro Micro Rural Total Share 39% 65% 78% 46% 33% 59% 72% 40% 29% 57% 71% 36% Community Bank Share of Total Deposits, by County Type (Percent) Metro Micro Rural Total Share 31% 62% 75% 36% 21% 53% 71% 26% 14% 56% 71% 18% Source: FDIC. Note: Based on 2010 county designations made by the U.S. Office of Management and Budget. Deposit and office data are merger-adjusted to year-end. 2010. Since then, however, the net percent reporting stronger demand has been positive in all but one quarter. These trends point to a gradual improvement in loan demand, which should contribute to loan growth at community banks beyond 2012. counties by both measures since 1984. The relative concentration of noncommunity banks in metropolitan statistical areas (MSAs) is one of the factors that have allowed these institutions to grow their assets ten times faster than community banks since 1984. The Geography of Community Banks Comparative Financial Performance: Community Versus Noncommunity Banks As expected, the geographic characteristics of community banking changed little during 2012. While community banks held just 14 percent of industry assets at year-end, they continued to hold the majority of bank deposits in rural and micropolitan counties (see Table 5). Community banks were three times more likely than noncommunity banks to locate offices in a nonmetro area in 2012, and were four times more likely to operate offices in rural counties, as was the case in 2011. Community banks continued to improve their earnings in 2012 following the severe downturn in profitability and earnings that they experienced during and after the financial crisis. Their aggregate pretax ROA rose to 1.06 percent in 2012 from 0.74 percent in 2011 (see Chart 9). Moreover, the gap between community and noncommunity bank profitability narrowed to 0.42 percent from 0.59 percent. Although the pretax ROA of community banks has increased in each of the past three years from a low of –0.13 percent in 2009, it remains well below the average of 1.5 percent observed in the period 1992 through 2006. Likewise, although the disparity between community and noncommunity bank earnings has narrowed, it is still comparable to the gap that existed in 2005. It remains to be seen whether this disparity is a persistent trend or simply the result of a slower recovery on the part of community banks. In 2012, 615 U.S. counties (627 in 2011) would not have had any physical banking offices operated by FDIC-insured institutions if not for those operated by community banks. Another 642 counties where community banks operated had fewer than three noncommunity banking offices present. This means that more than 1,200 U.S. counties (of 3,238 total), encompassing more than 16 million in population, would have very limited physical access to mainstream banking services without the presence of community banks. Although the office and deposit shares of community banks continue to decline, they still play a leading role in providing financial services in many parts of the country. Low interest rates continued to squeeze net interest income in 2012 (see Chart 10). Community bank net interest income fell to 3.37 percent of average assets in 2012 from 3.43 percent in 2011. Community banks still generated higher net interest income than did noncommunity banks, which saw their net interest income fall to 2.94 percent of average assets in 2012. As long as short-term interest rates remain at zero, net interest margins are likely to remain under pressure as higheryielding loans and securities come to maturity. Because community banks earned 78 percent of their net operating revenue from net interest income in 2012, versus 61 percent for noncommunity banks, the squeeze on net Noncommunity banks continued to hold a dominant market share in the nation’s 1,169 metropolitan counties in 2012. Noncommunity banks operated 71 percent of all banking offices and held 86 percent of total deposits in metropolitan counties at year-end, with both figures up slightly from 2011. As described in the Study, these counties not only account for the vast majority of U.S. population and gross domestic product (GDP), but also have grown faster than rural and micropolitan FDIC Quarterly 34 2013, Volume 7, No. 4 Community Bank Developments in 2012 Chart 9 Percent 2.5% Chart 11 Pretax Return on Assets, 1985–2012 Noninterest Income to Average Assets, 1985–2012 Percent 3.0% 2.0% 1.48% 1.5% Community Banks Noncommunity Banks 2.5% 1.90% 2.0% 1.0% 1.5% 0.5% Community Banks 0.96% 1.0% 1.06% Noncommunity Banks 0.5% 0.0% -0.5% 0.0% 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: FDIC. Source: FDIC. Chart 10 Chart 12 Net Interest Income to Average Assets, 1985–2012 Gains on Asset Sales Drove an Increase in Community Bank Noninterest Income in 2012 Percent 4.5% Community Bank Noninterest Income as a Percent of Average Assets 1.2% 4.0% 3.37% 3.5% 3.0% 0.8% 2.94% 2.5% 2.0% Community Banks 1.5% Noncommunity Banks 1.0% 0.5% 0.0% Gains on Asset Sales Fiduciary Income 0.4% Service Charges on Deposit Accounts 0.2% Other Source: FDIC. interest income has had a disproportionate impact on overall community bank earnings. 0.82% 0.6% 0.0% 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: FDIC. 2011 2012 percent in the first nine months of 2013.13 The higher long-term interest rates observed through September 2013 will make it difficult for banks to replicate their 2012 gains in noninterest income. Both community and noncommunity banks earned higher levels of noninterest income in 2012. Community banks saw their ratio of noninterest income to average assets rise from 0.82 percent in 2011 to 0.96 percent in 2012, while noncommunity banks saw their ratio rise from 1.85 percent to 1.9 percent (see Chart 11). Also, as depicted in Chart 12, virtually all of the increase in community bank noninterest income can be attributed to gains on asset sales, which were to some extent facilitated by the decline in long-term interest rates that occurred during the year. The tenyear Treasury yield fell from 2.8 percent in 2011 to 1.8 percent in 2012, before rising again to an average of 2.2 Community and noncommunity banks maintained similar levels of noninterest expenses in 2012. Community banks reported noninterest expenses equal to 3.01 percent of average assets in 2012, versus 3 percent in 2011 (see Chart 13). Noncommunity banks reported noninterest expenses of 2.99 percent of average assets in 2012, down from 3.05 percent in 2011. As described in the Study, bank Call Report data do not facilitate the breakdown of noninterest expenses into regulatory and 13 FDIC Quarterly 0.96% 1.0% 35 Source: Federal Reserve Board (Haver Analytics). 2013, Volume 7, No. 4 Chart 13 Chart 14 Efficiency Ratio, 1985–2012 Noninterest Expense to Average Assets, 1985–2012 Percent 90% Percent 4.0% 80% 3.5% 3.0% 2.5% 3.01% 70% 2.99% 60% 69.6% 61.9% 50% 2.0% 40% Community Banks 1.5% 1.0% Community Banks 30% Noncommunity Banks Noncommunity Banks 20% 0.5% 10% 0.0% 0% 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: FDIC. Source: FDIC. nonregulatory expenses. Appendix B of the Study discusses the results of interviews with bankers related to regulatory costs and overhead expenses.14 Although the stability of overhead expenses is a positive trend for the community banking sector, it does not preclude the possibility that the regulatory component of these costs could be rising. Chart 15 Loan-Loss Provisions to Average Assets, 1985–2012 Percent 2.5% 2.0% Noncommunity Banks 1.5% A useful metric that relates the various elements of income and expense is the efficiency ratio, or the ratio of overhead expenses to net operating revenue.15 As described in the Study, a sizable gap has emerged since the late 1990s between the efficiency ratios of community and noncommunity banks. During that period, community banks experienced a marked increase (deterioration) in their efficiency ratio, most of which was attributable to the gradual decline of their net interest income. 1.0% 0.43% 0.5% 0.33% 0.0% 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: FDIC. r evenue—as has been the case in every year since 2010—the post-crisis trend continues to be a narrowing of this efficiency gap. Despite this narrowing, declining net interest income continued to put upward pressure on the community bank efficiency ratio in 2012 (see Table 6). It may prove difficult for community banks to generate further improvements in this ratio until interest rates rise to levels more in line with historical norms. The efficiency ratio of community banks improved in 2012, declining to 69.8 percent from 70.6 percent in 2011, while the efficiency ratio for noncommunity banks improved to a smaller extent, declining to 61.9 percent from 62 percent (see Chart 14). These changes reduced the efficiency gap between community and noncommunity banks to 7.8 percentage points, or less than one-half the size of this gap as recently as 2010. While community banks on average remained less efficient than noncommunity banks in generating For both community and noncommunity banks, a key element of improved profitability in 2012 was the continued rapid decline in loan-loss provisions. Community bank loss provisions fell to $6.5 billion (0.33 percent of average assets) in 2012 from $10.9 billion (0.56 percent) in 2011 and a peak of $22.5 billion (1.16 percent) in 2009 (see Chart 15). Noncommunity banks recorded loss provisions of $51.7 billion For a discussion of regulatory costs at community banks, see: http://www.fdic.gov/regulations/resources/cbi/report/CBSI-B.pdf. 15 Formally, the efficiency ratio is expressed as: Noninterest Expense . Efficiency Ratio = Net Interest Income + Noninterest Income 14 FDIC Quarterly Community Banks 36 2013, Volume 7, No. 4 Community Bank Developments in 2012 Table 6 Sources of Change in the Community Bank Efficiency Ratio, 2011–2012 Ratio Net Interest Income Assets Noninterest Income Assets Noninterest Expense Assets Efficiency Ratio 2011 Change in Income or Expense Ratio, Percentage Points 2011–2012 2012 Contribution to Change in Efficiency Ratio, Percentage Points 2011–2012 3.43% 3.37% -0.06 0.97 0.82% 0.96% 0.14 -2.30 3.00% 3.01% 0.02 0.40 70.6% 69.6% -0.93 Source: FDIC. Table 7 Community Bank Pretax Return on Assets (ROA) by Lending Specialty Group Lending Specialty Group Agricultural Specialists Consumer Specialists C&I Specialists Mortgage Specialists CRE Specialists No Specialty Multi-Specialists Total Year 2011 2006–2010 1.25% 0.89% 1.04% 0.64% 0.26% 1.05% 0.69% 0.61% 2012 1.38% 2.22% 0.89% 0.69% 0.36% 1.08% 0.72% 0.74% 1.51% 1.53% 1.30% 0.93% 0.82% 1.18% 1.17% 1.06% All Years: 1985–2012 1.41% 1.27% 1.04% 1.00% 0.66% 1.27% 0.99% 1.03% Source: FDIC. Lending specialty groups are defined on page 5-3 of the FDIC Community Banking Study. Note: Figures represent weighted average pretax return on assets for federally insured community banks reporting in each group during the period. underperformed other community bank lending specialty groups, reflecting the ongoing effects of the real estate downturn. These two specialty groups did show a marked improvement in their profitability in 2012, mostly due to lower loan-loss provisions (see Table 7). Nonetheless, consumer and agricultural specialists continued to outperform other types of community banks in 2012. (0.43 percent of average assets) in 2012, down from $66.6 billion (0.57 percent) in 2011 and a peak of $141.4 billion (1.25 percent) in 2009. Chart 15 shows that provision expenses of noncommunity banks far exceeded those of community banks at their 2009 peak, and have declined faster since then. As year-over-year reductions in provision expenses at FDIC-insured institutions become progressively smaller over time, growth in community bank earnings will increasingly depend on their ability to increase revenues. Capital Formation at Community Banks16 Improved profitability at community banks in 2012 was driven by higher levels of net income. Community banks as a group generated $16.4 billion in net income in 2012, up from $10.6 billion in 2011 and a crisis low of –$2.8 billion in 2009. The sustained improvement in community bank earnings since 2009 has once again afforded these institutions the opportunity to generate new capital through retained earnings. Community Community banks are not a uniform group of institutions, and there has always been significant variation in performance among community bank lending specialty groups. The Study identified three lending specialty groups (agricultural specialists, diversified nonspecialty lenders, and consumer specialists) as consistently outperforming other groups in terms of pretax ROA during the 1984–2011 study period, while CRE specialists underperformed for the study period as a whole. During 2011, CRE and mortgage specialists FDIC Quarterly Although the term “capital formation” is frequently used in national income accounting to describe increases in the stock of physical capital, it is used here to represent additions to equity capital by individual financial institutions. 16 37 2013, Volume 7, No. 4 Table 8 Total Additions to Equity Capital Through Retained Earnings and New Capital Raised From External Sources, 2012 Bank Type Community Banks Noncommunity Banks Total Additions to Capital Through: New Capital Raised From Retained Earnings External Sources $ Billions % of Total $ Billions % of Total $7.5 69% $3.4 31% $37.3 84% $7.0 16% $44.8 81% $10.4 19% Total $ Billions $10.9 $44.3 $55.2 Source: FDIC. Note: Figures are not adjusted to reflect merger activity. Reserve’s Comprehensive Capital Analysis and Review (CCAR) process or have moved cautiously in restoring their dividends in the wake of the crisis.18 banks generated $7.5 billion in capital through retained earnings in 2012 (see Table 8), up from $4.2 billion in 2011. Some 69 percent of the total increase in community bank capital in 2012 was generated through retained earnings, while the remaining $3.4 billion (31 percent of the total increase) was raised from external sources. Despite the importance of retained earnings to capital formation at both community and noncommunity banks, capital raising from external sources continues to be important to both groups. During 2012, 549 community banks raised $3.4 billion in new capital from external sources. This capped a five-year period in which community banks as a group raised a total of nearly $40 billion from the capital markets, and reflects continued investor confidence in the community banking model. Altogether, this new capital represented 18 percent of the total equity capital held by community banks at the end of 2012. In addition, none of the $3.4 billion in external capital raised by community banks during 2012 was obtained through participation in either the government-sponsored Capital Purchase Program, which stopped disbursing in 2009, or the Small Business Lending Fund, which stopped disbursing in 2011. Although earnings were an important source of capital formation during 2012, community banks devoted a smaller share of net income to retained earnings during the year. Among community banks that earned a profit for the year, the earnings retention ratio fell to 51 percent in 2012 from 58 percent in 2011, with the remaining income being paid out in dividends. Although the community bank earnings retention ratio remained near its ten-year average in 2012, it is well below the average level of 62 percent reported between 1984 and 2002. Meanwhile, noncommunity banks continued to pay dividends at a much higher rate than did community banks, retaining only 31 percent of 2012 earnings and paying out the remaining 69 percent in dividends. With the capital obtained during 2012 through retained earnings and from external sources, community banks were able to increase their capitalization levels as measured by both the leverage and total risk-based capital ratios (see Table 9).19 Community banks have historically held higher levels of capital than have noncommunity banks, and this pattern continued in 2012. At the end of the year, community banks held equity capital equal to 10.20 percent of total assets, compared with 8.97 percent for noncommunity banks. Community banks historically have been more reliant than noncommunity banks on capital raised through retained earnings, but the opposite was true in 2012.17 Noncommunity banks generated $37.3 billion in retained earnings during the year, accounting for 84 percent of their total additions to equity capital. Part of the success by noncommunity banks in generating retained earnings is attributable to a more rapid recovery in their net income following the crisis, from a low of –$7.1 billion in 2009 to $124.7 billion in 2012. In addition, some of the nation’s largest banks either remain unable to pay dividends under the Federal For details on the CCAR process and the Federal Reserve’s dividend guidance to participating large banking organizations, see: http:// www.federalreserve.gov/newsevents/press/bcreg/20130314a.htm. 19 It should be noted that banks report other changes to equity capital, some of which are relatively large, but these changes do not represent net capital formation and are not part of the analysis in this chapter. 18 For a historical comparison of capital raised from retained earnings by community and noncommunity banks, see Table 6.1 of the FDIC Community Banking Study. 17 FDIC Quarterly 38 2013, Volume 7, No. 4 Community Bank Developments in 2012 Table 9 Capital Ratios at Community and Noncommunity Banks, 2011–2012 Leverage Ratio Total RBC Ratio Bank Type Community Banks Noncommunity Banks Community Banks Noncommunity Banks Year-End 2011 10.02% 8.91% 16.27% 15.16% Year-End 2012 10.20% 8.97% 16.47% 14.89% Source: FDIC. The leverage ratio measures common equity, certain types of preferred equity, and retained earnings as a percentage of total assets. The total risk-based capital ratio uses a broader regulatory definition of capital and adjusts total assets to reflect a range of on- and off-balance-sheet exposures. Note: Capital ratios for 2011 are adjusted to account for acquisitions that occurred in 2012. The community bank total risk-based capital ratio at year-end 2012 was 16.47 percent, compared with 14.89 percent at noncommunity banks. Conclusion however, and future earnings growth will eventually need to be based on increases in net interest income. Even so, community banks were able to augment their equity capital by $10.9 billion during 2012, of which $7.5 billion was derived from retained earnings. By many measures, 2012 was the best year for community banks since the beginning of the financial crisis. The number and rate of community bank failures declined, even as voluntary community bank closures increased. Although there were no new institutions chartered in 2012, recent signs point to renewed interest in new bank charters. Community banks continued to strengthen their balance sheets in 2012 by reducing problem assets and increasing capital levels. Although community bank assets grew at a slower rate than did those of noncommunity banks, the improvement in credit performance at community banks made it possible for them to achieve a net growth rate of 2.4 percent of total assets for the year. Despite their relatively low 14 percent share of banking industry assets, community banks continue to play an important role in the U.S. financial system. At year-end 2012, community banks represented 92 percent of FDIC-insured banking charters and 95 percent of U.S. banking organizations, and held 46 percent of the industry’s small loans to farms and businesses—all percentages that were unchanged from 2011. Additionally, they continue to hold the majority of deposits in offices located in rural and micropolitan areas, and there were 615 U.S. counties in 2012 where the only physical banking offices were those operated by community banks. The ability to generate capital and support balanced growth through retained earnings has traditionally been a recipe for long-term success for many community banks. Although operating conditions remain challenging on a number of fronts, these developments mark continued progress in the community banking sector’s recovery from the effects of the financial crisis. Community bank earnings continued to recover in 2012, with net income totaling $16.4 billion—the second-highest annual figure on record. Pretax ROA exceeded 1 percent for the first time since 2007, and the profitability gap between community and noncommunity banks narrowed by 17 basis points from 2011. The improvement in community bank profitability was driven by higher noninterest income and lower loss provisions, which more than offset a decline in net interest income. The factors that drove increased profitability in 2012 may prove to be short-lived, FDIC Quarterly Author: 39 Benjamin R. Backup Economic Analyst Division of Insurance and Research 2013, Volume 7, No. 4