FDIC's Second Quarter Report & Bank Health Ratings
The FDIC released its second quarter 2012 profile on the banking industry today. Here are some of the noteworthy excerpts from the press release:
- Commercial banks and savings institutions insured by the [FDIC] reported aggregate net income of $34.5 billion in the second quarter of 2012, a $5.9 billion improvement from the $28.5 billion in profits the industry reported in the second quarter of 2011. (First quarter's profit was $35.3 billion.)
- Loan balances posted their fourth quarterly increase in the last five quarters, rising by $102 billion (1.4 percent). (In the first quarter they declined by $56.3 billion.)
- Net operating revenue (net interest income plus total noninterest income) totaled $165.4 billion, an increase of $1.3 billion (0.8 percent) from a year earlier, as gains from loan sales rose by $3.0 billion.
- The flow of money into deposit accounts continued to slow. Total deposits increased by $61.6 billion in the second quarter, after rising by $74.7 billion in the first quarter and $186 billion in the fourth quarter of 2011.
- The number of "problem" institutions fell for the fifth quarter in a row. The number of "problem" institutions declined from 772 to 732. This is the smallest number of "problem" banks since year-end 2009.
- Total assets of "problem" institutions declined from $292 billion to $282 billion.
- Fifteen insured institutions failed during the second quarter. This is the smallest number of failures in a quarter since the fourth quarter of 2008, when there were 12.
- The Deposit Insurance Fund (DIF) balance continued to increase. The unaudited DIF balance — the net worth of the fund — rose to $22.7 billion at June 30 from $15.3 billion at the end of March.
- 7,246 banks and savings associations deposits are insured by the FDIC (down from 7,309 in the last quarter)
It's better for savers when deposits held at banks are shrinking while loans are increasing. In these conditions, banks need deposits and are more willing to offer good deposit deals. That was not the case in the first quarter. In the second quarter, conditions have improved with the total loan balance increasing. Total deposits still had an increase, but the flow of money into deposit accounts slowed. In addition, all of the increase appeared to be from deposits with temporary unlimited coverage under the Dodd-Frank Act. These accounts pay no interest. This temporary unlimited coverage is scheduled to end this year, and that may provide a little boost to deposit rates as banks may find they need to raise deposit rates to maintain their deposits.
In terms of bank failures, the trend of fewer bank failures continues. Only 15 banks failed in the first quarter which is down from 16 in the first quarter. For the first two months of this quarter, 9 banks have failed.
In addition to a decline in bank failures, the number of problem banks has gone down. The number of "problem" institutions is now 732, down from 772 in the first quarter.
The FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 898 problem banks based on public enforcement actions. When I reported on the FDIC's Q1 report 3 months ago, the unofficial problem bank number was 928.
In addition to the quarterly report, the FDIC updated its database with the banks' public financial reports that were filed by June 30, 2012. This is the data that we use to determine the health ratings of banks.
We will be updating our bank health scores and Texas Ratios soon based on this new data. You can view a table of banks and credit unions with the worst Texas Ratios in our Bank Health Ratings page. From here you can also search for your bank and credit union to view its Texas Ratio, health score and other financial data.
Update 8/30/2012: We have updated our bank health scores and Texas ratios for all banks. We are still waiting on the Q2 release from the NCUA.