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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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FDIC First Quarter Banking Report & Institution Health Ratings

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The FDIC released its first quarter 2013 profile of the banking industry on Wednesday. According to this AP news article, “U.S. banks earned more from January through March than during any quarter on record, buoyed by greater income from fees and fewer losses from bad loans.” Most of the growth is being driven by the largest banks, many of which have been helped by bailout money and by the record low interest rates. However, this low interest rate environment continues to put downward pressure on banks’ net interest margins.

This Forbes article provides a good explanation of why net interest margins have been declining. In addition to the low interest rates, loan growth continues to be slow as compared to deposit growth. If banks can’t use deposits for loans, they have to invest the deposits, and in today’s environment, there’s little return for safe investments. In fact, the FDIC Chairman warned about this in the FDIC press release: “tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention.”

Here are some of the noteworthy excerpts from the FDIC press release:

  • Commercial banks and savings institutions insured by the [FDIC] reported aggregate net income of $40.3 billion in the first quarter of 2013, a $5.5 billion (15.8 percent) increase from the $34.8 billion in profits that the industry reported in the first quarter of 2012 (Fourth quarter’s profit was $34.7 billion).
  • Total loan balances posted a seasonal decline. Loan balances fell by $36.8 billion (0.5 percent) in the first quarter, as credit card balances declined by $35.9 billion (5.2 percent).
  • Total deposits increased by $1.8 billion (0.02 percent), as deposits in domestic offices fell by $20.5 billion (0.2 percent) and foreign office deposits rose by $22.3 billion (1.6 percent). Noninterest-bearing transaction deposits with balances greater than $250,000 fell by $74.9 billion (4.3 percent) during the quarter. Balances in these accounts that were over the $250,000 basic FDIC coverage limit declined by $70.3 billion (4.6 percent).
  • First quarter net operating revenue (net interest income plus total noninterest income) totaled $170.6 billion, an increase of $2.7 billion (1.6 percent) from a year earlier, as noninterest income increased by $5.1 billion (8.3 percent) and net interest income declined by $2.4 billion (2.2 percent). The average net interest margin fell to its lowest level since 2006.
  • The number of banks on the FDIC's "Problem List" declined from 651 to 612 during the quarter.
  • Four FDIC-insured institutions failed in the first quarter, the smallest number since the second quarter of 2008 when two institutions were closed. Thus far in 2013, there have been 13 failures, compared to 24 during the same period in 2012.
  • The Deposit Insurance Fund (DIF) balance continued to increase. The DIF balance — the net worth of the fund — rose to $35.7 billion as of March 31 from $33.0 billion at the end of 2012.
  • 7,019 banks and savings associations deposits are insured by the FDIC (down from 7,083 in the last quarter)

For savers the two important trends are loan and deposit balance changes. The environment that’s most conducive for deposit rates is growing loan balances and shrinking deposit growth. The numbers from the first quarter are a little disappointing. First, loan balances declined. However, the FDIC blames this on seasonal factors. The decline was smaller than what was seen in the first quarter of 2012.

Deposit growth in this quarter was small, a growth of only 0.02%. However, this includes noninterest-bearing transaction accounts. Since the temporary unlimited deposit insurance for noninterest-bearing transaction accounts ended in January, it would have seemed likely that total deposit balances would have declined. Balances in these noninterest-bearing accounts that were over the $250,000 basic FDIC coverage limit declined 4.6 percent, but this wasn’t enough to cause the total deposit balance to decline.

With more deposits and fewer loans, banks will have more reasons to lower their deposit rates.

For bank failures, the trend of fewer failures continues. Only four banks failed in the first quarter. However, the number of bank failures went way up in April. For the year, the total number of bank failures is at 13. Even with the recent pace of bank failures, we’re still far behind last year. At this time last year there had been 24 bank failures for the year.

In addition to a decline in bank failures, the number of problem banks has gone down. The number of "problem" institutions is now 612, down from 651 in the fourth quarter.

The FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 767 problem banks based on public enforcement actions. When I reported on the FDIC's Q4 report three months ago, the unofficial problem bank number was 809.

Health Ratings

In addition to the quarterly report, the FDIC updated its database with the institutions' public financial reports that were filed by March 31, 2013. The NCUA should be updating its database soon. This is the data that we use to determine the health ratings of banks and credit unions.

We'll be importing the FDIC and NCUA data and updating the bank health scores over the next week.

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.

BauerFinancial typically takes a couple of weeks to update its ratings. Bankrate.com has been taking over a month before it updates its ratings.



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Comments
11 Comments.
Comment #1 by Shorebreak posted on
Shorebreak
“U.S. banks earned more from January through March than during any quarter on record, buoyed by greater income from fees and fewer losses from bad loans.” Most of the growth is being driven by the largest banks, many of which have been helped by bailout money and by the record low interest rates."

Say thank you to Chairman Bernanke.

11
Comment #2 by Anonymous posted on
Anonymous
SO I WALK INTO CHASE

1] I ASK IF I CAN GET A CAR LOAN

--THEY SAY THEY DONT DO CAR LOANS

2] SO I ASK IF I CAN OPEN A SAVINGS ACCOUNT

--THEY SAY I HAVE TO OPEN A CHECKING ACCOUNT TO HAVE A SAVINGS ACCOUNT

3] SO I SAY, OK, I WILL OPEN A CHECKING ACCOUNT

--SO THEY SAY DO I WANT A DEBIT OR A CREDIT CARD?

4] SO I SAY, I DONT WANT EITHER, JUST A CHECKING ACCOUNT SO I CAN OPEN A SAVINGS ACCOUNT

--SO THEY SAY I HAVE TO HAVE A DEBIT OR CREDIT CARD TO HAVE A CHECKING ACCOUNT

5] OK, GIVE ME A DEBIT CARD

--THEY TELL ME I MUST HAVE AT LEAST 3 TRANSACTIONS PER MONTH TO MAINTAIN MY DEBIT CARD WITH NO FEES

6] SO I SAY GIVE ME CREDIT CARD INSTEAD OF A DEBIT CARD

--THEY SAY I HAVE TO HAVE A BALANCE OF AT LEAST 250 IN MY CHECKING ACCOUNT  OR  AUTO PAY FROM MY SAVINGS ACCOUNT TO HAVE A CREDIT CARD

7] SO I PUT $250 IN THE CHECKING ACCOUNT, I OPEN MY .2% APY SAVINGS ACCOUNT AND PUT $100 IN IT, I GET MY CREDIT CARD

 

AND

 

8] GO TO FORD WHERE I GET MY CAR LOAN TO BUY A FOCUS

--THEY WANTED TO SEE MY CHASE CREDIT CARD BEFORE THEY MADE ME THE LOAN

 

AND THATS BANKING IN AMERICA TODAY 

14
Comment #3 by Anonymous posted on
Anonymous
What is not said is that the banks have two tears loan ledgers, one is current and performing loans and the second is bad loans, which is 10 times bigger than the performing loans.
FDIC allow this to happen in 2009 and the un-performing loans are shoved under the rag and are not used to balance the current performance of the banks.
Charades and more charades, make believe income, not reporting losses and there you have, healthy as a new born baby banking system.
This economy is based on lies and deceptions and Bernanke is the master chef of cooking the books.

12
Comment #4 by Maecl posted on
Maecl
The experience #2 had with Chase is why I love my hometown bank.  While not what they used to be, they are better than the big and regional banks.  Government Dodd-Frank may be their demise.

6
Comment #5 by Anonymous posted on
Anonymous
.” Most of the growth is being driven by the largest banks, many of which have been helped by bailout money and by the record low interest rates."

and add "paid for by SAVERS geting zero % on their savings and by the American taxpayer debt, both forced to support these so-called 'private' big banks.

13
Comment #6 by Anonymous posted on
Anonymous
Ken, do you want honest opinion, then read this:

Most of us could care less about the health of the banks, the rating is just for internal use only and for issuing bonds, notes or credits on the open market.
As long as you stay under $250K per account, only thing that matters is how much interest we can get out of the bank or CU.

That’s what we want to hear from you, who pays most interest, the rest is just a noise that has no effect on most of us. You have the Moody, S&P, Fitch, A.M. Best and many others that keep track of all of the banks.

At the end, none of it matters, any bank from small to big can go under without warning despite having prior high or low rating. If a bank has 5 stars or AAA, means nothing if they don’t pay interest on our savings.

I will put my money in a D- or no star bank as long as they pay me some interest.

The health of the banks is over rated anyway, they all manipulate the earnings, expenses, interest and income.

12
Comment #9 by Anonymous posted on
Anonymous
#6  I hope you are speaking for mainly yourself because if "most" of us don't care about the ratings of the banks and/or credit unions, why are Bankrate and Bauer so popular?  I think it is very helpful of Ken to let us know the ratings of these institutions.  It saves me from having to do extra research on the other websites.  Unlike yourself, I do care about the ratings of the banks etc. and will not use a bank with a one star or even two star rating no matter how high their interest rate is.  It is important to me that the places I deposit my funds are well run and in good shape financially even if they are FDIC insured etc.  So I do hope Ken will ignore your post and continue to inform us of the financial ratings of these institutions.  Peace of mine to one person may have a different meaning to another. 

9
Comment #10 by Anonymous posted on
Anonymous
#9 - You want Ken to completely ignore the post by #6 because 'you' do not agree with it? Will your next request be for Ken to ignore, and perhaps even remove, all posts that 'you' do not agree with? It would seem that #6 is entitled to his/her opinion, with or without your consent, and it appears that several posters herein agree with the opinion stated by #6. Of course, instead of  being a self-appointed forum sheriff, you could always post some meaningful information that might actually prove beneficial to us all. Think about it.

 

3
Comment #11 by Anonymous posted on
Anonymous
#10  So it's ok for #6 to say "most of us could care less about the health of the banks" but because "I" give a different opinion, I am suddenly the "self-appointed forum sheriff"??  I guess it all depends upon who "you" decide should post.  I post as many beneficial posts as I am allowed to considering how people like yourself wait for the chance to pounce.  You want to know the best bank to do business with?  Any bank I am "not" doing business with.  :)

2
Comment #8 by Anonymous posted on
Anonymous
To Anonymous "SO I WALK INTO CHASE".

The last sentence of your story SHOULD have been:

SO I WALKED OUT OF CHASE AND WENT TO MY LOCAL OPEN CREDIT UNION INSTEAD.

As long as people don't USE the CHOICES they have, they're just going to keep on getting ****ed and bullied. As they say... it's YOUR money...

 

6
Comment #12 by Anonymous posted on
Anonymous
Yes, #10, I suppose #6 can state his;her opinion so long as it is within the forum rules, not 'your' rules, the forum rules. No need for you to solicit Ken's help, just deal with it. You obviously have a hard time dealing with opinions contrary to your own and it certainly shows. And welcome to the internet. lol

3