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FDIC Third Quarter Report - Health Ratings Updated

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FDIC Third Quarter Report - Health Ratings Updated

The FDIC released its third-quarter reports that summarize the financial health of the banks. The FDIC also released third-quarter call reports of all the banks. The NCUA should soon be releasing similar data for credit unions. We have pulled in this data and have updated our financial health ratings. If you want to review the latest health ratings of your bank or credit union, check out our Bank Health Ratings page. This page also has a table of banks and credit unions ranked by Texas ratio, a standard financial health metric.

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 $36.0 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. (Second quarter’s profit was $42.2 billion)
  • Loan balances increased by $69.7 billion (0.9 percent) in the three months ending September 30, as all major loan categories except 1-4 family residential real estate loans experienced growth during the quarter. (Loan balance increased by $73.8 in the second quarter).
  • The average net interest margin — the difference between the average yield banks earn on loans and other investments and the average cost of funding those investments — was 3.26 percent, unchanged from second quarter, but down from 3.42 percent a year ago.
  • The number of banks on the FDIC's "Problem List" declined from 553 to 515 during the quarter. The number of "problem" banks is down more than 40 percent from the recent high of 888 at the end of the first quarter of 2011.
  • Six FDIC-insured institutions failed in the third quarter of 2013, down from 12 in the third quarter of 2012. Thus far in 2013, there have been 23 failures, compared to 50 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 $40.8 billion as of September 30 from $37.9 billion as of June 30.
  • 6,891 banks and savings associations deposits are insured by the FDIC (down from 6,940 in the last quarter)

The most noteworthy news in the report is the decline in profits. That’s the first decline since 2009. The FDIC attributed litigation costs at one bank to be the primary reason for this decline (The LA Times named JPMorgan Chase as this bank). However, it also mentioned another reason for the decline: reduced mortgage activity. According to the FDIC "[h]igher interest rates caused a sharp drop in mortgage activity." Those higher interest rates came when the Fed started to describe its plans to start tapering its bond buying program. You have to wonder how this news will affect the Fed’s future decisions. It seems likely that they’ll use this news to justify delays in the start of tapering or to lower the unemployment rate thresholds that they’ll use to decide on when to hike rates.

Higher interest rates caused a sharp drop in mortgage activity

Another thing to note in the press release is the increase in loan balances in the third quarter. That’s good news for savers since banks will need more deposits to support the loan growth. However, the loan growth was down from the second quarter (down from $73.8 to $69.7 billion).

Compared to the second quarter, the number of bank failures went down in the third quarter. The total number of bank failures for the year is 23 which is less than half of what it was at this time last year.

In addition to a decline in bank failures, the number of problem banks has gone down. The number of "problem" institutions is now 515, down from 553 in the second quarter.

The FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 654 problem banks based on public enforcement actions. When I reported on the FDIC's Q2 report three months ago, the unofficial problem bank number was 714.

Health Ratings

In addition to the quarterly report, the FDIC updated its database with the institutions' public financial reports that were filed by September 30, 2013. This is the data that we use to determine the health ratings of banks and credit unions.

We have already finished importing the FDIC data and updating the bank health scores. We’ll soon be doing this for credit unions when the NCUA data becomes available.

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 at least a week to update its ratings. Bankrate has been taking over a month before it updates its ratings.



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