The FDIC released its first quarter 2011 profile on the banking industry. Here are some of the noteworthy excerpts from the press release:
- Commercial banks and savings institutions insured by the [FDIC] reported an aggregate profit of $29 billion in the first quarter of 2011, an $11.6 billion improvement (66.5 percent) from the $17.4 billion in net income the industry reported in the first quarter of 2010.
- The number of institutions on the "Problem List" flattened. The net increase of four, to 888, is the smallest in three-and-a-half years. The number of "problem" institutions is the highest since March 31, 1993, when there were 928.
- Total assets of "problem" institutions increased from $390 billion to $397 billion
- 26 insured institutions failed during the first quarter, the smallest number in the last seven quarters.
- The Deposit Insurance Fund (DIF) balance neared positive territory. The DIF balance — the net worth of the fund — rose from negative $7.4 billion to negative $1.0 billion during the first quarter.
- Total loans and leases fell for the tenth time in the past eleven quarters (the one exception in first quarter of 2010 resulted from changes in reporting rules, not from actual loan growth). More than 70 percent of all insured institutions reported declines in loan balances in the first quarter. The net decline in balances in the first quarter totaled $126.6 billion (1.7 percent).
- Total estimated insured deposits increased by 1.4 percent in the first quarter. Over the past four quarters, insured deposits increased by 16.7 percent, reflecting the inclusion of temporarily insured deposits in large noninterest-bearing transaction accounts.
- 7,575 banks and savings associations (down from 7,657 in the last quarter)
One thing I found interesting is the big decline in loan balances which fell by 1.7% in the first quarter. In Q4 and Q3 of 2010, the loan balances fell only by 0.2% and 0.1%. Unlike loans, deposits increased by 1.4% in the first quarter. Deposits went up much more in Q4 of 2010, but that was likely primarily due to temporary coverage of non-interest accounts.
This isn’t a good sign for future deposit rates. With fewer loans, banks have less of a need to attract deposits. If they have more deposits than loans, they have to invest those deposits in safe investments like Treasuries which have pathetic yields. Earlier this year I reported on a credit union explanation of how this imbalance of loans and deposits was forcing them to lower deposit rates.
For bank failures, this report is another sign that we are past the peak. The 26 bank failures in the first quarter was the smallest number in the last 7 quarters. We are almost two-thirds through with Q2, and so far there have been only 17 more bank failures. So Q2 may have fewer bank failures than Q1. Even if we average 26 failures per quarter for this year, that would only be 104 failures for the year which is much less than the 157 bank failures in 2010.
Another sign that we’re past the peak is the flattening of the FDIC’s problem list. It grew only from 884 to 888. The FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 988 problem banks based on public enforcement actions.
In addition to the quarterly report, the FDIC updated its database with the banks' financial data for March 31, 2011. In the next few days we should have our database of bank financials updated so our health scores and Texas Ratios will be based on this latest 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. BauerFinancial typically takes a couple of weeks to update its ratings. Bankrate.com has been taking one to two months before it updates its ratings.