The FDIC released its 2014 first-quarter reports that summarize the financial health of the banks. The FDIC also released fourth-quarter call reports of all the banks. We have imported this data and have updated our financial health grades of all banks. We are still waiting on the NCUA to release the Q1 data from credit unions. Once that’s done, we’ll update the grades for all credit unions. 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 $37.2 billion in the first quarter of 2014, down $3.1 billion (7.6 percent) from earnings of $40.3 billion the industry reported a year earlier. (Fourth quarter’s net income was $40.3 billion)
- Total loan and lease balances rose by $37.8 billion (0.5 percent) in the first quarter to $7.9 trillion. (Loan balances increased by $90.9 billion in the fourth 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 3.17 percent, the lowest since the third quarter of 1989 as declining asset yields at larger institutions outpaced the decline in the cost of funds.
- The number of banks on the FDIC's "Problem List" declined from 467 to 411 during the quarter. The number of "problem" banks now is less than half the post-crisis high of 888 at the end of the first quarter of 2011.
- Five FDIC-insured institutions failed in the first quarter.
- The Deposit Insurance Fund (DIF) balance continued to increase. The DIF balance (the net worth of the Fund) rose to $48.9 billion as of March 31 from $47.2 billion at year-end 2013.
- 6,730 banks and savings associations deposits are insured by the FDIC (down from 6,812 in the last quarter)
The first thing to note is that net income from all banks fell in the first quarter on a year-over-year basis. According to the FDIC, this was caused by "reduced mortgage activity and a drop in trading revenue." The reduced mortgage activity was blamed on the higher interest rates that we saw last year after the Fed hinted that it was preparing to start tapering its bond buying program. This news gives the inflation doves on the Fed more reasons to delay rate hikes.
Another thing to note is how the total deposits and loans are trending. Banks are more likely to offer higher deposit rates when deposits are shrinking and loans are growing. From the FDIC report, total loans did grow by 0.5% but this increase is smaller than last quarter when it increased by 1.2%. Insured deposits increased 1.9% in the first quarter which was a larger increase than we saw in the fourth quarter when insured deposits grew by 0.7%. So loans grew less and deposits grew more. That’s the opposite of what we want to see for higher deposit rates.
On a positive note, there are fewer "problem banks", and this is a consistent trend that we’ve seen for the last 12 quarters. According to the FDIC the "number of banks on the FDIC's "Problem List" declined from 467 to 411 during the quarter. The number of "problem" banks now is less than half the post-crisis high of 888 at the end of the first quarter of 2011. "
The FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 499 problem banks based on public enforcement actions. When I reported on the FDIC's 2013 Q4 report three months ago, the unofficial problem bank number was 578.
In addition to the quarterly report, the FDIC updated its database with the institutions' public financial reports that were filed by March 31, 2014. This is the data that we use to determine the health grades of banks and credit unions.
We have finished importing the FDIC data, and all our bank health grades have been updated. We are still waiting on the NCUA to release the Q1 data from credit unions.
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.