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FDIC Third Quarter Report and Bank's Financial Health Grades


FDIC Third Quarter Report and Bank's Financial Health Grades

On Tuesday the FDIC released its 2014 Third Quarter Report, which summarizes the financial health of the banks. In addition, the FDIC released the 2014 Third Quarter Call Reports of all the banks. We are in the process of importing this data and updating the financial health grades of all banks. We are still waiting on the NCUA to update their Third Quarter data from credit unions. You can view the latest health ratings of your bank or credit union, in 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.

In the FDIC press release on the Third Quarter Report, the FDIC Chairman, Martin J. Gruenberg noted that the "banking industry had another positive quarter." The one challenge for the banking industry that Gruenberg mentioned was the low interest rate environment. Low interest rates have been putting pressure on bank profit margins. So savers haven’t been the only ones hurt by the low interest rates.

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 $38.7 billion in the third quarter of 2014, up $2.6 billion (7.3 percent) from earnings of $36.1 billion the industry reported a year earlier.
  • Total loan and lease balances rose by $50.9 billion (0.6 percent) in the third quarter to $8.2 trillion. [...] Over the last 12 months, loan and lease balances increased by 4.6 percent.
  • The average return on assets (ROA) rose slightly to 1.02 percent in the third quarter from 1.00 percent a year earlier. The average return on equity (ROE) rose from 8.94 percent to 9.04 percent.
  • The number of banks on the FDIC's "Problem List" declined from 354 to 329 during the quarter, the lowest since the 305 in the first quarter of 2009.
  • Two FDIC-insured institutions failed in the third quarter, compared to six in the third quarter of 2013.
  • The Deposit Insurance Fund (DIF) balance continued to increase. The DIF balance (the net worth of the Fund) rose to a record $54.3 billion as of September 30 from $51.1 billion at the end of June.
  • 6,589 banks and savings associations deposits are insured by the FDIC (down from 6,656 in the last quarter)
  • There were 6,107 community banks (93.0 percent of all FDIC-insured institutions) in the third quarter of 2014 with assets of $2.0 trillion (13.0 percent of industry assets).

The two things I look at in these reports are loan and deposit growth changes. The best environment for savers is growing loans and shrinking deposits. That encourages banks to raise deposit rates to attract deposits to fund new loans. In the report, the FDIC reported that loan and lease balances increased by 0.6%. That growth was quite a bit smaller than the previous quarter when the balances increased by 2.3%. Deposit news was also a little disappointing for savers. The FDIC reported that insured deposits increased by 0.4%. In the previous quarter, insured deposits decreased by 0.2%.

One thing that’s good for savers is fewer problem banks. The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" declined from 354 to 329 during the quarter. In recent times, that number peaked at 888 in Q1 of 2011.

The FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 411 problem banks based on public enforcement actions. When I reported on the FDIC's 2014 Q2 report in September, the unofficial problem bank number was 437.

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, 2014. The NCUA should be releasing similar reports from credit unions soon. This is the data that we use to determine the health grades of banks and credit union.

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 grade 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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