In the last two weeks, the FDIC and NCUA released their reports of the first quarter health of the institutions they insure. They also released the 2015 First Quarter Call Reports of all the insured institutions. We use these reports to derive our financial health grades for each institution. We have finished importing this data, and all of the health grades for banks and credit unions have been updated to reflect the March 31, 2015 reports.
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.
Here are a few of the noteworthy excerpts from the FDIC press release on its Q1 report:
- Loan Growth Edges Up: Total loan and lease balances increased $52.5 billion (0.6 percent) during the first three months of 2015. For the 12 months ended March 31, loans and leases increased $431.2 billion (5.4 percent), the biggest increase since mid-2008.
- Net Interest Margins Remain Under Pressure: The average net interest margin (the difference between the average yield on banks' interest-earning investments and the average interest expense of funding those investments) declined to 3.02 percent in the first quarter from 3.12 percent in the fourth quarter of 2014 and 3.16 percent in first quarter 2014. Asset yields fell more rapidly than funding costs as higher-yielding assets matured and were replaced by lower-yielding investments in an environment of low interest rates.
- "Problem List" Continues to Shrink: The number of banks on the FDIC's Problem List fell from 291 to 253 during the first quarter. This is the smallest number of banks on the Problem List in six years. The number of problem banks was down 72 percent from the peak of 888 in the first quarter of 2011.
- Deposit Insurance Fund (DIF) Rises $2.5 Billion to $65.3 Billion: The DIF increased from $62.8 billion to $65.3 billion in the first quarter, largely driven by $2.2 billion in assessment income.
- The FDIC insures deposits at the nation's banks and savings associations, 6,419 as of March 31, 2015 (down from 6,509 from the previous quarter)
It’s interesting to note that the FDIC press release highlighted that "the current interest-rate environment remains challenging for banks." This is putting pressure on the net interest margins. The rates on loans and investments aren’t high enough above deposit rates. This might be another headwind for rising deposit rates. Even when rates start to rise, banks may hold back on higher deposit rates to improve net interest margins.
The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" declined from 291 to 253 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 324 problem banks based on public enforcement actions. When I reported on the FDIC's 2014 Q3 report in November, the unofficial problem bank number was 378.
Here are a few of the noteworthy excerpts from the NCUA press release on its Q1 report:
- Total loans at federally insured credit unions reached $721.9 billion in the first quarter of 2015, an increase of 1.3 percent from the previous quarter and 10.6 percent from the first quarter of 2014.
- The loans-to-shares ratio at the end of the first quarter was 73.3 percent, a slight decline from the previous quarter but 4.1 percentage points higher than the end of the first quarter of 2014.
- Membership in federally insured credit unions grew to 99,969,794 at the end of the first quarter of 2015, an increase of more than 2.8 million from the end of the first quarter of 2014.
- The number of federally insured credit unions fell to 6,206 at the end of the first quarter, 285 fewer than at the end of the first quarter of 2014, a decline of 4.4 percent.
- At the end of the first quarter of 2014, 97.0 percent of credit unions were well-capitalized. As of March 31, 2015, less than one percent of federally insured credit unions were undercapitalized.
Note that the NCUA reported a slight decline in the loans-to-shares ratio for the quarter. This means that share growth (deposit growth) outpaced loan growth. In this environment, credit unions will be more concerned with growing loans than with growing deposits. Thus, they’ll have less of an incentive to raise deposit rates.
I did some research on loans-to-share ratios for credit unions, and I came across this 2013 article which listed credit unions that have the highest loan-to-share ratio. Some of the credit unions listed included Progressive, Melrose and PenFed. These credit unions have a long history of offering top deposit rates. As can be seen, the higher the loans-to-share ratio, the more likely we’ll see higher deposit rates at that credit union.
One final note about the NCUA press release is the table showing a summary of credit unions’ current ratios and growth during the first quarter of 2015 by asset size for selected metrics. It shows that large credit unions tend to be more financially healthy. Loan growth, return on average assets and membership growth are considerably higher at the big credit unions (those with at least $100 million in assets). It’s worth noting that the vast majority of the failed credit unions over the last several years were small with assets under $100 million.