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Bank and Credit Union Health Grades Updated from Q4 FDIC and NCUA Reports


Bank and Credit Union Health Grades Updated from Q4 FDIC and NCUA Reports

The FDIC and NCUA recently released their reports of the fourth quarter health of the institutions they insure. They also released the 2015 Fourth 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 December 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 highlights from the FDIC press release on its Q4 report:

  • Total loan and lease balances increased $197.3 billion (2.3 percent) during the fourth quarter. For the 12 months ended December 31, loans and leases increased $530.1 billion (6.4 percent). This is the largest 12-month growth rate since mid-2007 to mid-2008. At community banks, loan balances rose 2.5 percent during the fourth quarter of 2015 and increased 8.6 percent during the past 12 months.
  • Revenue growth continues to be held back by narrow interest margins. Many institutions are reaching for yield, given the competition for borrowers and low interest rates. And there are signs of growing credit risk, particularly among loans related to energy and agriculture.
  • "Problem List" continues to shrink: The number of banks on the FDIC's Problem List fell from 203 to 183 during the fourth quarter. Total assets of problem banks fell from $51.1 billion to $46.8 billion during the fourth quarter.
  • Deposit Insurance Fund (DIF) Rises $2.5 Billion to $72.6 Billion: The DIF increased from $70.1 billion in the third quarter to $72.6 billion in the fourth quarter, largely driven by $2.2 billion in assessment income. The DIF reserve ratio rose from 1.09 percent to 1.11 percent during the quarter.
  • The FDIC insures deposits at the nation’s banks and savings associations, 6,182 as of December 31, 2015 (down from 6,270 from the previous quarter)
You can view the latest health ratings of your bank or credit union in our Bank Health Ratings page.

The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" declined from 203 to 183 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 228 problem banks based on public enforcement actions. When I reported on the FDIC's 2015 Q3 report in December, the unofficial problem bank number was 255.

Here are a few of the noteworthy excerpts from the NCUA press release on its Q4 report:

  • Total loans at federally insured credit unions reached $787 billion in the fourth quarter of 2015, an increase of 2.3 percent from the previous quarter and 10.5 percent from a year earlier.
  • The loans-to-shares ratio at the end of the fourth quarter was 77.5 percent, unchanged from the previous quarter and up 2.5 percentage points from the end of the fourth quarter of 2014.
  • Membership in federally insured credit unions grew to 102.7 million at the end of 2015, an increase of 3.5 million from the end of the fourth quarter of 2014.
  • The number of federally insured credit unions fell to 6,021 at the end of the fourth quarter, 252 fewer than at the end of 2014, a decline of 4 percent. Consolidation within the credit union system has remained steady for more than two decades across a variety of economic cycles.
  • The percentage of federally insured credit unions that were well-capitalized rose over the past four quarters with 97.9 percent reporting a net worth ratio at or above the statutorily required 7 percent. A year earlier, 97.6 percent of credit unions were well-capitalized. As of Dec. 31, 2015, 0.6 percent of federally insured credit unions were undercapitalized.

Both the FDIC and NCUA reported increased loans, and the increases were both the same at 2.3% from the previous quarter. Increasing loans indicates that they are making more loans which means they will be needing more deposits, and that will eventually lead to higher deposit rates.

For the credit unions, even though credit union membership is growing, the number of credit unions continues to shrink. As the NCUA mentioned in its press release, most of the growth has been at the larger credit unions. Credit unions with assets of over $500 million had 6% membership growth. Credit unions with assets between $10 million and $100 million had negative growth of 0.1%. Small credit unions with assets under $10 million had negative growth of 1.4%.

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A1   |     |   Comment #1
Tried to look up Valor's Health rating here on Ken's site, found this:
"Health ratings for Valor Credit Union have been suspended due to the uncertainty around the credit union’s Prime Rate Certificates."
Why not post it?
Just as you did with a comment about the uncertanty of the institution due to the Prime Rate Certificates, you could instead put a LARGE, BOLD-FONT WARNING to people to make them aware of the situation (of Valor unilaterally breaking its own agreements with its members), as a warning to any potential customers thinking of banking there that it's probably not a good idea to bank with an institution that doesn't honor its own agreements and contracts (and on top of that -- specifically against NCUA regulations, did so WITHOUT ANY PRIOR NOTICE). There are apparently tons of complaints filed with the NCUA against them, but I think a lot of DA readers are curious (and would very much like to know) the current state of Valor's health (Unless the NCUA did not release such information... but it appears that it's DA that's declining to post the information, not the NCUA). Are they in the toilet? Doing better than suspected? I think with the proper warnings to people, the most recent health scores for Valor should be posted. Thanks!
Anonymous   |     |   Comment #2
Ken is very knowledgeable on this stuff; this is what he does for his living.  He is aware, as are we all, that these health ratings, by their very nature, are rather old . . even when they are newly released!  So Ken's decision in this instance (Valor) is quite revealing.  It says to me Ken believes recent events at Valor are sufficiently worrisome to where his readers could be harmed by the new rating (which is really old and pre-dates the recent events).  While some might view this as "only Ken's opinion", I think his opinion is valuable and is worth more than that of the average poster here.  In light of this I'd have to say Valor appears at present to be genuinely at risk.
Anonymous   |     |   Comment #3
Heavy-handed by Ken to omit Valor's health rating in my opinion.  Valor's actions in regards to their Prime rate Certificate are well documented elsewhere on this site.  Up to now there's been no legal or regulatory judgment against Valor for anything done by them.   It's rather paternalistic of Ken to allow his own personal reaction and stance towards Valor to infect what supposedly is the summary outcome and grading of objective financial data.  Publish the result.  We can each of us decide how to evaluate it in light of events we are or become aware of.   
Anonymous   |     |   Comment #4
If you don't like how Ken  manages this site, why visit it or go start your own website?
gregk   |     |   Comment #7
It's devotion to this site that stimulated my response, - not dislike.  Chances are that Ken respects and considers honest disagreement (civilly communicated) with one or another of his choices here from time to time.  It's toadies like yourself that are always harder to endure, - those who feel compelled to stand up and defend someone even when such posturing isn't asked for or needed.  It's probably an embarrassment now for Ken to have you on his side.
Ken Tumin
Ken Tumin   |     |   Comment #6
For the rare cases like Valor Credit Union where the financial numbers may not capture a significant issue, we felt it’s better to just report the issue rather than the financial health grades.