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Financial Health Grades Updated from Q2 FDIC and NCUA Reports

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Financial Health Grades Updated from Q2 FDIC and NCUA Reports

The FDIC and NCUA recently released their reports of the second quarter health of the institutions they insure. They also released the 2016 Second 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 June 30, 2016 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 Q2 report:

  • Total loan and lease balances increased $181.9 billion during the second quarter. For the 12 months ended June 30, loans and leases increased $574.1 billion (6.7 percent).
  • Income and revenue both increased from a year ago, loan growth remained strong, the number of unprofitable banks was at an 18-year low, and there were fewer banks on the problem list. Community banks reported strong net income, revenue, and loan growth.
  • “Problem List” Continues to Shrink: The number of banks on the FDIC’s Problem List fell from 165 to 147 during the second quarter. This is the smallest number of problem banks in more than seven years and is down significantly from the peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $30.9 billion to $29.0 billion during the second quarter. Two banks failed during the quarter.
  • Deposit Insurance Fund’s Reserve Ratio Surpasses 1.15 Percent Benchmark: The DIF increased $2.8 billion during the second quarter, from $75.1 billion at the end of March to $77.9 billion at the end of June, largely driven by $2.3 billion in assessment income. The DIF reserve ratio rose from 1.13 percent to 1.17 percent during the quarter. Under previously approved FDIC regulations, once the reserve ratio exceeds 1.15 percent, lower regular assessment rates will go into effect. As a result of lower rates, the FDIC estimates that regular assessments paid by banks to the FDIC will decline by about one-third.
  • The FDIC insures deposits at the nation’s banks and savings associations, 6,058 as of June 30, 2016 (down from 6,122 at the end of the previous quarter).
You can view the latest health ratings of your bank or credit union in our Bank Health Ratings page.

The FDIC also published this statistics at a glance document which provides a useful summary of the bank industry’s financials for both Q2 2016 and Q2 2015. One thing that I found promising is the change to the loans-to-deposit ratio. The ratio increased from 80.74% in 2015 to 81.43% in 2016. The larger this ratio, the more demand there will be for deposits which puts upward pressure on deposit rates.

Another thing that may provide a small boost to deposit rates is the news on the Deposit Insurance Fund’s (DIF) Reserve Ratio. The ratio increased from 1.13% to 1.17%, surpassing the 1.15% threshold. This will lower the assessments paid by banks to the FDIC by about one-third.

The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" declined from 165 to 147 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 184 problem banks based on public enforcement actions. When I reported on the FDIC's 2016 Q1 report in June, the unofficial problem bank number was 205.

Here are a few of the noteworthy excerpts from the NCUA press release on its Q2 report:

  • Total loans outstanding at federally insured credit unions reached $823.4 billion at the end of the second quarter of 2016, an increase of 10.5 percent from one year earlier.
  • The loans-to-shares ratio was 77.8 percent, up from 75.5 percent a year earlier.
  • Membership in federally insured credit unions in the second quarter of 2016 reached 104.9 million, an increase of 3.8 percent from the second quarter of 2015.
  • Credit union system consolidation, primarily the result of mergers, also continued in the second quarter. The number of federally insured credit unions fell to 5,887, down 272 from a year earlier. Nearly two-thirds of the decline occurred in credit unions with less than $10 million in assets.?
  • The percentage of federally insured credit unions that were well capitalized remained steady in the second quarter with 97.8 percent reporting a net worth ratio at or above the statutorily required 7 percent. At the end of the second quarter of 2016, 0.6 percent of federally insured credit unions were less than adequately capitalized.

Like the banks, the credit unions’ loans-to-deposit (shares) ratio also increased. That’s a good sign for deposit rates.

Also like the FDIC, the NCUA doesn’t name the institutions that are not well capitalized. One well-known credit union that has recently been reported to be undercapitalized is Melrose Credit Union. Based on Q2 financials, Melrose now has a Texas Ratio of 108%, which is the highest of all credit unions with assets of over $100 million. Texas Ratios over 100% is considered at risk. Please refer to our Texas Ratio table to compare Texas Ratios for various credit unions and banks.

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