Bank & Credit Union Health Grades Updated from Latest Data (2019 Q2)

The FDIC and NCUA recently released their reports of the second quarter health of the institutions they insure. They also released the 2019 Second Quarter Call Reports of all 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, 2019 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.

2019 Rankings of the Largest Banks and Credit Unions

In addition to the health grades, you can view how the banks and credit unions have changed in size in our table of the Largest Banks and Credit Unions by Assets. By default, the institutions are ranked by assets. Click on the column title and you can sort by total branches, number of states with branches, number of employees and number of customer accounts.

Chase Bank continues to be the largest bank based on assets. As of June 30th, total assets were $2.35 trillion, which is up 7.95% from last year. Navy Federal continues to be the largest credit union. Total assets as of June 30th are $106.04 billion, up 13.44% from a year ago. Navy Federal’s is way ahead of other credit unions in size. The second largest is State Employees' Credit Union in North Carolina with total assets of $40.62 billion, and the third largest is PenFed with total assets of $24.42 billion.

FDIC 2019 Q2 Report

Here are a few of the noteworthy highlights from the FDIC press release on its Q2 report:

• Aggregate net income for the 5,303 FDIC-insured institutions rose by $2.5 billion (4.1 percent) from a year earlier, led by higher net interest income. Almost 60 percent of all institutions reported a year-over-year increase in net income and less than 4 percent of institutions were unprofitable. The average return on assets remained stable at 1.38 percent.
• Net interest income rose by $4.9 billion (3.7 percent) from a year earlier to $139 billion in second quarter 2019. Slightly more than three out of four banks (75.1 percent) reported a year-over-year increase in net interest income. The average net interest margin remained stable from a year earlier at 3.39 percent.
• Total loan and lease balances rose by $152.2 billion (1.5 percent) from first quarter 2019. Growth among major loan categories was led by consumer loans, which includes credit cards, (up $42.2 billion, or 2.5 percent) and residential mortgage loans (up $38.3 billion, or 1.8 percent).
• The number of problem banks fell from 59 to 56 during the second quarter, the lowest number of problem banks since first quarter 2007. Total assets of problem banks increased from $46.7 billion in the first quarter to $48.5 billion.
• The Deposit Insurance Fund (DIF) balance increased by $2.6 billion from the previous quarter to $107.4 billion. The quarterly increase was mainly driven by assessment income, but unrealized gains on securities held by the DIF and a reduction in losses from past failures made considerable contributions. The reserve ratio increased by 4 basis points from the previous quarter to 1.40 percent.
• During the second quarter, five new banks opened, 60 institutions were absorbed through merger transactions, and one institution failed. [...] The FDIC insures deposits at the nation's banks and savings associations, 5,303 as of June 30, 2019 (down from 5,362 from the previous quarter.)

Loan Growth in Q2 Should Help Deposit Rates

The FDIC also published this statistics at a glance document which provides a useful summary of the bank industry’s financials for both Q2 2019 and Q2 2018. The loan-to-deposit ratio increased from 80.56% in Q2 2018 to 80.80% in Q2 2019. It also increased from Q1 when the ratio was 79.99%. There was both loan and deposit growth in the second quarter, but loans grew more than deposits resulting in a higher loan-to-deposit ratio. This is a positive condition for savers since it puts upward pressure on deposit rates as banks try to attract more deposits to fund the loans.

The “Problem Bank” Lists

The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" fell from 59 in Q1 to 56 in Q2. 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 76 banks based on public enforcement actions as of August 2019. When I reported on the FDIC’s 2019 Q1 report in June, the unofficial problem bank number was 73. You can also see the potential problem banks in our Texas Ratio table which ranks banks and credit unions based on the Texas Ratio, a standard financial health metric.

There have been no bank failures since last quarter when the first bank failure since December 2017 took place on May 31, 2019. The small Texas-based bank, The Enloe State Bank, was shut down by regulators. As I described in my bank failure review, it appears that employee fraud caused the failure. Please refer to this FDIC page for a listing of bank failures.

NCUA 2019 Q2 Report

Here are a few of the noteworthy excerpts from the 2019 Q2 Credit Union Data Summary:

• Total assets in federally insured credit unions rose by $91 billion, or 6.3 percent, over the year to $1.52 trillion in the second quarter of 2019.
• Total loans outstanding increased $64 billion, or 6.4 percent, over the year to $1.1 trillion. Credit union loan balances rose over the year in every major category, compared with the second quarter of 2018.
• Credit union shares and deposits rose by $72.1 billion, or 6.0 percent, over the year to $1.28 trillion in the second quarter of 2019. Regular shares rose $11.0 billion, or 2.5 percent, to $458.5 billion. Other deposits increased $50.6 billion, or 8.7 percent, to $632.3 billion, led by share certificate accounts, which were up $45.1 billion, or 20.5 percent.
• The loan-to-share ratio stood at 83.3 percent in the second quarter of 2019, up from 83.0 percent in the second quarter of 2018.
• The number of federally insured credit unions declined to 5,308 in the second quarter of 2019 from 5,480 in the second quarter of 2018. In the second quarter of 2019, there were 3,335 federal credit unions and 1,973 federally insured, state-chartered credit unions. The year-over-year decline is consistent with long-running industry consolidation trends.
• Consistent with long-running trends, credit unions with assets of at least $1 billion reported the strongest growth in loans, membership, and net worth over the year ending in the second quarter of 2019. Credit unions with less than $500 million in assets reported declines in those categories over the year.

Loan-to-Deposit Ratio Is Also Increasing at Credit Unions

Just like the banks, the NCUA reported that credit unions had a rise in their loan-to-share (deposit) ratio. The loan-to-share ratio increased from 82.4% in Q1 to 83.3% in Q2. The ratio also increased from the previous year, rising from 83.0% to 83.3%. That should put some upward pressure on deposit rates. When credit unions need to fund loan growth, they often introduce CD specials to attract deposits. That may be what prompted Navy Federal to offer its recent 3% CDs.

Large Credit Unions Remain Healthy

Just like the FDIC report, the NCUA report doesn’t mention any credit unions that are not well-capitalized. One interesting thing in the report was the financial performance review based on the size of the credit unions. The large credit unions continue to be financially strong while the small credit unions continue to be weak. This quarter was interesting in that the weakness also extended to the midsize credit unions with assets between $100 million and $500 million. Here’s an excerpt from the report on their Q2 performance:

The number of federally insured credit unions with at least $100 million but less than $500 million in assets declined to 1,012 in the second quarter of 2019 from 1,034 in the second quarter of 2018. These 1,012 credit unions held $224.1 billion in total assets, or 15.0 percent of total system assets. Credit unions in this category reported a 3.2 percent decline in total loans outstanding. Membership fell 5.8 percent. Net worth edged down 0.8 percent.

In contrast, the largest credit unions are very healthy and have strong growth. I included excerpts below of the performance summary of the largest credit unions (over $1 billion in assets) and the second largest credit unions (between $500 million and $1 billion in assets). Note how much healthier they are as compared to the midsize credit unions above.

The number of federally insured credit unions with assets of at least $1 billion increased to 317 in the second quarter of 2019 from 302 in the second quarter of 2018. These 317 credit unions held $1.0 trillion in assets, or 67 percent of total system assets. Credit unions in this category reported loan growth of 9.0 percent. Membership rose 8.0 percent. Net worth increased 12.5 percent.

The number of federally insured credit unions with assets of at least $500 million but less than $1 billion rose to 259 in the second quarter of 2019 from 240 in the second quarter of 2018. These 259 credit unions held $181.6 billion in total assets, or 12.0 percent of total system assets. Credit unions in this category reported a 7.4 percent increase in total loans outstanding over the year. Membership rose 5.6 percent, and net worth increased 8.6 percent.

Unlike the banks, there have been several credit union failures in the last year. Seven credit unions were liquidated in 2018, and one was liquidated so far in 2019. The most noteworthy credit union liquidated in 2018 was Melrose Credit Union. This was a large credit union which had assets of $1.1 billion at the time of the liquidation. Melrose failed due to its large exposure to the taxi industry which has been hurt by ride-sharing app-based services like Uber.

Troubled credit unions are sometimes placed into conservatorship in which the NCUA takes over the management role with the intent to restore safe and sound operation. So far in 2019, two credit unions have been placed into conservatorship. Two credit unions were placed into conservatorship in 2018.

Please refer to this NCUA page to view past credit union liquidations, conservatorships and mergers.