Bank & Credit Union Health Grades Updated from Latest Data (2018 Q4)

The FDIC and NCUA recently released their reports of the fourth quarter health of the institutions they insure. They also released the 2018 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, 2018 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 December 31st, total assets were $2.22 trillion, which is up by 3.52% from last year. Navy Federal continues to be the largest credit union with total assets of $97.0 billion, up 6.60% from last year. At this rate of growth, Navy Federal’s assets will likely exceed $100 billion by later this year.

The top ten largest banks may look different by next year after the merger of SunTrust Bank and BB&T (merger expected to close in Q4 2019). If those two banks were combined today, total assets would equal $428.79 billion. The new bank would rank as the sixth largest bank by assets, under Chase, Bank of America, Wells Fargo, Citi and US Bank.

FDIC 2018 Q4 Report

Here are a few of the noteworthy highlights from the FDIC press release on its Q4 report:

• In the fourth quarter of 2018, 5,406 insured institutions reported quarterly net income of $59.1 billion, up $33.8 billion (133.4 percent) from a year ago. Lower income tax expenses, coupled with higher net operating revenue boosted quarterly net income.
• Net interest income totaled $140.2 billion in the fourth quarter, a $10.5 billion (8.1 percent) increase from a year ago. More than four out of five banks (82.6 percent) reported an improvement in net interest income from a year ago. The average net interest margin was 3.48 percent in the fourth quarter, up from 3.31 percent a year ago.
• Total loan and lease balances increased 2.1 percent from third quarter 2018, reflecting fourth-quarter growth in all major loan categories.
• The FDIC’s Problem Bank List declined from 71 to 60 during the fourth quarter, the lowest number of problem banks since first quarter 2007. Total assets of problem banks declined from $53.3 billion in the third quarter to $48.5 billion. During the fourth quarter, merger transactions absorbed 70 institutions, two new charters were added, and no failures occurred.
• The Deposit Insurance Fund (DIF) balance rose by $2.4 billion from the end of the third quarter to $102.6 billion. The increase was mainly driven by assessment income, unrealized gains, and interest income on securities held by the DIF. The DIF reserve ratio remained unchanged from the third quarter at 1.36 percent as insured deposits also rose.
• The FDIC insures deposits at the nation’s banks and savings associations, 5,406 as of December 31, 2018 (down from 5,479 from the previous quarter.)

Deposit Growth in Q4 May Have Hurt 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 Q4 2018 and Q4 2017. The loan-to-deposit ratio had a slight increase from 80.47% in Q4 2017 to 80.49% in Q4 2018. However, there was a decrease in the loan-to-deposit ratio from the previous quarter. The loan-to-deposit ratio declined from 80.66% in September 2018 to 80.49% in December 2018. This is the result of deposits growing more than loans. When the stock market volatility rises and economic concerns grow (as we saw last December), deposits often grow more than loans. When banks have more deposits than they need to fund their loans, they have less reason to attract deposits with higher rates.

I was able to find further details of the Q4 deposit growth in this Fourth Quarter 2018 Quarterly Banking Profile:

Total deposits increased by $292.6 billion (2.2 percent) from the third quarter, the largest quarterly dollar increase since fourth quarter 2012. Interest-bearing deposits grew by $296.5 billion (3.2 percent), while noninterest-bearing deposits fell by $5.4 billion (0.2 percent).

This helps explain why we didn’t see the deposit deals that we were hoping for in December.

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 71 in the last quarter to 60. 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 78 banks based on public enforcement actions as of January 27, 2019. When I reported on the FDIC’s 2018 Q3 report in September, the unofficial problem bank number was also 78. 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.

Last year ended with no bank failures, and so far in 2019, there have been no bank failures. The last bank failure occurred more than a year ago on December 15, 2017. The last year before 2018 that was free of bank failures was 2006. Please refer to this FDIC page for a listing of bank failures.

NCUA 2018 Q4 Report

Here are a few of the noteworthy excerpts from the 2018 Q4 Credit Union Data Summary:

• Total assets in federally insured credit unions rose by $75 billion, or 5.4 percent, over the year ending in the fourth quarter of 2018, to $1.45 trillion.
• Total loans outstanding increased $86 billion, or 9.0 percent, over the year to $1.0 trillion. The average outstanding loan balance in the fourth quarter of 2018 was $15,300, up $494, or 3.3 percent, from one year earlier.
• Credit union shares and deposits rose by $60.3 billion, or 5.2 percent, over the year to $1.22 trillion in the fourth quarter of 2018. Regular shares rose $8.1 billion, or 1.9 percent, to $429.7 billion. Other deposits increased $30.7 billion, or 5.4 percent, to $600.1 billion, led by share certificate accounts, which were up $26.1 billion, or 12.3 percent, and money market accounts, which rose $2.3 billion, or 0.9 percent.
• The loan-to-share ratio stood at 85.6 percent in the fourth quarter of 2018, up from 82.6 percent in the fourth quarter of 2017.
• The number of federally insured credit unions declined to 5,375 in the fourth quarter of 2018 from 5,573 in the fourth quarter of 2017. In the fourth quarter of 2018, there were 3,376 federal credit unions and 1,999 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 fourth quarter of 2018. Credit unions with less than $100 million in assets generally reported mixed results for loans, membership, and net worth over the year.

One thing to note from the NCUA report is that the loan-to-share (deposit) ratio had a large increase for the year (from 82.6% to 85.6%.) Also, loan-to-share ratio had a substantial increase for the quarter (from 84.9% to 85.6%.) This is in contrast to the banks which had only a slight loan-to-deposit ratio increase for the year and a loan-to-deposit ratio decline for the quarter. A growing loan-to-share ratio should encourage credit unions to keep their deposit rates competitive.

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 size of the credit unions. The large credit unions continue to be financially strong while the small credit unions continue to be weak. The largest number of credit unions have assets between $10 million and $50 million. Here’s an excerpt from the report on their Q4 performance:

The number of federally insured credit unions with assets of at least $10 million but less than $50 million declined to 1,695 in the fourth quarter of 2018 from 1,774 in the fourth quarter of 2017. These credit unions held $42.7 billion in assets, or 3 percent of total system assets. Credit unions in this category reported a 0.4 percent increase in loans. Membership declined 4.9 percent. Net worth rose 0.4 percent.

In contrast, the largest credit unions are very healthy and have strong growth:

The number of federally insured credit unions with assets of at least $1 billion increased to 308 in the fourth quarter of 2018 from 287 in the fourth quarter of 2017. These 308 credit unions held $957.8 billion in assets, or 66 percent of total system assets. Credit unions in this category reported loan growth of 12.9 percent. Membership rose 9.8 percent. Net worth increased 12.9 percent.

Unlike banks which didn’t have any bank failures in 2018, seven credit unions were liquidated in 2018. In addition to the seven liquidations in 2018, three credit unions were merged with other credit unions with NCUA assistance, and two credit unions were placed into conservatorship. No liquidations, mergers or conservatorships have occurred 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.

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