Financial Health Grades Updated from 2017 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 2017 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, 2017 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.

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 $2.14 trillion, which is up 2.71% from last year. Navy Federal continues to be the largest credit union with total assets of $90.57 billion, up by almost 12% from last year. If Navy Fed continues this growth, they may reach $100 billion in assets before this year ends.

FDIC 2017 Q4 Report

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

• Excluding one-time income tax effects, estimated quarterly net income would have been $42.2 billion, a decline of 2.3 percent from a year ago.
• Net interest income totaled $129.5 billion in the fourth quarter, up $10.2 billion (8.5 percent) from a year ago.
• Total loan and lease balances increased 1.7 percent from third quarter 2017. [...] Over the past year, loan and lease balances increased $416.1 billion (4.5 percent).
• The FDIC’s Problem Bank List declined from 104 to 95 during the quarter, the lowest number of problem banks since first quarter 2008. Total assets of problem banks declined from $16 billion in the third quarter to $13.9 billion. During the quarter, merger transactions absorbed 64 institutions, two institutions failed, and one new charter was added.
• The Deposit Insurance Fund (DIF) balance increased $2.2 billion during the fourth quarter, to $92.7 billion on December 31, driven by assessment income, including surcharges on large banks. The DIF reserve ratio rose to 1.30 percent from 1.28 percent at the end of September. Estimated insured deposits rose 0.8 percent in the fourth quarter.
• The FDIC insures deposits at the nation's banks and savings associations, 5,670 as of December 31, 2017 (down from 5,738 from the previous quarter).

The FDIC also published this statistics at a glance document which provides a useful summary of the bank industry’s financials for both Q4 2017 and Q4 2016. The loan-to-deposit ratio increased from 79.89% in Q4 2016 to 80.47% in Q4 2017. The ratio also went up from Q3 when it was 80.17%. This increase indicates that loans grew more than deposits which puts upward pressure on deposit rates.

The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" finally fell below 100. The number is now 95, down from 104 last 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 101 problem banks based on public enforcement actions. When I reported on the FDIC's 2017 Q3 report in December, the unofficial problem bank number was 108. 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.

In the fourth quarter, two banks failed. So far in 2018, no banks have failed. Please refer to this FDIC page for a listing of bank failures.

NCUA 2017 Q4 Report

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

• Total assets in federally insured credit unions rose by $86 billion, or 6.7 percent, over the year ending in the fourth quarter of 2017, to $1.38 trillion.
• Total loans outstanding increased $88 billion, or 10.1 percent, over the year to $957.3 billion. The average outstanding loan balance in the fourth quarter of 2017 was $14,807, up $565, or 4.0 percent, from one year earlier.
• Insured shares and deposits rose $59 billion, or 5.7 percent, over the four quarters ending in the fourth quarter of 2017 to $1.09 trillion.
• The loan-to-share ratio stood at 82.6 percent in the fourth quarter of 2017, up from 79.5 percent in the fourth quarter of 2016.
• The number of federally insured credit unions declined to 5,573 in the fourth quarter of 2017 from 5,785 in the fourth quarter of 2016. In the fourth quarter of 2017, there were 3,499 federal credit unions and 2,074 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 2017. Credit unions with less than $50 million in assets reported declines in loans, membership, and net worth over the year.

Like the banks, the credit unions’ loans-to-shares (deposits) ratio increased, both in the last year and in the last quarter. From last year to this year, the ratio increased from 79.5 percent to 82.6 percent. From Q3 to Q4 of 2017, the ratio increased from 81.4 percent to 82.6 percent. This is another good sign that should be conducive to higher deposit rates.

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 has 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 1,774 in the fourth quarter of 2017 from 1,851 in the fourth quarter of 2016. These credit unions held $44.2 billion in assets, or 3 percent of total system assets. Credit unions in this category reported a 0.9 percent decline in loans. Membership declined 5.8 percent. Net worth declined 2.8 percent.

In contrast, the largest credit unions are very healthy and are growing:

The number of federally insured credit unions with assets of at least $1 billion increased to 287 in the fourth quarter of 2017 from 272 in the fourth quarter of 2016. These 284 credit unions held $875.6 billion in assets, or 64 percent of total system assets. Credit unions in this category reported loan growth of 13.7 percent. Membership rose 9.0 percent. Net worth increased 11.4 percent.

The one big exception to large credit unions with strong financial performance is Melrose Credit Union. In the first quarter of 2017, Melrose (which has $1.36 billion in assets) was placed into a conservatorship under the NCUA. The credit union has been hit hard by its large exposure to New York City taxi medallion loans. The NYC taxi industry has been weakened considerably by mobile app ridesharing services like Uber. Based on Q4 financials, Melrose now has the incredibly high Texas Ratio of 1,253% (up from 281% in Q3). Melrose now has the highest Texas ratio of any credit union or bank. Please refer to our Texas Ratio table to compare Texas Ratios for various credit unions and banks.

In the fourth quarter, three credit unions were liquidated and one was placed into NCUA conservatorship. So far in 2018, two credit unions have been liquidated and two have been placed into NCUA conservatorship. Please refer to this NCUA page for a listing of liquidations and conservatorships.