Financial Health Grades Updated from 2017 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 2017 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, 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 June 30th, total assets were $2.15 trillion, up 4.69% from last year. Navy Federal continues to be the largest credit union with total assets of $82.04 billion, up 5.13% from last year.

FDIC 2017 Q2 Report

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

• annual rate of loan growth continued to slow for a third consecutive quarter. [....] For the 12 months ended June 30, loan and lease balances were up $337.6 billion, a 3.7 percent increase. (This is down from 4 percent from the previous quarter.)
• Of the 5,787 insured institutions reporting second quarter financial results, 63.4 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the first quarter fell to 4.1 percent from 4.6 percent a year earlier. (This is up from 57 percent from the previous quarter.)
• The Number of "Problem Banks" Continues to Fall: The FDIC’s Problem Bank List fell from 112 to 105 during the second quarter. This is the smallest number of problem banks since March 31, 2008, and is nearly 90 percent less than the post-crisis peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $23.7 billion to $17.2 billion during the second quarter.
• Deposit Insurance Fund’s Reserve Ratio Rises to 1.24 Percent: The Deposit Insurance Fund (DIF) balance increased $2.7 billion during the second quarter to $87.6 billion on June 30, driven by assessment income, including surcharges on large banks. The DIF reserve ratio was 1.24 percent at the end of June, up from 1.20 percent at the end of March and the highest level since the fourth quarter of 2005. Estimated insured deposits declined 0.4 percent in the second quarter.
• The FDIC insures deposits at the nation’s banks and savings associations, 5,787 as of June 30, 2017 (down from 5,856 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 Q2 2017 and Q2 2016. The loan-to-deposit ratio continues to decline. The ratio decreased from 81.43% in Q2 2016 to 80.28% in Q2 2017. On a positive note, the ratio increased from the previous quarter (78.70%). This was helped by a 1.73% increase in loans and a 0.27% decrease in deposits. Increasing loans and decreasing deposits helps drive up deposit rates.

The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" declined from 112 to 105 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 123 problem banks based on public enforcement actions. When I reported on the FDIC's 2017 Q1 report in June, the unofficial problem bank number was 140.

In the second quarter, three banks failed. Two of them had over a billion dollars in assets. First NBC Bank (New Orleans, LA) had 29 branches and $4.74 billion in assets, and Guaranty Bank (Milwaukee, WI) had 119 branches and $1.01 billion in assets. Please refer to this FDIC page for a listing of bank failures.

NCUA 2017 Q2 Report

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

• Total assets in federally insured credit unions rose by $96 billion, or 7.7 percent, over the year to $1.35 trillion in the second quarter of 2017.
• Total loans outstanding increased $90 billion, or 10.9 percent, over the year to $913.0 billion. The average outstanding loan balance in the second quarter of 2017 was $14,613, up $665, or 4.8 percent, from one year earlier.
• Insured shares and deposits rose $78 billion, or 7.8 percent, over the four quarters ending in the second quarter of 2017 to $1.1 trillion.
• The loans-to-shares ratio stood at 79.7 percent in the second quarter of 2017, up from 77.8 percent in the second quarter of 2016.
• The number of federally insured credit unions declined to 5,696 in the second quarter of 2017 from 5,887 in the second quarter of 2016. In the second quarter of 2017, there were 3,568 federal credit unions and 2,128 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 2017. Credit unions with less than $50 million in assets reported declines in loans, membership and net worth over the year.

Unlike the banks, the credit unions’ loans-to-shares (deposits) ratio increased from Q2 of the previous year. Like the banks, the credit unions’ loans-to-shares (deposits) ratio increased from Q1 (77.7%) to Q2 (79.7%). That’s a 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 Q2 performance:

The number of federally insured credit unions with assets of at least $10 million but less than $50 million declined from 1,901 in the second quarter of 2016 to 1,813 in the second quarter of 2017. These credit unions held $45.1 billion in assets, or 3.0 percent of total system assets. Credit unions in this category reported a 4.5 percent decline in loans. Membership declined 7.7 percent. Net worth declined 5.5 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 from 265 in the second quarter of 2016 to 282 in the second quarter of 2017. These 282 credit unions held $844.7 billion in assets, or 63 percent of total system assets. Credit unions in this category reported loan growth of 15.1 percent. Membership rose 9.8 percent. Net worth increased 11.7 percent.

The one big exception to large credit unions with strong financial performance is Melrose Credit Union. In the first quarter, Melrose (which has $1.6 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 Q2 financials, Melrose now has a Texas Ratio of 266.2% (up from 241.5% in Q1). This is now the highest of all credit unions, regardless of size. Texas Ratios over 100% are considered at risk. Please refer to our Texas Ratio table to compare Texas Ratios for various credit unions and banks.

Another credit union with high concentration of taxi medallion loans is LOMTO Federal Credit Union. LOMTO was placed into NCUA conservatorship in June 26th. It has the fourth highest Texas Ratio of all credit unions (156.2%).

In the second quarter, a total of five credit unions were placed into NCUA conservatorship. No credit unions were liquidated in Q2. Please refer to this NCUA page for a listing of liquidations and conservatorships.