Bank & Credit Union Health Grades Updated from Latest Data (2019 Q1)

The FDIC and NCUA recently released their reports of the first quarter health of the institutions they insure. They also released the 2019 First 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 March 31, 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 March 31st, total assets were $2.29 trillion, which is up by 4.10% from last year. Navy Federal continues to be the largest credit union. In the first quarter, Navy Federal’s total assets surpassed $100 billion. Total assets as of March 31st are $103.15 billion, up by 12.94% from a year ago.

FDIC 2019 Q1 Report

Here are a few of the noteworthy highlights from the FDIC press release on its Q1 report:

• The aggregate net income for the 5,362 FDIC-insured institutions increased by $4.9 billion (8.7 percent) from a year ago to $60.7 billion, led by higher net interest income. Almost two-thirds of all institutions reported annual increases in net income and less than 4 percent of institutions were unprofitable. The average return on assets increased to 1.35 percent, up from 1.28 percent a year earlier.
• Net interest income totaled $139.3 billion in the first quarter, up $7.9 billion (6 percent) from first quarter 2018. Nearly four out of five banks (79.3 percent) reported an improvement in net interest income from a year earlier. The average net interest margin rose to 3.42 percent, up from 3.32 percent a year ago.
• Total loan and lease balances fell by $4.8 billion from fourth quarter 2018, with commercial and industrial loans registering the largest dollar increase from a year ago (up $155.6 billion, or 7.6 percent).
• The FDIC's Problem Bank List declined from 60 to 59 during the first quarter, the lowest number of problem banks since first quarter 2007. Total assets of problem banks declined from $48.5 billion in the fourth quarter to $46.7 billion. During the first quarter, merger transactions absorbed 43 institutions, one new charter was added, and no failures occurred.
• The Deposit Insurance Fund (DIF) balance increased by $2.3 billion from the previous quarter to $104.9 billion. The increase was mainly driven by assessment income, interest income, and unrealized gains on securities held by the DIF. The reserve ratio remained unchanged (1.36 percent) from the previous quarter, as strong seasonal growth in insured deposits offset the growth in DIF.
• The FDIC insures deposits at the nation's banks and savings associations, 5,362 as of March 31, 2019 (down from 5,406 from the previous quarter.)

Loan Decline and Deposit Growth in Q1 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 Q1 2019 and Q1 2018. The loan-to-deposit ratio had a slight increase from 79.56% in Q1 2018 to 79.99% in Q1 2019. However, there was a decrease in the loan-to-deposit ratio from the previous quarter. The loan-to-deposit ratio declined from 80.49% in Q4 2018 to 79.99% in March 2019. This is a result of a fall in loans and a rise in deposits. This condition is expected when economic concerns are growing which causes loan demand to shrink and deposit demand to rise as people move money out of the volatile stock market into safe bank deposits. 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 Q1 loan declines and deposit growth in this First Quarter 2019 Quarterly Banking Profile:

Total loan and lease balances fell by $4.8 billion (0.05 percent) compared with the previous quarter.

[...]

Total deposits rose by $59.5 billion (0.4 percent) from the previous quarter, as interest-bearing deposits increased by $172.4 billion (1.8 percent).

This puts downward pressure on deposit rates.

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 60 in the last quarter to 59. 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 73 banks based on public enforcement actions as of May 2019. When I reported on the FDIC’s 2018 Q4 report in March, the unofficial problem bank number was 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.

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 Q1 Report

Here are a few of the noteworthy excerpts from the 2019 Q1 Credit Union Data Summary:

• Total assets in federally insured credit unions rose by $90 billion, or 6.3 percent, over the year ending in the first quarter of 2019, to $1.51 trillion.
• Total loans outstanding increased $76 billion, or 7.9 percent, over the year to $1.0 trillion. The average outstanding loan balance in the first quarter of 2019 was $15,420, up $385, or 2.6 percent, from one year earlier.
• Credit union shares and deposits rose by $69.3 billion, or 5.8 percent, over the year to $1.27 trillion in the first quarter of 2019. Regular shares rose $17.2 billion, or 3.9 percent, to $462.6 billion. Other deposits increased $43.1 billion, or 7.5 percent, to $621.0 billion, led by share certificate accounts, which were up $38.7 billion, or 18.0 percent, and non-member deposits, which rose $1.8 billion, or 17.7 percent.
• The loan-to-share ratio stood at 82.4 percent in the first quarter of 2019, up from 80.8 percent in the first quarter of 2018.
• The number of federally insured credit unions declined to 5,335 in the first quarter of 2019 from 5,530 in the first quarter of 2018. In the first quarter of 2019, there were 3,350 federal credit unions and 1,985 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 first quarter of 2019. Credit unions with less than $100 million in assets reported declines in those categories over the year.

One thing to note from the NCUA report is the change in the loan-to-share (deposit) ratio. Even though the ratio increased in the last year, it decreased in the last quarter, falling from 85.6% in Q4 2018 to 82.4% in Q1 2019. This is the result of total loans outstanding holding at $1.0 trillion while total deposits rising from $1.22 trillion to $1.27 trillion. This decline in the loan-to-deposit ratio is consistent with the bank industry. When loan-to-deposit ratios fall, there’s downward pressure on deposit rates.

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 Q1 performance:

The number of federally insured credit unions with assets of at least $10 million but less than $50 million declined to 1,682 in the first quarter of 2019 from 1,761 in the first quarter of 2018. These credit unions held $42.4 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 5.1 percent. Net worth edged up 0.1 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 315 in the first quarter of 2019 from 294 in the first quarter of 2018. These 315 credit unions held $1.0 trillion in assets, or 67 percent of total system assets. Credit unions in this category reported loan growth of 11.3 percent. Membership rose 9.4 percent. Net worth increased 13.1 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.