Financial Health Grades Updated from 2018 Q1 FDIC and NCUA Report

The FDIC and NCUA recently released their reports of the first quarter health of the institutions they insure. They also released the 2018 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, 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.

2018 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 $2.20 trillion, which is up 2.74% from last year. Navy Federal continues to be the largest credit union with total assets of $89.80 billion, up 9.19% from last year.

FDIC 2018 Q1 Report

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

• Quarterly earnings totaled $56 billion for the first quarter, up $12.1 billion (27.5 percent) from 12 months ago.
• Net interest income was $131.3 billion in the first quarter, up $10.3 billion (8.5 percent) from a year earlier.
• Loan and lease balances increased by $31.3 billion (0.3 percent) from fourth quarter 2017.
• The FDIC’s Problem Bank List declined from 95 to 92 during the quarter, the lowest number of problem banks since first quarter 2008. Total assets of problem banks increased from $13.9 billion in the fourth quarter to $56.4 billion.
• The Deposit Insurance Fund (DIF) balance rose by $2.3 billion during the first quarter to $95.1 billion on March 31, driven by assessment income. The DIF reserve ratio remained unchanged (1.30 percent) from the previous quarter. Estimated insured deposits increased by 2.6 percent from the previous quarter and 3.7 percent from a year ago.
• The FDIC insures deposits at the nation’s banks and savings associations, 5,607 as of March 31, 2018. (down from 5,670 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 Q1 2018 and Q1 2017. The loan-to-deposit ratio increased from 78.70% in Q1 2017 to 79.56% in Q1 2018. However, this ratio declined from Q4 2017 when it was 80.47%. In the last quarter, deposits have grown more than loans with deposits rising 14.56% and loans rising just 0.32%. This puts downward pressure on deposit rates.

Large Bank Added to the FDIC’s “Problem Bank” List

The number of "problem banks" continues to fall. According to the FDIC, the number of banks on the FDIC's "Problem List" fell from 95 in the last quarter to 92. In recent times, that number peaked at 888 in Q1 of 2011.

Even though the number of problem banks fell, the total assets of problem banks had a huge spike, rising more than $42 billion. Since the FDIC does not list the problem banks, there’s no official word about what bank or banks were added to the problem list to cause this huge asset spike. This Wall Street Journal article exposed the likely culprit:

A downgrade by the Fed has also landed the bank’s FDIC-insured subsidiary, Deutsche Bank Trust Company Americas, on the FDIC’s “Problem Banks” list of at-risk institutions, according to people familiar with the matter.

Based on the size, this makes sense. Deutsche Bank Trust Company Americas has assets that total $42.1 billion.

As mentioned above, the FDIC doesn't name any of these problem banks. Calculated Risk Blog has an unofficial list of 92 problem banks based on public enforcement actions. When I reported on the FDIC's 2017 Q4 report in March, the unofficial problem bank number was 101. 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.

So far in 2018, no banks have failed. The last bank failure occurred on December 15, 2017. Please refer to this FDIC page for a listing of bank failures.

NCUA 2018 Q1 Report

Here are a few of the noteworthy excerpts from the NCUA press release on its Q1 report:

• Total assets in federally insured credit unions rose by $79 billion, or 5.9 percent, over the year ending in the first quarter of 2018, to $1.42 trillion.
• Total loans outstanding increased $87 billion, or 9.9 percent, over the year to $971.9 billion. The average outstanding loan balance in the first quarter of 2018 was $15,039, up $541, or 3.7 percent, from one year earlier.
• Insured shares and deposits rose $58 billion, or 5.5 percent, over the four quarters ending March 2018, to $1.13 trillion.
• The loan-to-share ratio stood at 80.8 percent in the first quarter of 2018, up from 77.7 percent in the first quarter of 2017.
• The number of federally insured credit unions declined to 5,530 in the first quarter of 2018 from 5,737 in the first quarter of 2017. In the first quarter of 2018, there were 3,477 federal credit unions and 2,053 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 2018. Credit unions with less than $100 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 from the previous year. From Q1 of 2017 to Q1 of 2018, it increased from 77.7% to 80.8%. Also like the banks, the ratio decreased from Q4 2017. At that time, the ratio was 82.6%. Perhaps this decline is seasonal and is not a trend. When deposits rise more than loans, banks and credit unions will be under less pressure to attract deposits with higher rates.

Large Credit Unions Remain Healthy Except for Melrose

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 1,761 in the first quarter of 2018 from 1,828 in the first quarter of 2017. These credit unions held $44.2 billion in assets, or 3 percent of total system assets. Credit unions in this category reported a 0.1 percent decline in loans. Membership declined 5.0 percent. Net worth declined 1.1 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 294 in the first quarter of 2018 from 278 in the first quarter of 2017. These 294 credit unions held $906.6 billion in assets, or 64 percent of total system assets. Credit unions in this category reported loan growth of 13.5 percent. Membership rose 9.1 percent. Net worth increased 11.5 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 now has $1.21 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. According to this Credit Union Times article, Melrose “lost $290.2 million in 2017 and $98.7 million in 2016.” It continues to operate under conservatorship.

So far this year, two credit unions have been liquidated and two credit unions have been placed into NCUA conservatorship. Please refer to this NCUA page for a listing of the 2018 liquidations and conservatorships.