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Quarterly Banking Profile


Notes to Users

  • Banks Earned $26.3 Billion in Fourth Quarter as Recovery Continued
  • Full-Year Net Income Surpassed $100 Billion for First Time Since 2006
  • Reduced Loan-Loss Expenses Remained Key to Earnings Growth
  • Asset Quality Indicators Registered Further Improvement
  • Loan Portfolios Grew for Third Consecutive Quarter

  • Quarterly Net Income Posts Tenth Consecutive Year-Over-Year Gain
    Lower provisions for loan losses, reflecting an improving trend in asset quality, lifted fourth-quarter net income of FDIC-insured commercial banks and savings institutions. Fourth-quarter earnings totaled $26.3 billion, an increase of $4.9 billion (23.1 percent) compared with the same period of 2010. The year-over-year improvement in profits comprised a majority of insured institutions. Almost two out of every three banks (63.2 percent) reported higher quarterly net income than a year ago, and only 18.9 percent were unprofitable, compared with 27.1 percent in fourth quarter 2010. The average return on assets (ROA) rose to 0.76 percent, from 0.64 percent a year earlier.

    Earnings Benefit Further from Lower Provisions for Loan Losses
    Insured institutions set aside $19.5 billion in provisions for loan losses in the fourth quarter, a decline of $13.1 billion (40.1 percent) from fourth quarter 2010. Provisions represented 12.1 percent of the industry’s net operating revenue (the sum of net interest income and total noninterest income), down from 19.7 percent a year ago, and well below the 51.7 percent peak level in this cycle registered in fourth quarter 2008. Loss provisions have fallen, year over year, for nine consecutive quarters. The trend of reduced provisioning was relatively broad: more than half of all institutions (54.6 percent) reported lower quarterly provisions than a year ago.

    Overall Revenues Continue to Exhibit Weakness
    For the third time in the last four quarters, net operating revenue posted a year-over-year decline. The $3.8 billion (2.3 percent) drop was caused by a $4.4 billion (7.4 percent) reduction in noninterest income. Gains on loan sales were $1.9 billion (53 percent) below the level of a year ago, servicing income was $1.4 billion (29.9 percent) lower, and trading income fell by $812 million (23.5 percent). Increases in the market values of some large bank liabilities produced accounting losses in the fourth quarter that reversed some of the related gains in noninterest income that occurred in third quarter 2011.1 Net interest income increased year over year for the first time in four quarters, rising by $609 million (0.6 percent).

    Full-Year Net Income Rises to Five-Year High
    For all of 2011, net income totaled $119.5 billion, an increase of $34 billion (39.8 percent) from full-year 2010 earnings. This is the highest annual net income total since the industry earned $145.2 billion in 2006. More than two out of every three banks (66.9 percent) reported improved earnings in 2011, and only 15.5 percent reported a net loss for the year. In 2010, 22.1 percent of all banks reported full-year net losses. The average ROA was 0.88 percent, up from 0.65 percent in 2010. The improvement in full-year net income was made possible by an $81.1 billion reduction in loan loss provisions.

    Full-Year Operating Revenues Are Lower than in 2010
    Both net interest income and noninterest income were lower than in 2010, as full-year net operating revenue declined for only the second time since 1938 (the only other decline occurred in 2008). Net interest income posted its first full-year decline since 1971, falling by $7.5 billion (1.7 percent). The average net interest margin in 2011 was 3.6 percent, down from 3.76 percent in 2010. Interest-bearing assets increased by 4.4 percent in 2011, but more than a third of this growth (35.7 percent) consisted of low-yielding balances with Federal Reserve Banks. Total noninterest income fell for a second consecutive year and the fourth time in the last five years, declining by $5.3 billion (2.3 percent). Income from trust operations and trading income were higher than in 2010 (by $1.6 billion and $2.2 billion, respectively), but these improvements were outweighed by lower servicing income (down $8 billion), reduced gains on loan sales (down $4.8 billion), and lower income from service charges on deposit accounts, which fell by $2.1 billion (5.9 percent). Realized gains on securities and other assets were $3.6 billion (39.5 percent) lower than in 2010. Insured institutions paid $77.9 billion in dividends during 2011, an increase of $24 billion (44.5 percent) from 2010, but below the record level of $110.3 billion paid out in 2007.

    Loan Losses Fall to Lowest Level in 15 Quarters
    Net charge-offs totaled $25.4 billion in the fourth quarter, a decline of $17.1 billion (40.2 percent) from a year ago. The fourth-quarter total represents the lowest level for quarterly charge-offs since first quarter 2008. This is the sixth consecutive quarter in which charge-offs have posted a year-over-year decline. Improvements occurred across all major loan types. The largest declines were in credit cards (down $5.4 billion, or 42.2 percent), real estate construction and land development loans (down $3.3 billion, or 62.4 percent), residential mortgage loans (down $2.4 billion, or 31.8 percent) and loans to commercial and industrial (C&I) borrowers (down $2 billion, or 43.5 percent).

    Noncurrent Loan Balances Decline in Most Major Loan Categories
    The amount of loan balances that were noncurrent (90 days or more past due or in nonaccrual status) declined for the seventh quarter in a row, falling by $4.3 billion (1.4 percent). The decline was led by real estate construction and land development loans, where noncurrent balances fell by $4.9 billion (13.2 percent), C&I loans, where noncurrents declined by $1.8 billion (9.5 percent), and nonfarm nonresidential real estate loans, where noncurrent balances fell by $1.6 billion (4 percent). The only significant increase in noncurrent loans occurred in residential mortgage portfolios, where noncurrent balances rose by $5.2 billion (3.1 percent). This increase reflected the addition of $6.3 billion in rebooked “GNMA loans” that were 90 days or more past due.2

    Reductions in Reserves Continue to Track Declines in Noncurrent Loans
    Loan-loss reserves fell for a seventh consecutive quarter, declining by $6.3 billion (3.2 percent), as net charge-offs of $25.4 billion exceeded loss provisions of $19.5 billion. As has been the case throughout the recent period of reserve reductions, most of the declines have been concentrated among large institutions. Half of all banks increased their reserves during the fourth quarter, whereas 70 percent of the 50 largest banks reduced their reserves. The industry’s “coverage ratio” of reserves to noncurrent loans and leases declined slightly, from 63.7 percent to 62.5 percent during the quarter.

    Equity Capital Registers a Small Decline
    Lower unrealized gains on available-for-sale securities and other financial instruments contributed to a $7.7 billion (0.5 percent) decline in the industry’s total equity capital during the fourth quarter. Unrealized gains are not included in regulatory capital, and tier 1 leverage capital increased by $2.4 billion (0.2 percent). This is the smallest quarterly increase in leverage capital in the past 13 quarters. Retained earnings contributed $3.7 billion to capital growth in the quarter, as banks paid $22.6 billion of their $26.3 billion in quarterly earnings in dividends.

    Loan Balances Post Largest Real Growth in Four Years
    Total assets of insured institutions increased by $76.1 billion (0.6 percent) in the fourth quarter, as loan balances rose by $130.1 billion (1.8 percent). This is the third consecutive quarter in which total loan balances have increased and, apart from first quarter 2010 when accounting rule changes caused a $221 billion increase in reported balances, it represents the largest quarterly increase since fourth quarter 2007.3 As in the prior two quarters, overall loan growth was led by C&I loans, which rose by $62.8 billion (4.9 percent), accounting for almost half of the total increase in loans and leases during the quarter. C&I loans have increased in each of the last six quarters. Additionally, C&I loans to small businesses (C&I loans in original amounts of $1 million or less) increased by $2.8 billion (1 percent). This is the first time in the seven quarters for which data on quarterly changes in these loans are available that small C&I loan balances have increased. Residential mortgage loans increased by $26 billion (1.4 percent), following a $23.6 billion increase in the third quarter. Credit card balances posted a seasonal increase of $21.3 billion (3.2 percent). Real estate construction and development loans declined for a 15th consecutive quarter, falling by $14.7 billion (5.8 percent). Investment securities portfolios increased by $61.6 billion (2.2 percent), with mortgage-backed securities rising by $45.0 billion (2.8 percent), and state, county, and municipal securities increasing by $13.3 billion (6.5 percent). Assets in trading accounts declined by $36 billion (4.8 percent), while interest-bearing balances due from depository institutions fell by $34.9 billion (3.3 percent).

    Money Continues to Flow into Fully Insured Deposit Accounts
    Deposit balances registered strong growth for a sixth consecutive quarter, as large-denomination transaction accounts that offer unlimited insurance coverage through the end of 2012 continue to attract new depositors. Total deposits at insured institutions increased by $183.2 billion (1.8 percent). Over the last six quarters, deposits at FDIC-insured institutions have risen by more than $1 trillion. Most of the growth has consisted of large-denomination noninterest-bearing transaction deposits that are fully insured until the end of 2012. Balances in these accounts increased by $191.2 billion (13.7 percent) during the fourth quarter, and totaled $1.58 trillion at the end of the year. In contrast, nondeposit liabilities declined by $99.5 billion (4.5 percent), while deposits in foreign offices fell by $66.6 billion (4.5 percent).

    “Problem List” Shrinks for Third Consecutive Quarter
    The number of institutions reporting financial results fell from 7,437 to 7,357 in the fourth quarter. During the quarter, 54 institutions were merged into other institutions, and 18 insured institutions failed. There were two institutions whose December financial reports had not been received at the time this publication was prepared. The number of institutions on the FDIC’s “Problem List” declined from 844 to 813 during the quarter, and total assets of “problem” institutions fell from $339 billion to $319.4 billion. For the full year, the number of reporting institutions declined by 301, as 3 new reporters were added, 92 institutions failed, and 198 were absorbed by mergers. During 2011, the number of full-time-equivalent employees at insured institutions increased from 2,088,579 to 2,107,976.

    Chart 1. Quarterly Net Income

    Chart 2. More Banks Are Improving Their Earnings, While Fewer Are Unprofitable

    Chart 3. Provision Declines Are Diminishing, but Revenues Are Not Growing

    Chart 4. Profitability Is Improving for Banks of All Sizes

    Chart 5. Noncurrent Loans and Loan Losses Continue to Fall, but Remain Well Above Pre-Crisis Levels

    Chart 6. After Three Years of Declines, Loan Balances Have Grown for Three Consecutive Quarters

    Chart 7. Deposit Inflows Have Been Very Strong in Recent Quarters

    Chart 8. Quarterly Changes in the Number of Troubled Institutions

    TABLE I-A. Selected Indicators, All FDIC-Insured Institutions

    TABLE II-A. Aggregate Condition and Income Data, All FDIC-Insured Institutions

    TABLE III-A. Full Year 2011, All FDIC-Insured Institutions

  • Asset Concentration Groups
  • Asset Size Distribution & Geographic Regions
  • TABLE IV-A. Fourth Quarter 2011, All FDIC-Insured Institutions

  • Asset Concentration Groups
  • Asset Size Distribution & Geographic Regions
  • TABLE V-A. Loan Performance, All FDIC-Insured Institutions

  • Asset Concentration Groups
  • Asset Size Distribution & Geographic Regions
  • TABLE VI-A. Derivatives, All FDIC-Insured Commercial Banks and State-Chartered Savings Banks

    TABLE VII-A. Servicing, Securitization, and Asset Sales Activities

    TABLE VIII-A. Trust Services, All FDIC-Insured Institutions


    1 See ASC Topic 820 (FAS 157) and ASC Topic 825 (FAS 159) in Notes to Users.

    2 See “GNMA Buy-Back Option” in Notes to Users.

    3 See “ASC Topics 860 & 810” in Notes to Users.

    Last Updated 02/28/2012 Questions, Suggestions & Requests