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Quarterly Banking Profile


Notes to Users

  • Fourth Quarter Earnings Total $34.7 Billion
  • Full-Year ROA Reaches 1 Percent for First Time in Six Years
  • Domestic Deposit Growth Sets Record
  • Quarterly Loan Losses Fall to Five-Year Low

  • Net Income Is More Than a Third Higher Than in Fourth Quarter 2011
    Bolstered by higher noninterest income and lower provisions for loan losses, earnings at FDIC-insured institutions in fourth quarter 2012 posted a $9.3 billion (36.9 percent) increase over the total for fourth quarter 2011. The $34.7 billion in fourth-quarter net income was the highest total for a fourth quarter since 2006. Well over half of all institutionsó60 percentóreported year-over-year improvement in quarterly earnings, while the share of institutions reporting net losses for the quarter fell to 14 percent, from 20 percent a year earlier. The average return on assets (ROA) rose to 0.97 percent from 0.73 percent in fourth quarter 2011

    Noninterest Income Rebounds From Year-Earlier Weakness
    The $10 billion (18.2 percent) year-over-year improvement in noninterest income was driven primarily by higher gains on loan sales (up $2.4 billion, or 132.4 percent, over fourth quarter 2011), increased trading revenue (up $1.9 billion, or 75.3 percent), and reduced losses on sales of foreclosed property (down $1.2 billion, or 72 percent). Additionally, noninterest income at some large banks was adversely affected a year ago by appreciation in the fair values of their liabilities; the absence of similar accounting losses in this quarter's results also helped to improve noninterest income.1 Overall, almost two out of every three banks (62.3 percent) reported year-over-year increases in noninterest income.

    Insured Institutions Continue to Reduce Their Loss Provisions
    Banks set aside $15.1 billion in loan-loss provisions in the fourth quarter, a $4.9 billion (24.6 percent) reduction compared with fourth quarter 2011. This is the smallest fourth-quarter loss provision since 2006, and marks the 13th consecutive quarter with a year-over-year decline in loss provisions. More than half of all institutionsó53.6 percentóreported lower loss provisions.

    Banks See Margins Erode
    The increase in noninterest income and reduction in loss provisions helped offset a $2.7 billion (2.5 percent) year-over-year decline in net interest income. Fourth-quarter net interest income totaled $104.4 billion, compared with $107.1 billion a year ago. This is the lowest quarterly total since fourth quarter 2009, when the industry had $1.4 trillion less in interest-bearing assets. The average net interest margin (NIM) fell to 3.32 percent, from 3.57 percent in fourth quarter 2011, as average asset yields declined more rapidly than average funding costs. This is the lowest quarterly NIM for the industry since fourth quarter 2007. More than two-thirds of all banksó67.9 percentóreported year-over-year NIM declines.

    Full-Year Earnings Are Second Highest Ever
    Full-year net income totaled $141.3 billion, a $22.9 billion (19.3 percent) improvement over 2011. This is the second-highest annual earnings ever reported by the industry, after the $145.2 billion total in 2006, when the industry had $2.7 trillion less in assets. The average ROA rose to 1.00 percent from 0.88 percent in 2011. The largest contribution to the increase in earnings came from reduced provisions for loan losses, which fell by $19.3 billion (24.9 percent). Noninterest income was $18.4 billion (8 percent) higher than in 2011, thanks to an $11.2 billion (174.4 percent) increase in gains on loan sales, a $6.8 billion (93.9 percent) increase in servicing income, and a $2.4 billion (51.8 percent) reduction in losses on foreclosed property sales. The improvement in noninterest income was limited by a $12.4 billion negative swing in results from trading credit exposures. Net interest income was $1.3 billion (0.3 percent) lower than in 2011, as the full-year NIM fell from 3.60 percent to 3.42 percent. Realized gains on securities and other assets added $4.2 billion (75.7 percent) more to pretax earnings than a year earlier.

    Loan Losses Improve Across All Loan Categories
    Asset quality indicators continued to improve in the fourth quarter. Net charge-offs (NCOs) totaled $18.6 billion, down $7 billion (27.4 percent) from fourth quarter 2011. This is the 10th consecutive quarter that NCOs have declined. It is the lowest quarterly NCO total since fourth quarter 2007. All major loan categories showed year-over-year improvement in quarterly NCO amounts. The largest declines occurred in 1-to-4 family residential mortgages, where quarterly NCOs fell by $1.5 billion (29.3 percent), in real estate construction and development loans, where NCOs declined by $1.3 billion (62.6 percent), in credit cards, where NCOs were $1 billion (14.1 percent) lower, and in loans to commercial and industrial (C&I) borrowers, where NCOs were also $1 billion (39.7 percent) lower.

    Noncurrent Rate Declines to Four-Year Low
    The amount of loans that were noncurrent (90 days or more past due or in nonaccrual status) declined by $16.1 billion (5.5 percent) during the quarter. At year-end, noncurrent loan balances totaled $276.8 billion, compared with $292.8 billion at the end of the third quarter. The percentage of total loans and leases that were noncurrent fell from 3.86 percent to 3.60 percent, the lowest level since the end of 2008. Noncurrent balances fell in all major loan categories in the fourth quarter. Noncurrent 1-to-4 family residential mortgage balances declined by $6.4 billion (3.5 percent), while noncurrent real estate construction and development loans fell by $3.6 billion (17.3 percent), and noncurrent nonfarm nonresidential real estate loans declined by $3.1 billion (9.2 percent).

    Coverage of Noncurrent Loans Improves Despite Reduction in Reserves
    Insured institutions reduced their reserves for loan losses by $5 billion (3 percent) in the fourth quarter, as fourth-quarter loss provisions replenished only $15.1 billion of the $18.6 billion taken out of reserves by NCOs. This is the 11th consecutive quarter that the industry's reserve balances have declined. The trend toward lower reserves continues to be led by larger institutions. More institutions added to their reserves than reduced them (48.8 percent versus 43.5 percent, respectively). Despite the overall reduction in reserves, the larger decline in noncurrent loan balances at insured institutions meant that the industry's coverage ratio of reserves to noncurrent loans increased from 57.0 percent to 58.5 percent during the quarter.

    Decline in Securities Values Contributes to Reduction in Equity Capital
    Total equity capital fell by $5.6 billion (0.3 percent) in the fourth quarter. The decline reflected a $7.2 billion decrease in accumulated other comprehensive income, as unrealized gains on securities held for sale fell by $7.6 billion (10.4 percent). For the industry as a whole, retained earnings made no contribution to equity formation in the fourth quarter, as declared dividends of $35.5 billion exceeded the $34.7 billion in quarterly net income. The high level of dividends was the result of a large quarterly dividend declared at one institution. A majority of institutions, 55.2 percent, added to their equity capital during the quarter.

    Loan Balances Increase for Sixth Time in Seven Quarters
    Total assets increased by $227.8 billion (1.6 percent). Loans accounted for more than half of the increase, as net loan and lease balances rose by $123.2 billion (1.7 percent). Loan growth was led by C&I loans (up $53.4 billion, or 3.7 percent), credit cards (up $28.2 billion, or 4.2 percent), and nonfarm nonresidential real estate loans (up $14.6 billion, or 1.4 percent). Home equity loan balances fell by $12.6 billion (2.2 percent) during the quarter, while balances of real estate construction and development loans declined by $6.6 billion (3.1 percent). Loans to small businesses and farms increased by $1.7 billion (0.3 percent), as small C&I loans (original amounts of $1 million or less) rose by $5.3 billion (1.9 percent), and small farmland loans (original amounts of $500,000 or less) increased by $234 million (0.6 percent). Cash and balances due from depository institutions increased by $87.2 billion (6.4 percent), as banks increased their balances with Federal Reserve banks by $60.2 billion (9.1 percent). Banks' investment securities portfolios grew by $23.5 billion (0.8 percent) during the quarter.

    Large Denomination Deposit Balances Surge
    Total deposits increased by $313.1 billion (3 percent), as deposits in domestic offices posted a record $386.8 billion (4.3 percent) increase. Most of the growth consisted of large denomination deposits. Balances in accounts of more than $250,000 increased by $348.5 billion (8.2 percent). Uninsured deposit balances increased by $252.7 billion (12.7 percent), while balances in noninterest-bearing transaction accounts above the basic FDIC coverage level of $250,000 that had temporary full FDIC coverage through the end of 2012 increased by $49.5 billion (3.3 percent). Banks reduced their nondeposit liabilities by $76.9 billion (3.7 percent), and their foreign office deposits by $73.7 billion (5.1 percent).

    Quarterly Failures Decline to 4 Ĺ Year Low
    In the fourth quarter, the number of insured commercial banks and savings institutions reporting financial results fell from 7,181 to 7,083. During the quarter, 88 institutions were merged into other banks, and eight insured institutions failed. This is the smallest number of failures in a quarter since second quarter 2008. For the sixth quarter in a row, no new reporting institutions were added. The year 2012 is the first in FDIC history that no new reporting institutions were added, and the second year in a row with no start-up de novo charters (the three new reporters in 2011 were all charters created to absorb failed banks). The number of institutions on the FDIC's "Problem List" declined for a seventh consecutive quarter, from 694 to 651. Total assets of "problem" institutions fell from $262 billion to $233 billion. During the fourth quarter, insured institutions increased the number of their employees by 4,259 (0.2 percent).

    Chart 1. Quarterly Net Income, 2008-2012

    Chart 2. Annual Net Income, 2000-2012

    Chart 3. Quarterly Revenue and Loan-Loss Provision, 2008-2012

    Chart 4. Noncurrent Loans and Loan Losses Continue to Fall but Remain Well Above Pre-Crisis Levels

    Chart 5. Reserve Coverage Ratio

    Chart 6. Quarterly Change in Loan Balances, 2007-2012

    Chart 7. Quarterly Change in Domestic Deposits

    Chart 8. Quarterly Changes in the Number of Troubled Institutions, 2007-2012

    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 2012, All FDIC-Insured Institutions

  • Asset Concentration Groups
  • Asset Size Distribution & Geographic Regions
  • TABLE IV-A. Fourth Quarter 2012, 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 Call Report Filers

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

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


    1 See FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities in Notes to Users.

    Last Updated 02/26/2013 Questions, Suggestions & Requests