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Quarterly Banking Profile


Notes to Users

  • Net Income of $37.2 Billion Is $3.1 Billion Below Year-Ago Level
  • Reduced Mortgage Activity Contributes to Decline in Revenue
  • 54 Percent of Banks Report Year-Over-Year Improvement in Earnings
  • Balances at Federal Reserve Banks Account for Almost Half of Asset Growth

  • Effects of Last Year's Rate Increase Are Evident in First Quarter Results
    The increase in medium- and long-term interest rates that occurred in second quarter 2013 continued to affect year-over-year earnings comparisons. Lower noninterest income, reflecting diminished mortgage revenue, declining trading income, and a one-time gain that inflated year-ago results, was the principal cause of the $3.1 billion (7.6 percent) year-over-year decline in industry earnings. This is only the second time in the last 19 quarters that the industry has reported a year-over-year decline in quarterly earnings. Both declines have occurred in the last three quarters. Last year's rise in interest rates resulted in a drying-up of demand for mortgage refinancings. Without this demand, mortgage originations have fallen sharply, and mortgage revenue has declined by almost one-half. The increase in interest rates also resulted in a steeper yield curve that has been beneficial for the net interest margins of banks that invest in longer-term assets and fund the investments with short-term liabilities. For the industry in aggregate, the declines in mortgage revenue and realized gains on securities caused by higher interest rates outweighed the gains in net interest income that stemmed from a steeper yield curve. For a majority of banks, however, the opposite was true. Even as total industry net income fell, more than half of all banks—54 percent—reported increased earnings compared with the year-ago period. The average return on assets for the quarter was 1.01 percent, down from 1.12 percent in first quarter 2013.

    Lower Noninterest Income Outweighs Growth in Net Interest Income
    Net operating revenue—the sum of net interest income and total noninterest income—totaled $163.7 billion in the first quarter. This was $6.7 billion (4 percent) lower than the first-quarter 2013 total. Net interest income was $361 million (0.3 percent) higher than the year before, but noninterest income was down by $7.1 billion (10.7 percent). More than two-thirds of all banks reported year-over-year increases in net interest income, but only seven of the 20 largest banks reported increases. The average net interest margin fell to 3.17 percent, from 3.27 percent in first quarter 2013, although 54 percent of banks reported higher margins compared with first quarter 2013. Larger institutions are less invested in longer-maturity, higher-yield assets, and a sizable share of their recent asset growth has consisted of low-yield, high-liquidity balances at Federal Reserve banks. They experienced the greatest margin erosion.

    Reduced Income From Mortgage Lending Contributes to Revenue Decline
    The year-over-year decline in noninterest income was led by a $4 billion (53.6 percent) drop in income from mortgage sales, securitization, and servicing. Trading revenue was $1.4 billion (18.3 percent) lower than the comparable period in 2013. In addition, first quarter 2013 noninterest income received a $2.5 billion boost from a litigation settlement, while there was no similar boost to first quarter 2014 income. A majority of banks, 55.6 percent, reported lower noninterest income than in first quarter 2013. Noninterest expense was essentially unchanged from 2013 (down $18 million, or 0.02 percent). Payroll expenses were $579 million (1.2 percent) lower, as the number of full-time equivalent employees was 43,890 fewer than a year ago. First-quarter expenses were elevated by a $959 million litigation expense.

    Gains From Lower Provisioning Are Diminishing
    The largest positive contribution to the year-over-year change in earnings came from reduced loan-loss provisions. The $7.6 billion that banks set aside for their loan-loss reserves was $3.3 billion (30.3 percent) lower than the year before. This is the 18th consecutive quarter that loan-loss provisions have declined year over year, and it is the second-smallest decline during this period. Forty-two percent of all banks reduced their loss provisions.

    Charge-Offs Fall to Pre-Crisis Level
    Loan losses continued to decline. Net charge-offs (NCOs) fell year over year for a 15th consecutive quarter, to $10.4 billion, $5.5 billion (34.8 percent) less than in first quarter 2013. This is the lowest quarterly NCO total since second quarter 2007. Charge-offs were lower across all major loan categories, with the largest declines occurring in residential mortgage loans (down $2 billion, 63.1 percent), home equity lines (down $1 billion, 53.3 percent), real estate loans secured by nonfarm nonresidential properties (down $734 million, 71.9 percent), and credit cards (down $709 million, 11.4 percent). The annualized NCO rate fell to 0.52 percent from 0.83 percent in first quarter 2013.

    Noncurrent Balances Fall Below $200 Billion
    The amount of loan and lease balances that were noncurrent (90 days or more past due or in nonaccrual status) declined for a 16th quarter in a row, as noncurrent levels improved in all major loan categories. Noncurrent balances totaled $195.1 billion at the end of the first quarter, down $12.1 billion (5.8 percent) from the total at year-end 2013. This is the first time since the end of third quarter 2008 that noncurrent balances have been below $200 billion. The improvement was led by residential mortgage loans, where noncurrent balances fell by $8.7 billion (6.5 percent), real estate loans secured by nonfarm nonresidential properties (down $1.2 billion, 5.7 percent) and real estate construction and development loans (down $1.1 billion, 12.7 percent).

    Reserve Coverage Improves for Sixth Consecutive Quarter
    Banks continued to release reserves in the first quarter, adding $7.6 billion in loss provisions while net charge-offs subtracted $10.4 billion. Total loan-loss reserves declined from $135.9 billion at year-end 2013 to $132.3 billion. This is the 16th consecutive quarter that reserve balances have fallen; reserves are now at a six-year low. The industry's coverage ratio of reserves to noncurrent loans increased from 65.6 percent to 67.8 percent during the quarter, however, owing to the decline in noncurrent loan balances. The coverage ratio has increased in each of the last six quarters. A year ago, the ratio was 59.5 percent.

    Capital Measures Exhibit Strength
    Equity capital increased by $29.8 billion (1.8 percent) in the quarter. Retained earnings contributed $17.3 billion, down from $25.9 billion in the same period of 2013, as declared dividends were up by $5.5 billion (38.3 percent). Higher market values for available-for-sale securities added $6.7 billion to equity during the quarter. Both the core capital (leverage) ratio and the Tier 1 risk-based capital ratio (as defined for Prompt Corrective Action purposes) rose to record levels for the industry. At the end of the first quarter, 98.2 percent of all insured institutions, representing 99.8 percent of industry assets, met or exceeded the requirements of the highest regulatory capital category.

    Pace of Loan Growth Picks Up
    Total assets increased by $178.3 billion (1.2 percent) in the first three months of 2014. Balances with Federal Reserve banks rose by $82.5 billion (7.1 percent), accounting for 46 percent of total asset growth. Investment securities portfolios rose by $52.7 billion (1.8 percent), as banks increased their holdings of U.S. Treasury securities by $44.6 billion (23.1 percent). Total loans and leases increased by $37.8 billion (0.5 percent) during the quarter. Credit card balances and agricultural production loans posted seasonal declines of $33 billion (4.8 percent) and $5.7 billion (8 percent), respectively. Home equity lines of credit declined for a 20th consecutive quarter, falling by $7.2 billion (1.4 percent). Residential mortgage balances declined by $6.3 billion (0.3 percent), as banks reduced their inventories of mortgages held for sale. All other major loan categories increased during the quarter. Loans to commercial and industrial borrowers increased by $15.3 billion (1.0 percent), while real estate loans secured by multifamily residential properties rose by $9 billion (3.4 percent), real estate loans secured by nonfarm nonresidential properties increased by $8.1 billion (0.7 percent), and auto loans rose by $6.2 billion (1.8 percent). Assets in trading accounts declined by $18.6 billion (3.1 percent).

    Retail Deposits Lead Growth in Funding
    Deposit balances were up by $125.8 billion (1.1 percent) in the quarter, as deposits in foreign offices fell by $5.4 billion (0.4 percent) and domestic office deposits increased by $131.1 billion (1.3 percent). Much of the increase in domestic deposits consisted of balances in smaller-denomination accounts. Deposits in accounts of less than $250,000 rose by $85.9 billion (1.7 percent). Nondeposit liabilities increased by $25.4 billion (1.4 percent), as unsecured borrowings increased by $28.1 billion (13.9 percent), and securities sold under repo agreements rose by $22 billion (7.2 percent). Liabilities in trading accounts declined by $22 billion (9.1 percent).

    Problem List Falls to Less Than Half of Recent Peak
    The number of insured commercial banks and savings institutions reporting financial results declined to 6,730 in the first quarter, down from 6,812 reporters at the end of fourth quarter 2013. No new reporters were added in the first quarter. Mergers absorbed 74 institutions during the quarter, and five insured institutions failed. The number of institutions on the FDIC's "Problem List" declined from 467 to 411 during the quarter. Assets of "problem" banks fell from $152.7 billion to $126.1 billion. The number of full-time equivalent employees declined to 2,058,927, from 2,102,817 in first quarter 2013. This is the fourth consecutive quarter that the number of employees has declined year over year.

    Chart 1. Quarterly Net Income

    Chart 2. Unprofitable Institutions and Institutions With Increased Earnings

    Chart 3. Quarterly Net Operating Revenue

    Chart 4. Quarterly Noninterest Income From Sale, Securitization, and Servicing of 1-to-4 Family Residential Mortgage Loans

    Chart 5. Year-Over-Year Change in Quarterly Loan-Loss Provisions

    Chart 6. Noncurrent Loan Rate and Quarterly Net Charge-Off Rate

    Chart 7. Quarterly Change in Loan Balances

    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. First Quarter 2014, All FDIC-Insured Institutions

  • Asset Concentration Groups

  • Asset Size Distribution & Geographic Regions
  • TABLE IV-A. Full Year 2013, 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

    Last Updated 5/28/2014 Questions, Suggestions & Requests