USA Bank Charge-Offs Lowest Since 2008

USA Bank Charge-Offs were at a 19-quarter low of 0.97% for the QE December 31, 2012. This is the lowest since the QE March 31, 2008 (0.99%). The financial crisis losses have been mostly worked off - at least the worthless credits the regulators have identified and ordered written-off.

Net Loans increased by +1.7% from the prior QE September 30, 2012. However, banks have been more risk-averse than before the 2008 - 2009 USA financial system crisis. Therefore, Loan Charge-Offs should continue to level off at a relatively lower rate or even decease further as loan underwriting standards are more conservative. The Net Charge-Off Rate is still high compared to historical rates.

USA Banks Net Charge-Off Rate by Quarter The USA Banks Net Charge-Off Rate was at a 19-quarter low of 0.97% for quarter ended December 30, 2012. The Net Charge-Off Rate peaked at 2.89% at the QE 12-31-09, during the USA financial system crisis.



USA Banks Net Charge-Off Rate by Segment For the quarter ended December 31, 2012, the Net Charge-Off Rates by segments were:
All institutions 0.97%
Credit card banks 3.55%
International banks 1.04%
Agricultural banks 0.34%
Commercial lenders 0.70%
Mortgage lenders 0.59%
Consumer lenders 1.50%
Other specialized (< $1 billion total assets) 0.64%
All other (< $1 billion total assets) 0.46%
All other (> $1 billion total assets) 0.85%

Loan Losses Improve Across All Loan Categories (FDIC Quarterly Banking Profile, February 26, 2013) 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.

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USA Banks Return on Assets Highest Since 2006

USA Banks Return on Assets of +1.00% for 2012 signals continued improvement in profitability and ongoing stability in the banking system. There were 7,083 financial institutions reporting. The prior year 2011 was +0.88%. The current ROA is the highest since 2006 (+1.28%).

Return on assets reflects the overall performance, and health, of the banking system and takes into account all of the income statement components, including net interest margins, loan loss provisions, operating expenses, and income taxes. Return on assets also indicates how effectively and efficiently assets are being deployed and if the asset mix is ultimately profitable. An ROA of +1.00% is a banking benchmark.

USA Banks Return on Assets by Year The USA Banks Return on Assets (ROA) was +1.28% for the years ended 2004, 2005, and 2006. The ROA decreased to +0.81% and +0.03% in 2007 and 2008, respectively. The ROA then turned negative to -0.07% in 2009, before rebounding to +0.65%, +0.88%, and now +1.00% in 2010, 2011, and 2012, respectively.



USA Banks Return on Assets by Segment For 2012, the ROA by banking segments was:
All institutions +1.00%
Credit card banks +3.14%
International banks +0.80%
Agricultural banks +1.27%
Commercial lenders +0.89%
Mortgage lenders +0.87%
Consumer lenders +1.47%
Other specialized (< $1 billion total assets) +1.24%
All other (< $1 billion total assets) +0.87%
All other (> $1 billion total assets) +1.00%

Full-Year Earnings Are Second Highest Ever (FDIC Quarterly Banking Profile, February 26, 2013) 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.

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Bank Failure Friday: FDIC Seizes Frontier Bank, LaGrange, GA

Bank Failures 2013 continue with the FDIC seizing Frontier Bank, LaGrange, GA on Friday, March 8, 2013. This is the fourth bank failure of the year. Banks have now been closed in Georgia, Illinois, Minnesota, and Washington in 2013.

#4 Frontier Bank, LaGrange, GA
* HeritageBank of the South, Albany, GA assumed all of the deposits and purchased most of the assets
* As of December 31, 2012, the bank had approximately $258.8 million in total assets
* FDIC estimates the cost to the Deposit Insurance Fund (DIF) will be $51.6 million
* The last bank closed in the state had been Hometown Community Bank, Braselton, on November 16, 2012

The FDIC closed 51 banks in 2012 in the following states: Alabama 1, California 1, Florida 8, Georgia 10, Illinois 8, Indiana 1, Kansas 1, Maryland 2, Michigan 1, Minnesota 4, Missouri 4, New Jersey 1, North Carolina 1, Oklahoma 1, Pennsylvania 2, South Carolina 2, Tennessee 3. Florida, Georgia, and Illinois accounted for 26 total or 51% of all bank failures in 2012.

Florida, Georgia, and Illinois accounted for 45 total or 49% of all bank failures in 2011.

USA Failed Banks by Year Bank failures skyrocketed in 2009 and 2010 to 140 and 157, respectively - a 2-year total of 297 compared to 32 from 2004 through 2008. Bank failures in 2011 continued at a high rate of 92. The 2012 closings decreased to 51. The total 2013 closings are currently estimated at 21. The 2013 annual bank failures are extrapolated from the weeks reported and failures year-to-date.



Cost of Failed Banks 2013 The total estimated losses to the FDIC Deposit Insurance Fund for 2013 bank closures year-to-date are $104.2million. The total estimated losses in 2012 were $2.47 billion.



Losses to the Deposit Insurance Fund (DIF) in 2013 to-date:
1 Frontier Bank, LaGrange, GA $51.6M
2 Covenant Bank, Chicago, IL $21.8M
3 Westside Community Bank, University Place, WA $20.3M
4 1st Regents Bank, Andover, MN $10.5M


Failed Credit Unions

The NCUA has seized 3 credit unions in 2013:
Closed and Liquidated
* Amez United Credit Union of Detroit, MI (February 19)
* New Covenant Missionary Baptist Church Credit Union of Milwaukee, WI (January 7)
Placed into Conservatorship
* NCP Community Development Federal Credit Union of Norfolk, VA (February 8)

The NCUA has reported satisfactory progress of 4 credit unions previously placed in conservatorship:
* Arrowhead Central Credit Union of San Bernardino, CA
* Texans Credit Union of Richardson, TX
* Keys Federal Credit Union of Key West, FL
* AEA Federal Credit Union of Yuma, AZ

The NCUA closed 17 credit unions in 2012 in the following states: California 2, Colorado 2, Kansas 1, Michigan 1, New York 2, North Carolina 1, Ohio 1, Oregon 1, Pennsylvania 1, Texas 2, Vermont 1, Wisconsin 2.

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FDIC Deposit Insurance Fund Balance at Multi-Year High

FDIC Deposit Insurance Fund The FDIC Deposit Insurance Fund (DIF) balance and related Provision for Insurance Losses (PIL) indicate continued improvement through the 3 months ended December 31, 2012. During the 2008 financial system crisis and the Great Recession, the Provision for Insurance Losses increased, and therefore the DIF decreased, as a result of bank failures and the resulting costs of seizure and liquidation. However, the FDIC problem bank list remains high which indicates ongoing bank failures and DIF costs. Bank failures and the related charts of total failures and cost to the FDIC Deposit Insurance Fund are posted as occurring on this blog.

FDIC Deposit Insurance Fund by Quarter The FDIC Deposit Insurance Fund balance was +$32.96 billion at the quarter ending 12-31-12. This is the 7th consecutive quarterly positive balance, after 7 consecutive negative quarters, and a 17-quarter high. The peak balance was +$52.84 billion at QE 3-31-08. This was before the 2008 USA financial system crisis and Great Recession. The low balance was -$20.86 billion at the QE 12-31-09. The Provision for Insurance Losses (PIL), the cost of seizing and liquidating failed banks, was a negative -$3.34 billion at QE 12-31-12. The PIL peaked at +$21.69 billion for the QE 9-30-09. Prior to the QE 3-31-08, the PIL was an immaterial amount, positive or negative, of less than $100 million each quarter.



DIF Balance Increases (FDIC Quarterly Banking Profile, February 26, 2013) The Deposit Insurance Fund (DIF) increased by $7.7 billion during the fourth quarter to $33.0 billion. Assessment income of $2.9 billion, a negative provision for insurance losses of $3.3 billion, and $1.8 billion previously set aside for debt guarantees under the FDIC’s Temporary Liquidity Guarantee Program were the main drivers of growth.

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FDIC Problem Banks List Decreases for 7th Consecutive Quarter

The FDIC problem banks list decreased by 43 to 651 at December 31, 2012 for the 7th consecutive quarterly decline and a 13-quarter low. The total continues very high, but has dropped below 700 after 11 consecutive quarters above. The problem banks list has peaked and continues a downtrend and bank failures also continue decreasing accordingly. Bank failures and the related charts of total failures and cost to the FDIC Deposit Insurance Fund are posted as occurring on this website.

There were 7,083 financial institutions reporting and the problem banks list of 651 represents 9.19% of the total and a 12-quarter low. This is down from 9.66% at the prior QE 9-30-12 and down from the peak of 11.72% for the QE 3-31-11. In a healthy economy and banking system, less than 1% of financial institutions are on the problem banks list and this can be as low as 0.50% (1/2 percent).

FDIC Problem Banks by Quarter The FDIC problem banks list peaked at 888 at March 31, 2011. The total problem banks remain elevated but is decreasing. The problem banks list has decreased 7 consecutive quarters, after increasing 18 consecutive quarters (from Q4 2006 through Q1 2011). The total assets of the problem banks from the year-ends 2004 through 2012 (in billions) were $28, $7, $8, $22, $159, $403, $390, $319, and $238, respectively. The total assets of the current (12/31/2012) 651 problem banks is $238 billion, or an average of $366 million in total assets per problem bank. The FDIC reports the total problem banks on a quarterly basis.



Quarterly Failures Decline to 4 ½ Year Low (FDIC Quarterly Banking Profile, February 26, 2013) 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).

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Peter Schiff: Fed Has No Exit Strategy!

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Peter Schiff

Bernanke Almost Comes Clean On "Exit" Strategy

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