FDIC issues banking profile for second quarter 2023
On Sept. 7, 2023, the FDIC released the quarterly banking profile covering the second quarter of 2023. FDIC Chair Martin Gruenberg remarked on the resilience of the industry, observing strong performance in key metrics such as net income, asset quality, and capitalization. However, Gruenberg also noted the continued risks of inflation, rising market interest rates, and geopolitical uncertainty, as well as challenges faced specifically by the commercial real estate industry.
According to the report, FDIC-insured banks and savings institutions earned $70.8 billion in the second quarter of 2023, a decrease of $9 billion or 11.3% from the previous quarter. The FDIC noted that net income would have been roughly flat compared to the prior quarter without the three failed-bank acquisitions of the past two quarters.
The report provides these additional second quarter statistics:
- Net interest income totaled $174.3 billion for the second quarter of 2023, down from $175.7 billion in the first quarter of 2023. From the previous quarter, the average net interest margin decreased 3 basis points to 3.28%.
- The average return on assets ratio was 1.21%, down from 1.36% in the first quarter of 2023.
- Total loan and lease balances increased $86.5 billion (0.7%) from the previous quarter, largely driven by increases in credit card loans and loans to nondepository financial institutions.
- Total deposits were $17.7 trillion in the second quarter of 2023, a decline of $98.6 billion (0.5%) from the previous quarter. The decrease was driven by a reduction in estimated uninsured deposits, which dropped 2.5%, while insured deposits increased by 0.8%.
- The noncurrent loan rate increased 1 basis point to 0.76% compared to the previous quarter.
- Community banks’ quarterly net income totaled $7.1 billion in the second quarter of 2023, an increase of $236.2 million, or 3.4%, compared to the previous quarter.
- Unrealized losses on available-for-sale and held-to-maturity securities totaled $558.4 billion, up $42.9 billion, or 8.3%, compared to the previous quarter.
- The deposit insurance fund balance totaled $117 billion as of the end of the second quarter, an increase of $897 million from the previous quarter.
The total number of FDIC-insured commercial banks and savings institutions declined from 4,672 in the first quarter of 2023 to 4,645 in the second. During the second quarter, two banks opened, one bank failed, and 27 institutions merged. The number of institutions on the FDIC’s problem bank list remained unchanged at 43. Total assets of problem banks decreased by $12 billion from the previous quarter to $46 billion.
NCUA issues second quarter 2023 performance data
On Sept. 7, 2023, the National Credit Union Administration (NCUA) reported quarterly figures for federally insured credit unions based on call report data submitted to and compiled by the agency for the second quarter of 2023. Highlights include the following statistics:
- The number of federally insured credit unions declined to 4,686, down from 4,712 in the previous quarter. In the second quarter, 2,931 federal credit unions and 1,755 federally insured, state-chartered credit unions existed.
- Total assets reported for federally insured credit unions rose by 3.8% to $2.22 trillion, up $82 billion from a year ago.
- Net income totaled $17.4 billion in the first half of 2023 at an annual rate, down $0.4 billion (2.1%) compared to the same period a year earlier.
- The annualized return on average assets was 79 basis points in the second quarter of 2023, down from 85 basis points in the first half of 2022.
- The credit union system’s net worth increased by $13.2 billion, or 5.9%, over the year to $235.9 billion. The aggregate net worth ratio was 10.63% in the second quarter of 2023, up from 10.42% a year earlier.
Banking agencies issue long-term debt proposal for large banks
On Aug. 29, 2023, the OCC, the Fed, and the FDIC jointly issued proposed long-term debt requirements for certain insured depository institutions (IDIs) and other entities. The proposed rules would improve the loss-absorbing capacity of covered entities and IDIs, providing a greater range of options for resolution in the event of a failure.
The proposal would require certain large bank holding companies, large insured depository institutions, and certain intermediate holding companies of foreign banking organizations to maintain eligible long-term debt of, at minimum, the greater of 6% of the institution’s total risk-weighted assets, 2.5% of its total leverage exposure (if required to maintain a supplementary leverage ratio), or 3.5% of its average total consolidated assets. The minimum debt requirements would be phased in over a three-year implementation period.
Comments are due Nov. 30, 2023.
FDIC issues resolution plan proposal; FDIC and Fed propose resolution plan changes
On Aug. 29, 2023, the FDIC advanced a proposal to strengthen resolution plan requirements for certain financial institutions, under which banks with more than $100 billion in total assets would be required to submit comprehensive resolution plans on a periodic basis. Among other updated requirements, such banks would have to provide a strategy to facilitate an orderly and efficient resolution, including timely access to insured deposits, maximized value from sale or disposition of assets, and minimized loss to creditors. Banks with $50 billion to $100 billion in total assets would submit more limited informational filings.
Additionally, the FDIC and the Fed jointly issued proposed guidance on resolution plans for banks with more than $250 billion in total consolidated assets. The guidance outlines agency expectations related to capital, liquidity, governance, and operational capabilities, and it notes strategies that covered entities should consider when developing a resolution plan.
Comments on both proposals are due Nov. 30, 2023.
FinCEN issues notice on tax evasion and insurance fraud
On Aug. 15, 2023, the Financial Crimes Enforcement Network (FinCEN) issued a notice on trends toward increasing state and federal payroll tax evasion and workers’ compensation insurance fraud in the residential and commercial real estate construction industries. The notice describes common fraud schemes, which often are perpetrated using shell companies and fraudulent documents. It warns of common red flags, including new specialized construction companies with little online presence, owners with no prior involvement in the industry using a non-U.S. passport as identification, and companies with a recently acquired workers’ compensation policy that covers a small number of employees paired with an unusually high volume of transactions, often from different cities or states.