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First Glance 12L (4Q14) 2014: A Year of Opportunities and Challenges

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First Glance 12L (4Q14) 2014: A Year of Opportunities and Challenges
First Glance 12L
(4Q14)
Financial Performance of Banks in the 12th Federal Reserve District (“12L”)
2014: A Year of Opportunities and Challenges
February 23, 2015
Authors: Judy Plock, Colin Perez,
Martin Karpuk, Grant LaCorte, Josephine Chan
Editors: Eva Chow, Cynthia Course, David Doyle, Diego Maldonado, Michael Nimis, Gary Palmer, Marty Tunnell
This report is based upon preliminary data from 4Q2014 and prior Condition & Income Reports as well as other examination and economic
sources. Data has been prepared primarily for bank supervisors and bankers. The opinions expressed in this publication are those of the
authors. Opinions are intended only for informational purposes, and are not formal opinions of, nor binding on, the Federal Reserve Bank of
San Francisco or the Board of Governors of the Federal Reserve System.
Data Inquiries: please contact [email protected]
Press Inquiries: please contact Media Relations at http://www.frbsf.org/our-district/press/
Table of Contents
Highlights:
12th District Overview
3-4
Section 1:
Economic Conditions
5 – 12
Section 2:
Commercial Bank Performance
13
Earnings
Hot Topic – Net Interest Margins Flat
14 – 21
Provisions and Loan Loss Reserves
22 – 24
Loan Growth and Mix
Hot Topic – Loan Growth Driven in Part by Loosening Standards?
25 – 33
Credit Quality
34 – 39
Liquidity and Interest Rate Risk
Hot Topic – Nonmaturity Deposits and Asset Maturities
40 – 45
Capital and Dividends
46 – 47
Merger Activity
48
Section 3:
Commercial Bank Regulatory Ratings and Trends
49 – 53
Section 4:
Savings Institution and Industrial Bank Performance
54 – 58
Appendix 1/2:
Banks Covered in This Report / Technical Information
59
Appendix 3:
Regulatory Hot Topics
60
12th District Overview
“2014: A Year of Opportunities and Challenges”
The District’s economy continued to expand at a slightly above-average rate. Growth in jobs,
single-family homebuilding, and residential and commercial property prices outpaced the nation.
Job growth helped the District’s aggregate unemployment rate decline to 6.6% in December
2014, down from 7.6% in the prior year, but still above a national figure of 5.6%.
The District is fairly insulated from the direct negative effects of the slump in oil prices, except
where oil is an important economic driver (e.g., Alaska and pockets of Utah and California).
Overall, lower energy costs are expected to benefit consumers and provide some economic lift.
Still, banks are vulnerable to the indirect effects of a concurrent “flight to safety”, such as the
impact of lower interest rates on margins and of a strengthening dollar on the export economy
and foreign currency translation adjustments. Trade-related risks posed by currency fluctuations
and a slowing global economy could be compounded by the West Coast port disruption.
2014 was generally a year of continued financial improvement among District banks. With
problem asset volumes easing, earnings inched higher but remained below long-term, prerecession averages due to ongoing margin pressures. Loan growth accelerated further. Liquidity
and capital measures moderated but remained well above pre-crisis troughs.
Year-to-date pretax profit ratios generally increased year-over-year but were flat on a linkedquarter basis and trailed national averages. Improved credit quality and stronger financial health
drove noninterest and provision expenses lower, more than offsetting margin and fee income
pressures.
State-Level YOY
Job Growth, 4Q14
UT
3.69%
OR
2.85%
WA
2.70%
AZ
2.55%
NV
2.37%
CA
2.11%
Year-to-Date Annualized, % of Average Assets - 12th District Banks
4.0%
3.66
3.64
3.41
3.24
Dec-13
3.0%
Sep-14
2.0%
0.68
1.0%
0.65
0.0%
Net Interest
Income (TE)
Noninterest
Expense
Noninterest
Income
1.17
0.84
1.36%
Pretax Net
Income
AK
0.05%
Nation
2.14%
0.86
0.05
Provision
Expense
HI
Dec-14
1.06
0.08
1.60%
ID
Net Income
FRB-SF
0%
1%
2%
3%
4%
3
12th District Overview, Continued
District annual net loan growth remained strong, accelerating to 12%. Among the
District’s states, year-over-year net loan growth ranged from 15% in California to 4% in
Alaska. Only two states, Washington and Alaska, trailed the national average growth rate
of 7%. Districtwide, commercial and industrial lines and certain real estate loan
categories continued to lead in dollar terms. However, the relatively small construction
and land development category continued to register the largest segment-level growth
rate. While economic gains likely fueled most loan growth, Federal Reserve Senior Loan
Officer Opinion Surveys suggest that looser underwriting may have contributed as well.
Average Nonperforming
Assets/Assets (%)
0.0%
1.22
1.49
0.96
0.4%
0.79
0.74
0.8%
0.94
1.2%
0.92
0.98
1.6%
Dec-14
0.95
Sep-14
1.53
Dec-13
12L
Nation 12L Mid- 12L
Total
Large Sized Small
(> $50B) ($10- (< $10B)
$50B)
Nation
Total
Banks Rated CAMELS
Composite 3, 4, or 5
60%
Ongoing shifts in balance sheet maturities also pose risks in a rising interest rate
environment. Longer-duration loans and securities drifted higher and their value may
decline more severely than short-term assets should interest rates increase. Meanwhile,
non-maturity deposit reliance increased further. These deposits’ sensitivity to rising
interest rates may be difficult to forecast accurately.
12L Composite "3"
12L Composite "4"
12L Composite "5"
Nation Composite "3"-"5"
50%
40%
Asset quality continued to improve, especially among smaller banks. The districtwide
average nonperforming asset ratio, which includes both noncurrent loans and foreclosed
real estate, ended the year at 0.94%, comparable to the nation. Although lower, the
District ratio still exceeded pre-recession averages. Prospectively, rising interest rates
could increase debt service coverage requirements for loans priced with variable interest
rates. An expanding economy and strengthening incomes, revenues, and rents, which
typically accompany rising interest rates, could provide some offset to higher credit costs.
District on-balance sheet liquidity and capital measures moderated slightly but were still
strong overall. Noncore funds reliance remained relatively low. However, history suggests
a rising interest rate environment may alter the mix of deposits and funding
prospectively. Meanwhile, risk-based capital ratios ebbed as banks continued to shift
assets towards higher risk-weight buckets in response to stronger loan demand.
30%
20%
10%
FRB-SF
Dec-14
Dec-10
Dec-06
Dec-02
Dec-98
Dec-94
Dec-90
0%
Examination ratings improved along with financial performance. The share of District
banks with less-than-satisfactory examination ratings declined to 22%, still above a
national ratio of 13%, but well below a peak of 60% in late 2010. Consumer compliance
ratings also continued to recover from the Crisis.
4
District Job Growth Outpaced the Nation
but Was Relatively Flat
Section 1 - Economic Conditions
Annual Nonfarm Job Growth Rate
4% 3.4%
3.7%
2.8%
2%
Job Growth
3.1%
2.3%
2.1%
2.1%
0%
State Leading Index
-2%
District
-4%
Nation
-6%
-4.9%
5
Leading Index Measures Suggest Continued Economic
Improvement; Oregon’s Prospects are Particularly Strong
Leading Index Measure by State - December 2014
Leading index predicts if a
local economy might expand
(+) or slow (-) in the near term
Dec-14
Dec-13
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
Dec-03
Dec-02
Dec-01
Dec-00
Dec-99
Dec-98
Dec-97
Dec-96
Dec-95
Dec-94
FRB-SF
Dec-12
-6.7%
-8%
Dec-11
Oil-Related Employment Exposures
Dec-10
Commercial Real Estate Market Metrics
Dec-09
Housing Market Metrics
Based on average nonfarm payrolls over trailing three months; Source: Bureau of Labor Statistics, Haver
Analytics.
6
While District Home Prices Continue to Rise,
They Remained Below Pre-Recession Peaks in All but Alaska
Home Price Index - % Recovered From Pre-Recession Peak - December 2014
12%
2.74
Source: Core Logic
Current HPI / PreRecession Peak HPI
Nation = -13.4%
Leading Index Reading
Strongest 10 States
Nation = 1.74
Other States Above U.S.
Strongest 10 States
Other States Above U.S.
FRB-SF
Other States Below U.S.
FRB-SF
Weakest 10 States
Other States Below U.S.
Year-Over-Year Change in Home Price Index (%)
Weakest 10 States
The Leading Index predicts the 6-month growth rate of state's coincident economic index (also calculated by the Philadelphia FRB).
Inputs include state-level nonfarm payroll jobs, average hours worked in manufacturing, unemployment rate, wages and salaries, 1-4
family permits, and initial unemployment claims, as well as national manufacturing delivery times and the 3-mo. vs. 10-yr. Treasury
7
yield spread. Source: Federal Reserve Bank of Philadelphia, Haver Analytics
U.S.
AK
AZ
CA
HI
ID
NV
OR
UT
WA
December 2014
5.0%
5.4%
2.8%
7.0%
6.6%
1.3%
7.3%
6.7%
4.3%
6.7%
December 2013
12.0%
4.8%
14.6%
22.5%
11.6%
12.4%
25.3%
13.6%
11.9%
8
12.0%
Home Permit Growth Continued, With Moderate Slowing
Among Annual Multifamily Starts
Year-Over-Year Change in 12-Mo. Housing Starts - West (%)
CRE Markets: Vacancy and Availability Rates May Be Near
Cyclical Lows, Except Among Retail Properties
Quarterly Aggregate Vacancy and Availability Rates – 12th District
120%
Property
Type
West
100%
SingleFamily
8.3% 4.1%
80%
2+
Family
9.2% 15.6%
60%
U.S.
18.8%
Forecast
18%
13.9%
14%
12.8%
40%
11.2%
20%
10.2%
10%
0%
Industrial
7.4%
Based on average new privately owned housing units started in trailing 12 months (seasonally adjusted); West:
AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY; Source: Census Bureau, Haver Analytics
9
Dec-16
Dec-14
Dec-12
Dec-10
Dec-04
Dec-02
Dec-00
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
Dec-03
FRB-SF
Multi-Housing
2.8%
2%
-80%
Retail
8.1%
4.4%
2+ Family
-60%
Dec-08
-40%
6.7%
5.4%
6%
Single Family
Dec-06
-20%
FRB-SF
Office
11.8%
Retail and Industrial trends are availability rates; Office and Multi-Housing trends are vacancy rates; based on an
10
aggregate of rates for 15-16 large metropolitan areas; Source: CBRE-Econometric Advisors
Oil and Gas Job Concentrations Highest in AK, Parts of CA,
and Eastern UT (and Bordering Counties in WY and CO)
Commercial Property Price Appreciation Accelerated
Year-Over-Year
Average Oil and Gas Extraction Employment Location Quotient – 2Q 2014
Year-Over-Year Change in Commercial Real Estate Price Index
23%
20%
11%
12%
10%
0%
Year-Over-Year
Change in National
CRE Price Index
by Type
Sector
4Q 13 4Q 14
Apartment
10.5% 10.0%
Industrial
9.4%
UT Counties:
Duchesne (67.4)
& Grand (2.1)
CA: Kern
County
(7.4)
-10%
Nation = 1.0
West*
Nation
-20%
Office
-30%
9.8%
9.4% 11.0%
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-08
Dec-09
-32%
-40%
FRB-SF
Oil & Gas
Extraction
Employment
Location
Quotient
Retail
< 2.0
AK Boroughs:
Kenai (11.7) &
Anchorage (8.1)
2.0 – 7.9
8.0 – 13.9
14.0 – 19.9
9.4% 10.8%
=> 20.0
All
9.5% 10.0%
*West: AZ, CA, CO, ID, MT, NV, NM, OR, UT, WA, WY; Source: NCREIF Transactions-Based Index of Institutional
Commercial Property Investment Performance
11
FRB-SF
FRB-SF
Compares the concentration of oil and gas exploration jobs for the county to the nationwide employment
concentration. Source: Bureau of Labor Statistics, U.S. Department of Labor, “The Economics Daily”, 1/9/2015
(http://www.bls.gov/opub/ted/2015/counties-with-highest-concentration-of-employment-in-oil-and-gas-ext 12
raction-june-2014.htm)
Earnings: Pretax Profitability Improved Incrementally
Section 2
Commercial Bank Performance
Pretax Return on Average Assets (TE)
2.13%
Earnings
1.0%
Credit Quality
0.5%
Liquidity and Interest Rate Risk
0.0%
See also “Banks at a Glance,” Bank Profiles by State:
http://www.frbsf.org/banking-supervision/publications/banks-at-a-glance/
-1.0%
Nation
-1.20%
13
In Most District States, Average Pretax Earnings
Continued To Recover From Crisis-Era Troughs
2008
2007
FRB-SF
2006
-1.5%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; for
comparability, Pretax ROAAs are adjusted on a tax-equivalent (TE) basis to assume taxes are paid on income
from tax-free municipal loans and securities
Pretax Return on Average Assets (TE) by Bank Size
District Small (< $10B)
2.67%
3.0%
2.5%
1.0%
1.33% 1.22%
1.21% 0.99% 0.97% 0.96% 0.88%
0.81%
1.17%
14
Pretax Returns at Smaller Institutions Lagged Those of
Larger Firms but Improved Year-Over-Year
Range of Annual Pretax Return on Average Assets (TE) by State, 2001 - 2014
1.65%
2013
Note: bank size groups are defined as small (<$10B), mid-sized ($10B-$50B) and large (>$50B) banks.
The large bank group covers nationwide banks (a larger statistical population), while the other two
groups cover 12th District banks.
District
2012
Merger Activity
-0.5%
2011
Capital and Dividends
1.17%
0.59%
2009
Loan Growth and Mix
District Mid-Sized ($10B-$50B)
2.13%
Nation Large (> $50B)
2.0%
1.21%
1.65%
1.41%
1.14%
1.5%
0.0%
1.0%
-1.0%
0.5%
0.61%
0.0%
-2.0%
2014
2013
2001-14 Peak
2001-14 Trough
HI
AZ
12th Nation
Dist.
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; for
comparability, Pretax ROAAs are adjusted on a tax-equivalent (TE) basis to assume taxes are paid on income
from tax-free municipal loans and securities; *NV: excludes credit card and zero-loan banks
FRB-SF
15
2014
WA
2013
OR
2012
ID
2011
NV*
2010
CA
2009
AK
2008
UT
-1.25%
-1.5%
2007
-5.0%
-1.0%
2006
-4.0%
-0.05%
-0.5%
2005
-3.0%
FRB-SF
1.21%
2010
Provisions and Loan Loss Reserves
2.0%
1.58%
1.5%
2014
2.0%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; for comparability,
Pretax ROAAs are adjusted on a tax-equivalent (TE) basis to assume taxes are paid on income from tax-free
16
municipal loans and securities
Margin Compression Continued to Weigh on
Earnings, Especially at Large and Mid-Sized Banks
3.39%
2%
0.35%0.33%
17
Improvements in Overhead More Than Offset
Declines in Noninterest Income
Noninterest Expense / Average Assets
FRB-SF
Dec-14
Sep-14
0.40%
0.37%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
Personnel & Benefits
FRB-SF
19
Occupancy Expense
2014
2013
2012
2011
2010
2009
2008
2014
2013
2012
0.0%
2011
Nation
2010
2.8%
District
2.9%
2009
0.2%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2.9%
1.14%
1.04%
1.12%
0.3%
3.0%
0.3%
0.45%
2008
Nation
0.6%
3.0%
2014
0.4%
Nation
1.2%
0.9%
3.2%
3.1%
District
3.2%
2013
0.5%
3.3%
District
1.5%
2012
0.60%
3.4%
2011
0.6%
3.4%
3.4%
1.85%
1.81%
1.74%
2010
0.68%
0.65%
0.7%
1.8%
3.5%
Among other things, includes
legal, consulting, audit, deposit
insurance, data processing,
telecommunications, marketing,
and intangible amortization/
impairment expenses
Noninterest Expense Category / Average Assets
2008
0.75%
Net Interest Margin (NIM)
Overhead Improvements Mainly in “All Other” Expenses
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0.8%
Declines during the crisis
were partially due to losses
on the sale of foreclosed real
estate
Interest Expense
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; figures are
adjusted on a tax-equivalent (TE) basis to assume taxes are paid on income from tax-free municipal loans and 18
securities
3.5%
0.9% 0.87%
Interest Income
FRB-SF
Sep-14
0%
0.32%
Jun-14
Large banks rely more
heavily on noninterest
income than mid-sized
and small banks for
earnings.
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; for
comparability, net interest income is adjusted on a tax-equivalent (TE) basis to assume taxes are paid on
income from tax-free municipal loans and securities
Noninterest Income / Average Assets
1%
Jun-14
2.77%
Mar-14
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
FRB-SF
2001
2.0%
2.97%
3.89%
3%
Dec-13
Nation
3.90% 3.84%
Mar-14
Nation
Large
(>$50B)
District
3.0%
District MidSized
3.48%
($10B-$50B)
Dec-14
3.8%
District
Nation
3.90%
Sep-14
3.9%
3.95%
Jun-14
4.3%
4.22%
4%
District
Small
(<$10B)
4.0%
4.27%
4.19%
2014
Dec-13
2013
Dec-14
Bank Size
5.0%
One-Quarter Annualized Income or Expense / Average Earning Assets
Mar-14
5.2%
5.1%
TOPIC
Average Net Interest
Income (TE) / Average
Earning Assets
Net Interest Income (TE) / Average Earning Assets
Quarterly Margins Improved from Early 2014
But Were Flat on a Linked-Quarter Basis
HOT
Dec-13
TOPIC
2009
HOT
All Other Noninterest
Expenses
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
20
Noninterest Expense Controls Fueled Further Efficiency
Gains, Primarily Among The District’s Smaller Banks
70¢
63¢
55
1.8%
Bank Size
2013
2014
1.5%
District Small
(<$10B)
77¢
74¢
1.2%
District MidSized
($10B-$50B)
45
Nation Large
(>$50B)
35
64¢
21
5X
3X
District
Nation
2X
1X
0.0%
0X
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0.4%
2.9X
2014
2013
2012
2011
2010
2009
2008
2007
2006
1.6%
1.4%
1.1%
1.0%
1.0%
2.8X
3.5X
22
1.9%
1.5%
4X
1.5%
1.4%
2.0%
1.0%
0.8%
0.5%
2.6X
2.4X
0.7X
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; ALLL =
allowance for loan and lease losses
23
0.0%
C&LD
FRB-SF
Mar-14
Jun-14
Sep-14
Dec-14
1.8%
Nation
Mar-14
Jun-14
Sep-14
Dec-14
1.6% 1.5%
14%
Nation ($1B-$50B)
2.4%
2.3%
2.3%
Mar-14
Jun-14
Sep-14
Dec-14
1.7%
7%
12th District ($1B-$50B)
2.5%
District
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2.0%
FRB-SF
3.0%
6X
3%
2%
27%
Allowance for Loan and Lease Losses / Total Evaluated* Loans and Leases
7.0X
7X
0%
2%
3%
23%
Reserves Trailed Loan Growth Across
Most Loan Segments, Similar to National Trends
ALLL / Noncurrent Loans (X)
2.7%
2.4%
0.8%
0.08%
0.05%
5%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
Reserves Slipped Relative to Total Loans but Coverage of
(Declining) Noncurrent Loan Balances Improved
ALLL / Total Loans
2005
2004
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; efficiency
measure = overhead / (net interest income + noninterest income)
9%
10%
0.3% 0.16%
FRB-SF
18%
20%
0.0%
FRB-SF
21%
0.66%
0.6%
64¢
Zero
30%
56¢
25
1.2%
40%
Nation
0.9%
57¢
Negative
2.04%
2014
72¢
Average Efficiency
by Bank Size
District
2.1%
2013
66¢
50%
Mar-14
Jun-14
Sep-14
Dec-14
65
73¢
Nation
2.4%
2012
75
% of District Banks with Prov. Exp. of:
Consumer
C&I**
Commercial
Real Estate
Mar-14
Jun-14
Sep-14
Dec-14
District
Provision Expense / Avg. Assets
2011
83¢
85
Efficiency ratios were
somewhat flat at large
banks but improved
among smaller firms.
2010
Cost to Produce $1 of Revenue
2009
Efficiency Measures
Loan Loss Reserves: The Recent Pace of Provision Expenses
May Not be Sustainable for Long Given Loan Growth Rates
Residential
Real Estate
Based on aggregate data for commercial banks with assets between $1 billion and $50 billion (smaller banks are
not required to report this information); preliminary 12/31/14 data; *evaluated excludes loans accounted for at
24
fair value or held for sale; **C&I also includes “all other” loan types not specified above
Loan Growth: District Loan Growth Accelerated Faster
Than Nation; Historically Prone to Broader Swings
Average Net Loan Growth in Most
District States Outpaced the Nation
Year-Over-Year Growth in Net Loans & Leases
Year-Over-Year Growth in Net Loans & Leases
18.5%
20%
District
15%
Nation
11.9%
10%
7.0%
5%
0%
YOY Net Loan Growth
Nation = 7.0%
-5%
Strongest 10 States
-6.2%
Other States Above U.S.
FRB-SF
Dec-01
Jun-02
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Jun-13
Dec-13
Jun-14
Dec-14
-10%
FRB-SF
Weakest 10 States
Based on aggregate data for commercial banks, preliminary 12/31/14 data; excludes banks with assets <$1
billion, which do not report this information; *evaluated excludes loans accounted for at fair value or held for
sale; **C&I also includes “all other” loan types not specified above
25
Annual Loan Growth Accelerated in Most District States
But Continued to Trail Pre-Recession Peaks
28%
Nonfarm Nonresidential
1-4 Family First Lien
Home Equity + Jr Lien
Commercial & Industrial
Construction & Land Dev
Consumer
1.4%
1.8%
2.8%
3.8%
13.2%
0.9%
15.5%
10.4% 10.4% 9.5%
7%
11.9%
8.2%
8.0%
7.5%
6.8%
7.0%
4.4%
12th Dist.
Mid-Sized
($10B-$50B)
0%
2.7%
2.0%
-7%
Nation
-0.7%
Large Banks
($50B+)
-14%
CA
FRB-SF
Multifamily
Other
Ag + Farmland Secured
1.6%
12th Dist.
Small Banks
(<$10B)
21%
14%
26
Percentage Point Contribution to Aggregate Year-Over-Year Loan Growth
2014
2013
2001-14 Peak
2001-14 Trough
35%
Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 12/31/14 data
Nonfarm Nonresidential, C&I, and Residential Were Big
Percentage Point Contributors to Overall Growth Rate . . .
Range of Year-Over-Year Average Net Loan Growth by State, 2001 - 2014
42%
Other States Below U.S.
ID
OR
UT
AZ
HI
NV*
WA
AK
12th Nation
Dist.
Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary
12/31/14 data; *NV: excludes credit card and zero-loan banks
FRB-SF
27
-2%
2.0%
-0.4%
2.4%
0%
0.5%
1.8%
3.0%
2.1%
2.4%
0.6%
12.5%
6.9%
0.3%
2%
4%
6%
8%
10%
12%
14%
Based on a panel of commercial banks; excludes banks with significant mergers, loan sales, or loan purchases
over the period; preliminary 12/31/14 data
28
. . . But at the Segment Level, Growth Rates Among Relatively
Small C&LD Portfolios Outpaced Other Categories
14%
Consumer
13%
1-4 Family First Lien
10%
Nonfarm Nonresid
10%
Ag + Farmland Secured
Other Revolving:
Other Consumer
Credit Card:
Auto:
Consumer
Multifamily
+ 56%
+ 20%
+ 11%
+ 3%
4%
All Loans
Nonowner-occupied: + 11%
Owner-occupied:
+ 7%
79
Ag + Farmland Secured
25%
19
1-4 Family First Lien
24%
57
0%
5%
Home Equity + Jr Lien
10%
15%
20%
25%
FRB-SF
30%
29
Non-Traditional/
Non QM-Jumbo*
20%
15%
10%
Multifamily
NonfarmNonresid.
Commercial
Real Estate (CRE)
1-4 Family
Mortgages*
Jan-15
Jul-14
Apr-14
Jan-14
Jul-14
Apr-14
Jan-14
Jul-14
Apr-14
Jan-14
Oct-14
Jan-15
Jul-14
Jan-14
Apr-14
Comm'l. &
Indust.
Credit
Card
Prime/GSE
Eligible*
Oct-14
C&LD
Large Borrowers
(15%)
Jan-15
(10%)
Oct-14
(5%)
Auto
Oct-14
Small Borrowers
Jan-15
0%
30%
40%
50%
Unfunded Commercial Line of Credit
Growth*, Year-Over-Year
Unfunded Construction and CRE Line
of Credit Growth, Year-Over-Year
60%
60%
45%
5%
20%
Unfunded Growth in C&I and Construction Lines
Decelerated but Continued to Outpace the Nation
Net Percentage Reporting Tightening (Loosening) Standards During Quarter
25%
10%
*Based on a panel of 346 District commercial banks without significant mergers, loan sales, or loan purchases over
30
the period. Includes only banks with at least 4% of loans in the particular loan type; preliminary 12/31/14 data
On Net, More Lenders Eased Than Tightened
Standards, but by a Declining Margin
TOPIC
50
16%
0%
# of high
growth
banks
25
19%
Nonfarm Nonresid.
Based on a panel of commercial banks with assets <$200B; excludes banks with significant mergers, loan
sales, or loan purchases over the period; preliminary 12/31/14 data
FRB-SF
25%
13%
Including Wells: 8%
58
34%
Commercial & Industrial
9%
Home Equity + Jr Lien
21
34%
Consumer
Based on a sample of loan officers at 70+/- domestic banks (number varies by period and loan type); *in the
latest survey, two categories were replaced with six based on GSE eligibility, qualifying mortgage (QM) status,
and size (making comparisons imperfect); Source: Federal Reserve Senior Loan Officer Opinion Survey
(http://www.federalreserve.gov/BoardDocs/snloansurvey/)
Nation
45%
30%
30%
15%
15%
0%
0%
-15%
-15%
-30%
-30%
-45%
-45%
-60%
-60%
FRB-SF
31
District
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Commercial & Industrial
Other C&LD:
+ 30%
Residential Constr.: + 29%
88
48%
Construction & Land Dev
16%
District
Nation
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Multifamily
HOT
Nearly half of active C&LD lenders expanded
the segment by 25%+ year-over-year.
29%
Construction & Land Dev
(20%)
TOPIC
Percent of Banks Making Loans in
Category* With > 25% YoY Growth
Aggregate Year-Over-Year Loan & Lease Growth by Category
FRB-SF
Segment Growth Exceeded 25% Among a Large Share
of Active C&LD, Consumer, and Multifamily Lenders
HOT
Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary
12/31/14 data; *includes unfunded loan commitments not secured by residential or commercial real
estate (CRE) or for CRE purposes or for credit cards (i.e., mostly commercial and industrial lines)
32
Growth in Construction and Multifamily Pushed Overall
Commercial Mortgage Concentrations Higher on Average
Credit Quality: Year-End Noncurrent Rates Continued to
Recede, Approaching Levels Not Seen Since 2007
Noncurrent Loans and Leases / Total Loans and Leases
CRE Mortgage Loans / Total Risk-Based Capital
Noncurrent loan rates
improved the most
among smaller banks.
4.66%
500%
452%
4.0%
District
Nation
400%
Average
Noncurrent Rate (%)
327%
300%
3.0%
District
200%
129%
126%
111%
131%
Bank Size
Nation
130%
27%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
33
Noncurrent Rates Continued to Ebb Across Loan Categories
Noncurrent Loans by Type (%)
16%
16.1%
14%
District
Nation
12%
Improved credit conditions led the
trend; lack of seasoning among rapidlygrowing loan portfolios also provided
“denominator effect” on ratios.
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
FRB-SF
Dec-05
0.0%
Dec-04
Total CRE
Dec-03
Nonfarm-Nonres. Nonfarm-Nonres.
Owner-Occup. Nonowner-Occup.
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Multifamily
0.91%
0.88%
0.85%
1.0%
Dec-02
Construction
& Land Dev.
18%
Dec-01
FRB-SF
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
29%
District MidSized
($10B-$50B)
1.11% 0.92%
Nation Large
(>$50B)
1.49% 1.14%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; Noncurrent =
90+ days past due or on nonaccrual
34
Most State-Level Noncurrent Loan Rates Continued to
Revert Toward Pre-Crisis Troughs
Range of Noncurrent Loans/Total Loans by State, Year-End 2001 - 2014
10%
2014
2013
2001-14 Peak
2001-14 Trough
8%
10%
8%
2014
District Small
1.49% 0.91%
(<$10B)
2.0%
100%
0%
2013
6%
6%
4%
1.0%
0.7%
0.7%
Construction
& Land Dev.
NonfarmNonresidential
Multifamily
Commercial &
Industrial
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
2%
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
FRB-SF
0.7%
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
0%
0.9%
4%
2.9%
2.4%
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
2%
3.2%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
0%
1-4 Family
AZ
FRB-SF
35
ID
UT
NV*
CA
WA
0.8%
OR
0.8%
AK
0.4%
HI
0.9%
1.0%
12th Nation
Dist.
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; *NV: excludes
credit card and zero-loan banks
36
Foreclosure Volumes Continued to Wane
And Were In Line with National Levels
Average District Net Charge-off Rate Sank to
Pre-Crisis Levels
Foreclosed Other Real Estate Owned / Total Assets by Type
Net Charge-Offs / Average Loans and Leases
0.99%
1.0%
2.15%
2.0%
District
0.8%
1.6%
District
0.6%
0.52%
Nation
Nation
1.2%
0.4%
0.31%
Net Loans and Leases / Assets
80%
75%
66%
65%
0.57
0.02
0.00
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
FRB-SF
FRB-SF
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
(0.12)
Construction
& Land Dev.
Commercial
& Indust.
Home Equity
Lines
1-4 Family
Closed End
Based on all 12th District commercial banks; trimmed means; preliminary 12/31/14 data
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
(0.01)
NonfarmNonresid.
60%
2014
2013
2012
2011
2010
6%
4%
55%
2%
50%
0%
FRB-SF
39
62%
8%
8% 7%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; Short-Term
Investments: interest-bearing bank balances, Federal funds sold & securities purchased under agreements to
resell, <1-year debt securities
Dec-14
0.08
0%
-1%
61%
0.66
8%
Dec-13
1%
67%
Dec-12
1.24
67%
11%
Dec-11
2%
67%
Dec-09
2.48
11%
10%
70%
3%
12%
Dec-08
4%
13%
District
Nation
Dec-07
5%
Nation
Dec-06
District
14%
District
Nation
76%
Dec-05
5.64
Short-Term Investments / Assets
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
6%
Liquidity: On-Balance Sheet Liquidity Back to 2010
Level, Down From 2012 Peak
Dec-10
Net Losses Declined Across Major Loan Types;
C&LD and 1-4 Family Categories Registered Net Recoveries
Net Charge-offs (Recoveries) / Average Loans by Type
38
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
Dec-04
37
Dec-03
Based on all 12th District commercial banks; trimmed means; preliminary 12/31/14 data
2009
FRB-SF
2008
Total
2007
1-4 Family
0.06%
0.0%
2006
Nonfarm-Nonresid.
0.18%
0.06%
2005
Construction
& Land Dev.
0.4%
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
0.02%
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
FRB-SF
0.07%
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
0.0%
0.11%
0.72%
0.8%
0.21%
0.2%
40
Reliance on Noncore Funding, Which Swelled
As the Crisis Unfolded, Continued to Recede
Jumbo CD Growth Gained Modest Momentum;
Brokered Deposit Growth Cooled
Deposit growth was
fastest among midsized banks, in part
because of mergers
Year-Over-Year Deposit Growth – 12th District
180%
150%
35%
90%
60%
30%
9.2%
4.7%
0.4%
-8.1%
0%
-30%
Total Dep.
Brokered Dep
CDs>$100K
CDs<$100K
25%
Bank Size
2013
2014
District Small
(<$10B)
5.1%
9.0%
District MidSized
($10B-$50B)
18%
18%
20%
16%
15%
District >$100K
District >$250K
Nation >$100K
Nation >$250K
10%
7.9%
15.0%
5%
Interest Rate Risk: Longer-Term Assets Inched
Higher at All But Mid-Sized Bank Group
Loans and Securities Maturing
or Re-Pricing > 3 Years / Assets
Dec-14
District Small
(<$10B)
33%
18%
District MidSized
($10B-$50B)
45%
20%
Nation Large
(>$50B)
39%
24%
9%
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-08
On average, half of
traditional noncore funding
derived from CDs $100K $250K
42
Non-Maturity Deposits Increased As Rates
Remained Low, but the Trend Could Reverse
TOPIC
Non-Maturity Deposits / Total Assets
Qtly. Avg. 3-Month U.S. CM
12th District Banks
Treasury Rate
Non-maturity Deposits / Assets (Left Axis)
44%
3-Mo. U.S. CM Treasury Rate (Right Axis)
5.12%
65%
District Mid-Sized ($10-$50B)
63% 6%
60%
Nation Large (>$50B)
40%
Bank Size
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; *Noncore
includes borrowed funds, foreign and brokered deposits, large CDs (previously defined as > $100K—green
area, now defined as > $250K—blue bars)
HOT
Earning assets will be slower to
re-price upward as rates rise.
District Small (<$10B)
45%
FRB-SF
Dec-04
6.8%
Dec-03
3.0%
Dec-02
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Nation Large
(>$50B)
Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 12/31/14
41
data
TOPIC
(Using CDs > $100K)
0%
-60%
HOT
34%
30%
Average Annual
Deposit Growth
120%
FRB-SF
Average Noncore*
Liabilities / Assets
by Bank Size
Noncore* Liabilities / Assets
5%
41%
56%
55%
4%
35%
30%
50%
30%
27%
3%
45%
25%
2%
42%
0.93%
40%
1%
0.02%
20%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
43
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
Dec-03
Dec-02
FRB-SF
0%
Dec-01
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
Dec-04
Dec-03
Dec-02
Dec-01
FRB-SF
FRB-SF
35%
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; non-maturity
includes demand, money market and savings; Constant Maturity (CM) Treasury Rate from Federal Reserve,
Haver Analytics
44
A Flight to Safety in Late 2014 Boosted Bonds, but
Values Could Slip Again Should Interest Rates Rise
14%
10%
0.00%
3%
9.7%
13.4%
12%
8%
11.7%
7.2%
45
60%
78% 79% 80%
71%
53%
64%
Dec-04
Dec-14
Dec-13
Dec-12
113%
40
65% 67%
33
10
11
8
2008
2009
0
10%
21
150
125
100
5
1
2
31
8
30% 30% 32%
123%
86%
12
30
20%
26
28
31
2011
2012
2013
75
50
26
25
0
2010
2014
Assisted P&A Transactions of Failed 12th District Banks (Left Axis)
Under $1 Billion
$1 - $10 Billion
2014
2013
2012
2007
2014
2013
2012
2007
2014
2013
2012
2007
0%
FRB-SF
Dec-11
50
20
30%
Dec-10
138%
50%
40%
46
Average Price / Tangible Book Value (%)
60
Nation
70%
Dec-09
12th District M&A Deal Counts
87%
District
8%
Mergers: Merger Activity Persisted in the District;
Average Valuation Multiples Drifted Higher
Share of Banks Paying Dividends by Size (excluding S-Corps)
80%
District Small (< $10B)
District Mid-Sized ($10B-$50B)
Nation Large (> $50B)
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data
Dividend Payout Activity Trailed Pre-Crisis Levels
but Increased Modestly Year-Over-Year
90%
Dec-05
Dec-04
Dec-14
Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; available for
sale (AFS) securities only; Constant Maturity (CM) Treasury Rate from Federal Reserve, Haver Analytics
FRB-SF
Dec-08
4%
10%
District Small (< $10B)
District Mid-Sized ($10B-$50B)
Nation Large (> $50B)
Dec-07
1%
Jun-14
Jun-13
Dec-13
Jun-12
Dec-12
Dec-11
Jun-11
Jun-10
Dec-10
Jun-09
Dec-09
Dec-08
Jun-08
Jun-07
Dec-07
Jun-06
Dec-06
Dec-05
Jun-05
Jun-04
Dec-04
Dec-03
FRB-SF
6%
1.64%
-0.08%
-0.10%
2.28% 2%
Dec-06
-0.05%
14.6%
Dec-14
4%
0.03%
9.9%
Dec-13
0.05%
14.4%
10.2%
10.1%
15.0%
16%
Dec-12
5%
11.3%
Dec-11
10-Yr. U.S. CM Treasury Rate (Right Axis)
0.10%
12%
Dec-10
Net Unrealized Gains (Losses) (Left Axis)
5.07%
Dec-09
0.13%
16.6%
Dec-08
6%
Total Risk-Based Capital Ratio
Tier 1 Leverage Ratio
Dec-07
Qtly. Avg. 10-Year
U.S. CM Treasury Rate
Net Unrealized Gains (Losses)
on AFS Securities / Tier 1 Cap. – 12th District
0.15%
Capital: Risk-Based Capital Ratios Moderated More Than
Leverage Measure as Assets Shifted Into Higher Risk Weights
Dec-06
TOPIC
Dec-05
HOT
FRB-SF
Unassisted M&A Involving 12th District Buyers/Targets (Left Axis)
Average Price / Tangible Book Value, % (Right Axis)
Over $10 Billion
Based on commercial banks organized as C-Corps (S-Corps omitted as these typically have high payout rates to
47
cover shareholder tax obligations), excluding De Novos; preliminary 12/31/14 data
Assisted purchase and assumption (P&A) data by failure year and excludes liquidations and deposit transfers;
unassisted merger and acquisition (M&A) data by announcement year and includes whole/minority/thrift merger
conversion deals completed or with a pending definitive agreement; price multiple data includes unassisted
transactions only and was not available for all transactions; Source: SNL Financial (1/29/2015)
48
Section 3 – Regulatory Ratings and Trends
Focusing on trends in examination (CAMELS) ratings
assigned by regulatory agencies among commercial
banks headquartered within the 12th Federal Reserve
District.
49
Regulatory Ratings: Pace of CAMELS Upgrades Moderated but
Continued to Outpaced Downgrades
Percent of 12th District Exams that Resulted in CAMELS Composite
Rating Upgrade or Downgrade (downgrades shown as negative percentages)
Share of Banks Rated Composite 3, 4, or 5
27%
20%
Percentage of Banks with CAMELS Composite Ratings of
3, 4, or 5 Continued to Fall
13%
50%
10%
0%
12th Dist. - Composite "4"
5%
-20%
Nation - Composite "3", "4", "5"
21%
% Upgrades
-40%
31%
12th Dist. - Composite "5"
30%
-30%
22%
20%
13%
% Downgrades
10%
0%
Dec-14
50
Trends for all commercial banks based on examination completion dates (mail dates); data updated through
2/11/15
Earnings and Management Better but Weakest; Asset Quality
Rating Upgrades Continued; Sensitivity Ratings Somewhat Flat
2.0
10%
5%
FRB-SF
Dec-14
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
4% Consumer
3% CRA
0%
1.5
Trends for all commercial banks based on examination completion dates (mail dates);
recent data are preliminary; data updated through 2/11/15; *Sensitivity to Market Risk
13%
52
Dec-14
2.4
Earnings
Management
Asset Quality
Capital
Sensitivity*
Liquidity
Dec-12
2.5
2.5
2.3
2.2
2.1
2.1
1.9
14%
Dec-10
2.5
15%
Dec-08
2.7
20%
Dec-06
2.9
3.0
25%
Dec-04
3.2
27%
Dec-02
Recession
Percent of 12th District Banks with Less-than-Satisfactory Ratings
Dec-00
3.4
3.5
Earnings and
Management
ratings remained
the weakest;
sensitivity ratings
remained
pressured by
interest rate risk
concerns.
Dec-98
(1: strong; 2: satisfactory; 3-5: less-than-satisfactory)
Dec-96
Average CAMELS Component Ratings for 12th District Banks
51
Consumer Compliance Ratings Continued Improving;
CRA Ratings Have Plateaued
Dec-94
Includes any change in composite CAMELS rating for commercial banks; quarterly data based on examination
completion dates (mail dates); recent data are preliminary; data updated through 2/11/15
FRB-SF
Dec-92
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Dec-09
Jun-09
Dec-08
FRB-SF
Jun-10
60%
-70%
Dec-90
Dec-91
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
-60%
Dec-90
-50%
FRB-SF
12th Dist. - Composite "3"
39%
40%
-10%
60%
60%
Trends for all commercial banks based on examination completion dates (mail dates); CRA = Community
Reinvestment Act; recent data are preliminary; updated 2/11/15
53
Section 4 - Savings Institution
and Industrial Bank Performance
Focusing on trends among savings institutions and industrial banks headquartered within
the 12th Federal Reserve District.
Commercial Banks (352)
Savings Institutions (40)
$2.4 trillion
(Wells Fargo accounts
for $1.5 trillion)
Industrial Banks (27)
The savings institutions represent a combined population of District
savings & loan associations plus savings banks
54
High Yield Lending and Limited Branching Enabled Industrial
Banks to Out-Earn Commercial and Savings Institutions
Industrials typically conduct nationwide consumer or C&I
lending (contributing to strong loan yields) from one office
(limiting overhead expenses).
Return on
Average Assets
4%
Noncurrent Loan Ratios Continued to Ebb
Across Charter Types
Noncurrent Loans and Leases /Total Loans and Leases
3.88% Industrial
4.0%
3.54% 3.57%
3% 2.79%
2%
1%
Noncurrent rates
at commercial
banks were more
severe than at
industrial banks or
savings institutions
during the crisis
4.76%
3.0%
1.38%
0.89% Savings
0.86% Commercial
0.88%
1.16%
2.0%
-0.32%
0%
1.03% Savings
0.91% Commercial
0.84% Industrial
1.0%
-1%
-1.00%
Based on District commercial banks, savings institutions, and industrial banks, excluding De Novos;
trimmed means; preliminary 12/31/14 data
55
Dec-14
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Based on District commercial banks, savings institutions, and industrial banks excluding De Novos; trimmed
means; preliminary 12/31/14 data; Noncurrent = 90+ days past due or on nonaccrual.
Industrial Banks’ Capital Still High on a GAAP Basis; Margin
Relative to Savings Institutions Disappears When Risk-Based
GAAP Equity / Assets
Dec-08
FRB-SF
Jun-08
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
FRB-SF
Dec-07
0.0%
-2%
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Similar to Banks, Share of Savings Institutions Rated
Composite 3, 4, or 5 Drifted Downward
Share of District Institutions Rated CAMELS Composite 3, 4, or 5
61%
60%
16.4% Industrial
16.0%
50%
10%
Savings
Commercial
22.3%
16.5%
0%
Based on District commercial banks, savings institutions, and industrial banks, excluding De Novos; trimmed
means; preliminary 12/31/14 data; Equity = equity capital per generally accepted accounting principles (GAAP)
FRB-SF
57
8%
13% Savings
6%
Dec-14
22.1%
Dec-13
Industrial
22% Commercial
Dec-12
20%
Dec-11
Dec-13
Dec-12
Dec-11
Dec-10
Dec-09
Dec-08
6.0%
Total Risk-Based Capital
Ratios 12/31/14 (Average)
Dec-10
10.4%
8.0%
30%
Dec-09
11.7% Commercial
11.0%
Dec-08
12.7% Savings
10.0%
FRB-SF
40%
Dec-07
12.0%
41%
12.5%
Dec-14
14.0%
Trends for all institutions based on examination completion dates (mail dates); recent data are preliminary;
data updated through 2/11/15; note: there are too few Industrials to disclose specifics.
58
Appendices
1. Banks Covered in this Report
2. Technical Information
3. Regulatory Hot Topics
Appendix 1: Institutions Covered in this Report
Geography
FRB-SF
Appendix 2: Technical Information
Commercial Banks
Industrial Banks
Savings Institutions
(De Novos)
(De Novos)
(De Novos)
This report focuses on the financial trends and performance of commercial banks headquartered within the
12th Federal Reserve District (“12L”). 12L includes 9 western states: AK, AZ, CA, HI, ID, NV, OR, UT, and
WA, as well as Guam.
Dec-13
Dec-14
Dec-13
Dec-14
Dec-13
Dec-14
Alaska
4 (0)
4 (0)
-
-
2 (0)
1 (0)
De Novos: Many of the charts exclude “De Novo” banks, or banks less than five years old.
Arizona
23 (0)
21 (0)
-
-
1 (0)
1 (0)
California
200 (2)
193 (1)
6 (0)
4 (0)
17 (1)
13 (0)
Groups by Asset Size: ‘Small’, and ‘Mid-Sized’ bank groups are based on 12th District community banks
(<$10B) and regional banks ($10B-$50B), respectively. The ‘Large’ bank group is based on nationwide
banks with assets >$50B, because a larger statistical population was needed to construct trimmed means.
Guam
2 (0)
2 (0)
-
-
1 (0)
1 (0)
Hawaii
6 (0)
6 (0)
1 (0)
1 (0)
2 (0)
2 (0)
Idaho
15 (0)
11 (0)
-
-
1 (0)
1 (0)
Nevada
13 (0)
12 (0)
4 (0)
4 (0)
2 (0)
2 (0)
Oregon
25 (0)
25 (0)
-
-
3 (0)
3 (0)
Utah
32 (0)
31 (0)
18 (0)
18 (0)
4 (0)
4 (0)
Washington
50 (1)
47 (0)
-
-
12 (0)
12 (0)
370 (3)
352 (1)
29 (0)
27 (0)
45 (1)
40 (0)
5,815 (33)
5,571 (13)
31 (0)
29 (0)
964 (4)
904 (2)
12th
District
Nation
Based on preliminary 12/31/14 data.
Trimmed Mean (also referred to as “average”): Many of the charts present trends in ratio averages,
adjusted for outliers. The method used is to eliminate or “trim” out the highest 10% and the lowest 10% of
ratio values, and average the remaining values.
Aggregate: In some cases, the trimmed mean method is not appropriate (e.g., when many banks have
zero values for a particular ratio or for some growth rates where there may be many highly positive and
highly negative values). In these cases, District aggregates sometimes are computed (i.e., summing
numerator values across all District banks and dividing by the sum of all denominator values), as opposed
to averaging individual bank ratios). When an aggregate is used, it is indicated on the chart.
Industrial banks and savings institutions: The main focus of this report is on commercial banks.
Industrial banks and savings institutions have different operating characteristics so are highlighted
separately in Section 4. There, the savings institution data include institutions that file the bank Call Report
plus those that, up until March 2012, filed the thrift Call Report.
59
HOT
TOPIC
Appendix 3: Regulatory Hot Topics
Moderate-to-High Concern Areas to Watch
DIRECTION OF CONCERN
Stable
Increasing
BSA/AML - Internal Control Environment
Elevated
Credit - Quality of Loan Growth
Market - Lengthening Asset Maturities
Operational - Info./Cyber Security
BSA/AML policies, processes, and
procedures have not always kept
pace with the District’s vulnerability
to trade-based money laundering,
bulk cash smuggling, marijuana
related businesses, and virtual
currencies.
Other - Capital Plans & Stress Testing
Operat'l. - Business Continuity Planning
Operat'l. - Service Provider Risk Management Credit - Loan Concentrations
Operat'l. - Internal Audit Oversight & Program
Operat'l. - Model Risk Management
Liquidity - Non-Maturity Deposit Sensitivity
Moderate
LEVEL OF CONCERN
High
Decreasing
Evolving competitive, economic, regulatory, and technological challenges have
heightened risks in many areas, especially BSA/AML, information technology,
interest rate risk/liquidity, operations, and consumer compliance.
FRB-SF
Compliance - New/Complex Prod. & Services BSA/AML - Board and Mgmt. Oversight
Compliance - Keeping Pace with Reg. Change
Prevention and detection of rapidly
evolving IT vulnerabilities and
threats is challenging. The stakes
are very high in the event of a
breach.
High - Represents a current or future (next 1-2 years) problem area that if realized would likely lead District institutions to unprofitability,
downgrade, or failure (note: High concern cannot have an Increasing outlook because High is already the highest concern level).
Elevated - Represents a lower likelihood than High of becoming a problem area and/or the problem area has a somewhat lower impact
on District institutions’ profitability, supervisory ratings, or ongoing concern.
Moderate - Represents a concern that is notable, but has low likelihood of realization or low impact to District institutions. Typically, these
issues are of an emerging nature.
Concern Outlook – based on outlook within 1-2 years.
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