FDIC Releases 2nd Quarter Banking Data; 72% Are
State-Chartered
State-chartered
banks continue to out-number their national- and
federally-chartered brethren, according to second quarter
statistics. The FDIC's Quarterly Banking Profile, released
this week, showed there were 6,107 state-chartered
commercial and savings institutions as of June 30, 2008,
down from 6,182 at the same time last year. There were 2,344
national- and federally-chartered financial institutions,
compared to 2,432 on June 30, 2007. National banks and
federal thrifts continue to hold the lion's share of assets,
with a 71 percent asset share, while state-chartered
financial institutions' assets stood at 29 percent.
Reflecting the
current economic downturn, state commercial banks had an
average return on assets of 0.61 compared to 1.26 at the
same time last year. For national banks, ROA was 0.48 for
national banks, compared to 1.25 last year. State savings
institutions had an ROA of 0.30, compared to 0.80 as of June
30, 2007, while federal savings banks had an ROA of -0.73,
down significantly from last year's 1.05. Total number of
employees (FTEs) at state-chartered commercial banks and
savings associations as of June 30, 2008 stood at 743,495,
down from 774,452 a year earlier. Net interest margin for
state chartered commercial banks as of June 30, 2008
averaged 3.41, down from 3.67 a year earlier.
Columbian Bank of Topeka Closed
Last Week; Missouri Bank Assumes Deposits, Branches
Kansas Bank
Commissioner J. Thomas Thull closed The Columbian Bank and
Trust Company of Topeka on
Friday and named the FDIC as receiver. Citizens Bank and
Trust, Chillicothe,
Mo.,
assumed the insured deposits of Columbian Bank and nine
branches. As of June 30, 2008, Columbian Bank had total
assets of $752 million and total deposits of $622 million,
of which there were approximately $46 million in uninsured
deposits held in approximately 610 accounts that potentially
exceeded the insurance limits. Columbian Bank also had
approximately $268 million in brokered deposits. Citizens
Bank and Trust agreed to assume the insured deposits for a
1.125 percent premium. The bank also purchased $85.5 million
of the failed bank's assets. The assets mainly comprised
cash, cash equivalents and securities. FDIC will retain the
remaining assets for later disposition. The agency estimated
the cost of the failure to the Deposit Insurance Fund would
be $60 million. The Columbian Bank and Trust Company is the
first bank to fail in Kansas since
1993. A total of nine FDIC-insured institutions have been
closed in 2008.
Around The Agencies
FDIC:
FDIC this week issued guidance to highlight the importance
of liquidity risk management at financial institutions. The
agency said recent disruptions in the credit and capital
markets have exposed weaknesses in liquidity risk
measurement and management systems. The guidance describes
FDIC's expectations for banks that have shifted from
asset-based liquidity to liability-based or off-balance
sheet strategies that involve securitization,
brokered/Internet deposits or borrowings. The agency noted
that it limits "the use of brokered deposits by insured
institutions that are less than well capitalized, and also
limits the effective yield that these institutions may offer
on all their deposits." The agency said examiners will
continue to evaluate a bank's ability to maintain access to
funds and liquidate assets in a reasonable and
cost-efficient manner in both normal and stressed markets.
FDIC noted that banks that use volatile, credit sensitive,
or concentrated funding sources are generally expected to
hold capital above regulatory minimum levels to compensate
for the elevated levels of liquidity risk present in their
operations.
FDIC:
The FDIC will offer eight free telephone seminars for bank
employees on the rules for deposit insurance coverage. The
seminars will be offered weekly over an eight-week period,
starting Sept. 17, and will be open to employees of all
FDIC-insured banks and savings associations. The telephone
seminars will explain the basic information bank employees
need to assist their customers in calculating coverage. The
presentations will provide an overview of deposit insurance
coverage and review FDIC rules that apply to depositors with
more than $100,000 in one FDIC-insured bank.
FDIC:
Banks earnings plunged by 86.5 percent to net income of $5
billion between the second quarter of 2008 and a year
earlier, according to statistics released by FDIC on
Tuesday. The agency's bank problem list stood at 117
institutions from 90 at the end of the first quarter. Total
assets of problem institutions increased to $78 billion from
$26 billion with $32 billion coming from IndyMac Bank, F.S.B.,
Pasadena,
Calif.,
which failed in July. "More banks will come on the list as
credit problems worsen," said FDIC Chairman Sheila Bair.
FDIC said the primary reason for the drop in profits was
higher provisions for loan losses, which totaled $50.2
billion. In early October, FDIC will consider a plan to
replenish the agency's Deposit Insurance Fund that will
likely include an increase in the premium rates. Bair said a
proposal will be issued to "shift a greater share of any
assessment increase onto institutions that engage in
high-risk behavior to encourage and reward safer behavior."
The DIF balance fell to $45.2 billion at the end of the
second quarter, down from $52.8 billion at the end of the
first quarter. The reserve ratio fell to 1.01 percent as of
June 30th from 1.19 percent one quarter earlier.
OTS:
The Office of Thrift Supervision reminded thrifts on Tuesday
that changes to home equity lines of credit must comply with
federal laws and rules designed to protect customers. OTS
said that when an institution reduces, suspends or
terminates customers' home equity lines of credit these
actions must be done in accordance with provisions of the
Truth in Lending Act, Equal Credit Opportunity Act, Fair
Housing Act and OTS nondiscrimination rules. The agency
issued the six-page bulletin in response to a rash of
complaints received from consumers whose home equity lines
have been frozen or altered. "OTS will review associations'
HELOC account management policies and practices to ensure
compliance with these requirements," the agency said. FDIC
also recently reminded lenders to ensure that adjustments to
home equity loans are done properly.
FROM THE ICBA NEWSWATCH TODAY:
ICBA Continues GSE Preferred Stock Message
ICBA
continued its efforts to safeguard the interests of
community banks as officials and the industry work
through the challenges in the broad housing finance and
financial services sector. In its latest letter, to the
Treasury Department, ICBA conveyed that preferred stock
takes priority over common and typically pays a fixed
dividend.
Previously,
ICBA successfully petitioned Congress to strip out
damaging statutory language in the Treasury-advanced
Housing and Economic Reform Act enacted on July 30 that
would have had the immediate effect of diminishing the
value of GSE preferred stock holdings. The challenge
continues and ICBA continues to work with lawmakers,
bank regulators, and the Administration so they are
fully mindful of the significance of community banks'
preferred stock investments supporting Fannie Mae and
Freddie Mac.
Read ICBA Letter.
Fed Releases Refinancing Resource
The Federal
Reserve Board
launched an online resource to help consumers make
informed choices when refinancing a home loan.
A Consumer's Guide to Mortgage Refinancing contains
tips and answers to frequently asked questions about the
refinancing process.
The
information provided can help consumers determine when
refinancing makes sense, what refinancing will cost, and
whether it is advisable to switch into a different type
of mortgage. ICBA offers a variety of
financial literacy resources community bankers can
use to help customers get the information they need on
home mortgages, identity theft and other issues.
DHS Urges Storm Precautions
The
Department of Homeland Security
advised Gulf Coast region residents to take
precautions as Tropical Storm Gustav makes its way into
the Gulf of Mexico. The DHS Ready Campaign encourages
citizens to get an emergency supply kit, make emergency
plans and keep track of the potential hurricane's
strength and direction.
The
campaign's
Web site is a free resource offering an emergency
supply checklist, plan and links to local information.
It also has resources to help business owners maintain
their business plans, communicate with employees and
protect their assets.
Thrifts Post Loss, Record Reserves
Savings institutions lost $5.4 billion during
second quarter 2008 and set aside record
reserves for loan losses,
according to the Office of Thrift
Supervision. Thrifts set aside $14 billion in
loan-loss provisions to cushion against the
continued housing market downturn.
Over
the past year, savings institutions added more
than $30 billion in reserves, decreasing
earnings but providing protections against loan
delinquencies and other problem assets. The
second-quarter loss was the second largest on
record, following the $8.8 billion loss in
fourth quarter 2007.
More
than 98 percent of the industry exceeded the
standard for being well-capitalized. The number
of "problem thrifts" rose to 17 from 12 in the
previous quarter.
Bair: FDIC Might Borrow from Treasury in Future
The
FDIC might have to borrow short-term funds from
the Treasury Department to cover liquidity
following bank failures until monies are
replenished from sale of the failed banks
assets, according to The Wall
Street Journal.
FDIC Chairman Sheila Bair told the newspaper
that the agency might need to "tap into
[short-term] lines of credit with the Treasury
for working capital, not to cover our losses,
but just for short-term liquidity purposes." She
said it was unlikely in the "near-term."
Money borrowed from Treasury could be needed to
restore funding immediately after the failure of
a bank when insured depositors are paid, Bair
said, and would be repaid as the failed bank's
assets are sold. The FDIC received access to
Treasury funds in 1990, borrowed funds during
the savings-and-loan crisis when hundreds of
institutions failed, and repaid the loans by
1992. Bair said she did not expect the agency
would need to tap its separate $30 billion line
of credit at Treasury, which has never been
used, according to the Journal.
The
FDIC's Deposit Insurance Fund had $45.2 billion
at the end of the second quarter, according to
an agency
report released prior to Bair's interview.
That report also found quarterly industry
earnings were down 86.5 percent and that the DIF
reserve ratio had fallen below the threshold
requiring a restoration plan. ICBA has
urged the agency to gradually recapitalize
the fund to avoid sharp deposit-insurance
premium increases.
OTS Issues HELOC Guidance
The
Office of Thrift Supervision issued
guidance on managing programs offering home
equity lines of credit. Institutions that
curtail, suspend or terminate customers' home
equity lines of credit must comply with federal
laws and regulations designed to protect
customers, the guidance said. The Truth in
Lending, Equal Credit Opportunity and Fair
Housing Acts and the OTS nondiscrimination rule
should be followed.
Weekly Mortgage Applications Increase
Mortgage applications were up for the first time
in three weeks, according to a Mortgage Bankers
Association
index. The Market Composite Index of
application volume was up 0.5 percent from the
previous week on a seasonally adjusted basis,
but down 31.2 percent over the past year.
The
increase came with lower interest rates. Average
interest rates for 30-year and 15-year
fixed-rate mortgages were down slightly.
FDIC Announces Earnings, DIF Plans
The FDIC
said insured financial institutions
reported quarterly earnings of $5
billion in second quarter 2008, and it
announced plans for a Deposit Insurance
Fund restoration. The DIF reserve ratio
fell to 1.01 percent from 1.19 percent
the previous quarter, requiring an FDIC
plan to replenish the ratio to at least
1.15 percent within five years. The fund
fell to $45.2 billion from $52.8 billion
due to failures at IndyMac Bancorp and
other banks.
Chairman Sheila Bair said institutions
that engage in high-risk behavior will
shoulder a greater share of premium
increases under the restoration plan. In
a previous
comment letter to the agency, ICBA
urged the FDIC to gradually recapitalize
the fund over three to five years
without precipitous premium hikes.
Insured banks and savings institutions
reported a $31.8 billion decline in net
income from second quarter 2007, an 86.5
percent drop. The FDIC said the size of
the earnings decline was largely due to
a few large institutions, though more
than half of all insured institutions
reported lower income.
Noncurrent loans are also up. At the end
of June, 2.04 percent of all loans and
leases were noncurrent, the highest
level since 1993. The FDIC said its
problem list of struggling financial
institutions grew to 117 from 90 in the
previous quarter.
Housing Market Indicators Mixed
A variety of indicators gave a mixed
picture of the housing market and
overall economy. Home sales rose 2.4
percent in July, according to a Commerce
Department
estimate, but the agency revised
down June numbers to the lowest level
since September 1991. New-home sales
were down 35.3 percent in the past year.
The S&P/Case-Shiller
index found June home prices down a
record 15.9 percent from the previous
year, though the drop was slower than in
May. The Office of Federal Housing
Enterprise Oversight's purchase-only
index reported U.S. home prices fell
1.4 percent in second quarter 2008,
slower than the first quarter, and 4.8
percent in the past year. Consumer
confidence
rose on lower inflation
expectations. The 56.9 reading was the
highest since May.
Minutes: Fed Anticipating Slow Growth
The Federal Open Market Committee held
interest rates at 2 percent because of
concerns that the economy would remain
weak in coming quarters and inflation
would ultimately go down, according to
minutes from the committee's Aug. 5
meeting.
FOMC members said financial, labor,
energy and housing problems "would
likely weigh on economic growth in
coming quarters," the minutes show. "[M]ost
participants anticipated that core
inflation would edge back down during
2009."
Members held the federal funds target
rate at 2 percent for the second
straight meeting, after seven
consecutive rate cuts.
Community Banker Now Fed Governor
Former community banker
Elizabeth Duke was formally sworn in
as a member of the Federal Reserve Board
of Governors. Prior to her appointment,
Duke was senior executive vice president
and chief operating officer of TowneBank
in Portsmouth, Va. She is the only
governor with commercial banking
experience and will serve through 2012.
FDIC Releases Liquidity Guidance
The FDIC issued
guidance highlighting the importance
of liquidity risk management at
financial institutions. "Recent
disruptions in the credit and capital
markets have exposed weaknesses in
liquidity risk measurement and
management systems," the letter said.
The guidance urged contingency funding
plans that include practical funding
alternatives that can be implemented as
access to funding is reduced.
ICBA's Fine: Fed Forum to
Convention
ICBA President and CEO Cam Fine
attended the Kansas City Federal
Reserve's policy symposium in
Jackson Hole, Wyo. Bankers,
economists and regulators
debated policy decisions during
the current economic downturn.
They discussed economic
conditions and central bank
actions over the past year,
including interest rate cuts and
the Bear Stearns intervention.
Regulatory reform suggestions
were also heard. Fed Chairman
Ben Bernanke said Congress
should give the central bank
oversight authority for payment
and settlement systems. Former
IMF chief economist Raghuram
Rajan and two co-authors
proposed offering banks
disaster insurance to access
capital after suffering losses
on loans.
Fine then joined ICBA Chairman
Cynthia Blankenship in Denver
for the Democratic National
Convention to represent ICBA and
highlight the contributions of
community banks. ICBA will also
attend next week's Republican
National Convention in the Twin
Cities.
Failed Kansas Bank Branches
Reopen
The nine branches of the
Columbian Bank and Trust of
Topeka, Kan., reopened as
branches of Citizens Bank and
Trust of Chillicothe, Mo. The
FDIC was
named receiver of the failed
bank, and Citizens Bank acquired
its insured deposits. As of June
30, Columbian had total assets
of $752 million and total
deposits of $622 million.
Columbian is the ninth U.S. bank
that regulators closed this
year, and the FDIC encouraged
depositors with accounts of more
than $100,000 to call its
toll-free helpline. ICBA offers
community bankers a variety of
communications tools to
teach customers about deposit
insurance and the safety and
soundness of community banks.
Existing-Home Sales Increase in
July
July sales of existing homes
rose 3.1 percent to the highest
level in five months, but are
down 13.2 percent over the past
year, according to a National
Association of Realtors
report. The national median
existing-home price was down 7.1
percent from a year ago. Total
housing inventory was up 3.9
percent over the previous month,
a record high reached largely
because of a buildup of
condominiums. Supply of
single-family homes was down.
Farm Bill Comparison Online
The USDA's Economic Research
Service is offering an online
resource comparing the 2008
and 2002 farm bills. The ERS
comparison provides
comprehensive summaries of
provisions in the legislation.
The new farm bill runs through
2012.
Freddie Debt Auction Bolsters
Shares
Freddie Mac's $2 billion debt
auction sent its shares rising
Monday as the
government-sponsored enterprise
demonstrated its ability to
raise capital. Fannie Mae shares
also were up. Several investment
analysts said a nationalization
of the mortgage-finance giants
was unlikely, further bolstering
investor confidence.
Mint Begins $1 Coin Pilot
Promotions
The U.S. Mint is
beginning a pilot program in
four American cities to
encourage regular use of the $1
coin. The campaign begins this
month in Austin, Texas;
Charlotte, N.C.; Grand Rapids,
Mich.; and Portland, Ore.
According to the Mint, the $1
coin lasts for decades and is
100 percent recyclable, which
can save money for the United
States. More than one billion
new $1 coins have been minted
since 2007.
Fannie, Freddie
Financial Ratings Cut
Moody's Investors
Service downgraded the
preferred stock ratings
and bank financial
strength ratings of
Fannie Mae and Freddie
Mac due to mortgage
risk. The financial
research firm lowered
their preferred stock
ratings to Baa3 from A1
and bank financial
strength ratings to D+
from B-. Moody's held
the government-sponsored
enterprises' debt
ratings at Aaa.
Additionally, a Freddie
Mac spokesman told the
Associated Press the GSE
met with mortgage
investors, including
Warren Buffett, about
possibly purchasing
stock to raise capital.
Freddie has said it will
raise $5.5 billion.
Latest Payments
Newsletter Available
The summer 2008 edition
of
ICBA Payments
was distributed and is
available online. The
latest edition includes
articles on new IRS
reporting requirements,
an extended compliance
deadline for ACH
transactions, OCC
risk-management guidance
and other critical
developments.
Subscribe now to the
quarterly payment trends
newsletter, which is
free to employees of
ICBA member bank.
Bernanke: Inflation
Could Moderate
Federal Reserve Chairman
Ben Bernanke
said declines in
commodity prices,
increased stability of
the dollar and slower
growth could help
moderate inflation later
this year and next year.
Bernanke warned,
however, that "the
financial storm that
reached gale force...
has not yet subsided"
and inflation pressure
remains.
Study Offers Tips to
Attract Business
Big retail banks are
missing opportunities to
attract prospective
customers, according to
a J.D. Power and
Associates
study. The study
found many bank
representatives could
improve how they
recommend products to
prospective customers.
It also found that
offering consumers
non-financial amenities,
such as refreshments,
television and play
areas for children,
enhances customers'
experiences; and branch
accessibility is a major
factor influencing which
banks consumers choose.
The study is based on
reports from 475 mystery
shoppers who audited
bank branches in major
metropolitan and
suburban areas in the
Mid-Atlantic and
Southeast regions.
VA Raises Home Loan
Ceilings
The Department of
Veterans Affairs
increased limits on
its guaranteed
single-family home loans
to veterans in some
areas, in accordance
with the housing-rescue
bill signed in July.
Locality-specific loans
with no down payments
grew from $417,000 to as
much as $729,000.
