The FDIC reported numbers for the fourth quarter and the full year 2012 yesterday that paint an industry experiencing improving conditions. Earnings are up, deposit funds are flowing into banks at record rates, fewer banks are losing money, and fewer banks remain on the agency’s problem list.
The nation’s 7,083 banks and thrifts reported combined earnings of $141.3 billion for the year. That’s the second-highest ever in a single year behind 2006’s $145.2 billion and 19.3 percent ahead of 2011. The FDIC said the increase was attributable to lower expenses for loan-loss provisions and higher fee income. Most of the income was earned by the nation’s largest banks. The nation’s 2,205 banks with less than $100 million in assets reported combined net income for the year of $920 million.
Asset quality improved across the industry with noncurrent loans falling for the 11th consecutive quarter. Deposits continued to pour into banks, with an increase of $313.1 billion. At 3 percent, that’s the biggest quarterly gain ever. The FDIC’s problem list, which peaked first quarter of 2011 at 888, closed 2012 at 651, marketing the seventh consecutive quarterly decline.
Read the FDIC press release by clicking here.
Banks across the Upper Midwest generally reported earnings in line with the national averages. There is a general decline in the number of institutions, with most of the decline occurring among institutions with less than $100 million in assets.
In Illinois, for example, the number of banks in the state has declined to 560 from 607 in 2010, although the number of banks with less than $100 million in assets has declined by 33 in that time to 226, compared to banks with more than $100 million in assets which have declined by 14 to 334. Nonetheless, earnings at the smaller banks are improving. The smaller banks reported collective earnings of $68 million for 2012 compared to $26 million last year. That’s a 161 percent improvement in earnings despite a 7 percent drop in the number of institutions in that size category. Still, the return on assets and return on equity for smaller banks were below the national average: 0.54 percent for Illinois banks versus 0.72 percent for the country on ROA, and 4.73 percent versus 5.95 percent on ROE.
Banks in Iowa and the Dakota were among the nation’s leaders based on ROA and ROE. Iowa banks (of all sizes) averaged 1.16 percent ROA compared to the all-bank national average of 1.00, and 11.16 percent ROE compared to the national all-bank average of 8.92 percent. Larger banks did better in Iowa than smaller banks: 1.17 percent ROA for large banks versus 1.06 percent for smaller banks; and 11.47 percent ROE for large banks compared to 8.98 percent for smaller banks. All North Dakota banks averaged 15.32 percent ROE (11.72 percent for smaller banks and 15.62 for larger banks), and 1.61 percent ROA (1.16 percent for smaller banks and 1.65 percent for larger banks). South Dakota’s numbers came in at 9.98 percent ROE (10.03 percent for smaller banks and 9.98 percent for larger banks) and 1.11 percent ROA (1.14 percent for smaller banks 1.11 percent for larger banks).
Minnesota’s 379 banks earned $603 million for all of 2012. This total does not include earnings from Wells Fargo or U.S. Bank which have their charters in other states. There are 205 banks with less than $100 million in assets in the state; that’s down from 231 two years ago. The smaller banks collectively earned $87 million last year, compared to $43 million two years ago. All banks combined, returned 0.93 percent on assets (0.83 percent for small banks; 0.95 percent for larger banks), and returned 8.92 percent on equity (7.71 percent for small banks; 9.17 percent for larger banks). The percentage of unprofitable institutions in the state continues to decline. In 2012, 10 percent of the banks lost money, compared to 2010 when 23.27 percent of the banks lost money.