From the federal financial institution regulators
FDIC issues banking profile for fourth quarter 2023
On March 7, 2024, the Federal Deposit Insurance Corp. (FDIC) issued the quarterly banking profile covering the fourth quarter of 2023. FDIC Chair Martin Gruenberg remarked on the sustained resilience of the banking industry, highlighting strong performance in full-year earnings, net operating revenue, and net interest margin. However, Gruenberg also noted “significant downside risks,” including potential “credit quality, earnings, and liquidity challenges” and the continued deterioration of commercial real estate loans and consumer credit.
According to the report, FDIC-insured banks and savings institutions reported $256.9 billion full-year net income, a decrease of $6 billion or 2.3% from 2022. The decrease in net income was driven largely by higher provision expense and lower noninterest income.
The report provides these additional full-year statistics:
- Net interest income totaled $698.2 billion for full-year 2023, up from $633.3 billion (10.3%) in 2022. From the previous year, the average net interest margin increased 35 basis points to 3.30%.
- Return-on-assets ratio was 1.10%, a decrease of one basis point from the prior year.
- Total loans and leases increased $225.1 billion (1.8%) from the prior year.
- Total deposits declined $401.3 billion (2.1%) between 2022 and 2023.
- From the previous quarter, the noncurrent loan rate increased four basis points to 0.86%.
- Community banks’ annual net income totaled $26.6 billion for 2023, a decrease of $2 billion, or 7.1%, from the prior year.
- Unrealized losses on securities totaled $477.6 billion in the fourth quarter, a decrease of $206.3 billion, or 30.2%, from the prior quarter. The decline was driven primarily by lower unrealized losses on residential mortgage-backed securities.
- The Deposit Insurance Fund balance totaled $121.8 billion, an increase of $2.4 billion from the prior quarter, driven by increased assessment revenue.
The total number of FDIC-insured commercial banks and savings institutions that filed call reports declined from 4,614 in the third quarter to 4,587 in the fourth quarter. The number of banks at the end of 2022 totaled 4,706. During the fourth quarter, one new bank opened, 23 banks were absorbed by mergers, one bank failed, and four banks did not file a call report after selling a majority of their assets. The number of institutions on the FDIC’s problem bank list increased by eight from the third quarter to 52. Total assets of problem banks increased $12.8 billion from the previous quarter to $66.3 billion.
NCUA issues fourth quarter 2023 performance data
On March 12, 2024, 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 fourth quarter of 2023. Highlights include the following statistics:
- The number of federally insured credit unions declined to 4,604 in the fourth quarter of 2023, from 4,760 in the previous year. Also in the fourth quarter, 2,880 federal credit unions and 1,724 federally insured, state-chartered credit unions existed.
- Total assets reported for federally insured credit unions rose by 4.1% to $2.26 trillion, up $88.1 billion from a year before.
- Net income totaled $15.2 billion in 2023, down $3.5 billion (18.8%) from 2022.
- The return on average assets was 69 basis points in 2023, down from 88 basis points in 2022.
The credit union system’s net worth increased by $8.7 billion (3.8%) over the year to $241.5 billion. The aggregate net worth ratio as of the fourth quarter of 2023 was 10.7%, up from 10.74% a year prior.
Fed vice chair for supervision speaks on counterparty credit risk management
On Feb. 27, 2024, Federal Reserve (Fed) Vice Chair for Supervision Michael Barr spoke on counterparty credit risk management, emphasizing the heightened risks and noting the importance of international cooperation in a “more complex, diverse, and interconnected” financial environment. Barr highlighted three critical areas of focus, stating that banks should:
- Maintain a comprehensive and evolving understanding of counterparty positions and risk profile
- Continuously measure counterparty risk, manage risk aggregation, and maintain appropriate margins to mitigate the impact of potential losses
- Set and enforce limits for acceptable counterparty credit risk, maintain multiple measures to evaluate counterparty risk, and take timely action to address elevated risk
According to Barr, banks should prioritize these risk management practices to proactively monitor accumulation and avoid an excessive buildup of risk.
Barr also stated that the Fed will publish, alongside its stress-test results, exploratory analyses on the resilience of systemically important banks to hypothetical counterparty default scenarios.
Federal banking agencies publish Shared National Credit report
On Feb. 16, 2024, the Fed, FDIC, and Office of the Comptroller of the Currency jointly issued the 2023 Shared National Credit (SNC) Program report, providing an overview of borrowers with aggregate loan commitments totaling $100 million or more.
The agencies reported that credit risk remains moderate, but they noted increased risk due to the impact of “higher interest rates on leveraged borrowers and compressed operating margins in some industry sectors.” The report observed declining credit quality in the technology, telecom, and media; healthcare and pharmaceuticals; and transportation sectors as well as some components of the real estate and construction sectors.
This year’s findings are based on a review of 6,589 borrowers totaling $6.4 trillion in commitments, representing an 8.7% increase from prior year. The agencies reported that the percentage of loans labeled as needing “management’s close attention” increased from 7% to 8.9% year over year.
FinCEN publishes BOI access guide for small financial institutions
On Feb. 21, 2024, the Financial Crimes Enforcement Network (FinCEN) published a small-entity compliance guide on the Beneficial Ownership Information (BOI) Access and Safeguards Rule’s requirements. The guide includes information on allowable BOI use and re-disclosure, security and confidentiality requirements, FinCEN’s processes for administering BOI requests, and civil and criminal penalties for violations.
The guide will assist financial institutions with understanding FinCEN’s expectations when those institutions are accessing the BOI database, once they have been approved to do so. Financial institutions will be given access to the BOI database in phases, as reported in the January 2024 Financial Institutions Executive Briefing.
CFPB issues final rule to limit permissible late fees on credit card statements
On March 5, 2024, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending Regulation Z and its accompanying commentary related to credit card penalty fees. The final rule applies to credit card issuers that together with their affiliates have one million or more open accounts. The final amendments lower the safe harbor threshold for allowable credit card late fees to $8, prohibit higher fees for additional violations of the same nature within a single billing cycle, and exclude the new safe harbor dollar threshold from annual inflation-based adjustments under Regulation Z.
