Federal Reserve Bank of San Francisco
First Glance 12L - First Quarter 2012
The "First Glance 12L" provides a first look at the financial performance of banks in the West each quarter. The 1Q12 report, subtitled "Banks Making Steady Progress Towards Full Recovery", describes how banks of all sizes continued to reduce their average noncurrent loan rates with small banks lagging to some extent the improvement of larger banks. First quarter bank profitability remained weak with an average return on average assets of 0.60% annualized. But this was up considerably from a year ago, and, for the first time in nearly four years, every District state had positive earnings for banks on average. The percentage of banks with less-than-satisfactory CAMELS ratings further edged down to 48%, from the record-high 60% at year-end 2010. Given the extent of financial stress on the industry, it is likely that District banks will take two or more years to fully recover in terms of asset quality and core earnings. Challenges include a difficult environment to improve net interest margins and still weak real estate conditions.
The First Glance 12L report again highlights some "Banks Supervisors' Hot Topics" (in no particular order here): 1) Banks reducing ALLL, 2) Weak housing market & impact, 3) HELOC and other junior lien mortgages, 4) CRE income property loan quality and vulnerability, 5) Interest rate risk - lengthening of asset maturities, 6) Expansion into new or unfamiliar lending areas, 7) Capital planning/stress testing, and 8) Economy/Europe.
Author: Federal Reserve Bank of San Francisco
Date of Publication: May 21, 2012
Last Updated: May 29, 2012