Third Quarter 2013: Banking Recovery – Slow and Steady


Federal Reserve Bank of San Francisco

Download PDF
(2 MB)

November 27, 2013

The First Glance 12L provides a first look at the financial performance and condition of banks headquartered within the 12th Federal Reserve District (nine western states) each quarter. The 3Q13 report, subtitled “Banking Recovery – Slow and Steady,” details the slow financial recovery of District banks from recession. The average bank profitability rate (return on average assets) of 0.79% (year-to-date annualized) represents an improvement from 0.67% a year earlier, largely due to credit quality improvements. But this level remains well short of the 1995-2005 average of 1.15% as declining net interest margins remain an earnings impediment. Loan growth is becoming a positive story, rising to 6.9% year-over-year on average through 9/30/2013, considerably stronger than the 3.5% average for all banks nationwide. Mid-sized ($1-10B) and Large (>$10B) banks expanded their loan portfolios most quickly, although small banks (<$1B) still registered a respectable 5.8% average growth rate.

Loan Growth: Turnaround Accelerated

In addition to analyzing financial trends and conditions, the First Glance 12L report also includes a discussion of selected “Bank Supervisors’ Hot Topics.” This quarter, these topics are:

  • Interest Rate Risk
  • Cybersecurity
  • Leveraged Lending
  • Underwriting Risk in Rapid Loan Growth Areas
  • Managing Outsourcing Risk
  • Capital Planning and Stress Testing Expectations
  • Model Risk Management 
  • Maintaining Compliance with Laws and Regulations