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FDIC report helps localize record bank profits

September 3, 2014

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Screenshot of AP video from HuffPost Live

A recently released report from the FDIC on quarterly U.S. bank performance contains the nuggets for a variety of stories that reflect your local area’s economy.

As Reuters reports, banks earned more than $40 billion in the second quarter of 2014, according to the Federal Deposit Insurance Corporation’s Quarterly Banking Profile.

Financial institutions are setting aside less money to cover bad loans, Reuters says — presumably a sign that borrowers are less likely to default than just about any time since 2006, according to the loss-reserve data.  Bloomberg also reported on the results, noting that those near-record profits are owed in part to the hottest lending environment since before the recession. (Although it is worth noting that according to the ABA Banking Journal, loss reserves for commercial loans — vs. commercial and residential real-estate loans — are actually up.  What does that portend?  Again, fodder for questions for local banking officials.  Is this trend reflected in your market?)

FDIC reports at state level

So, as we head into the home stretch of 2014 and the end of Q3, the time is ripe for a sit-down with some of your region’s banking executives.  Use the FDIC report as a springboard to talk about how your area echoes or bucks national trends, any big or noteworthy deals they’ll disclose, the creditworthiness of borrowers,  small business trends they’ve observed and competition for borrowers.

The FDIC reports are available at the state level; go to this page and select your state from the drop-down menu; note that you also can run the state report for the  same quarter in 2013 and 2012 for comparative purposes.  You might want to enlist a commercial accountant, bank industry analyst or other pro to help you parse the financial statements, but some year-over-year stats are obvious and great fodder for those executive interviews.  Running the Michigan reports, for example, I see that the number of banks is down by several, employment in the banks reporting to the FDIC is down by several thousand jobs in just a couple of years and that “non-performing assets’ (past-due loans) are down quite a bit.

I think more than any specific bank’s financials, however, readers and viewers would like to know what this means for them.  Are construction loans up and likely to ripple out through the community with jobs?  Any new developments coming in, or small businesses expanding?  What do these metrics translate into (if anything) relative to momentum, growth and recovery in the local market.

Banking on jobs

And speaking of jobs, I had a very interesting chance conversation with a tradesman servicing my house.  He mentioned that his wife was one of many long-time employees being let go by JPMorgan Chase, which did project 8,000 layoffs earlier this year.   In addition to the worker’s plight — according to this conversation, she, a 25-year employee of the company, was offered a modest buyout package or the chance to take a job at a $20,000-per-year pay cut — the inside view of the situation offered some insight into the new bank branch paradigm.  Again, this is hearsay but if I were on the beat I’d be hotfooting it to some regional bank offices to inquire:  Assistant managers are being eradicated and tellers trained to do some management tasks while working as tellers at peak times of day, and lobby kiosks are being installed to reduce the workload of human bank employees.

Clearly, banks at record profit levels still see the value in reducing full-time positions and relying instead on a more flexible and lower-paid workforce — a lament of the post-recovery job scene common in today’s business coverage.  Ask all local banks and credit unions about their staffing models today, next year and so on compared to a couple of years ago, and what their rational is for cutting jobs when profits are soaring.

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