FDICi 

FEDERAL DEPOSIT INSURAl'-CE CORPORATION 

FDIC Advisory Committee on 

Community Banking 

October 5, 2023 

Discussion of Banking Conditions 
 

Outline 

• Economic Overview 

• Economic Growth 

• Interest Rates and Lending Standards 

• Funding and Interest Rate Risk 

• NIM 

• Deposits 

• Funding costs 

• Credit Risk 

• Consumer 

• Commercial 

2 
 

Real GDP: Percent Change at Annual Rate, 2022:Q4-2023:Ql 

.... 

U.S. Bureau of Economic Analysis 

,. 

HI 

·­

•'a 

3.2 • 

MA2.5 

Quintile percent changes 

■ 3.5% to 12.4% 

■ 2.5% to 3.5% 

1.4% to 2.5% 

D 1.0% to 1.4% 

D 0.1%to 1.0% 

U.S. percent change = 2.0% 

The economy remained resilient this year, but conditions varied across 

states. 

3 
The yield curve inversion deepened this year as rates rose, though markets 

expect the federal funds rate to decrease in the coming quarters. 

Federal Funds Rate Target - Lower Bound 

Percent 

9 

8 

7 

6 

5 

4 

3 

2 

1 

0 

Market based 

expectations 

based on 

federal funds 

futures 

 

 

 

 

 

~ ----==========-

-

1990 1998 2006 2014 2023 

Sources: Federal Reserve; CME Group. Data as of Sept. 7, 2023. 

Note: Data points to lower limit of Federal Funds Target Rate. 

March 1, 2022 Percent 

September 1, 2022 6 

5 

4 

3 

2 

1 

00

January 1, 2023 

September 1, 2023 

1 M 3 M 6 M 1 Y 2 Y 3 Y 5 Y 7 Y 10 Y 30 Y 

Source: CapitalIQ. 4 
 

Quarterly Net Interest Margin 

Percent 

5.0 

4.5 

___ .,,,,.--

.,,,....,,.-......__, ____ '-.., 

2.5 

2.0 --Assets> $250 Billion 

--Assets $10 Billion - $250 Billion 

1.5 --Assets $1 Billion - $10 Billion 

--Assets $100 Million - $1 Billion 

--Assets< $100 Million 

1.0 - - Industry 

0.5 

o.0-----------------------------------------------------

2008 

Source: FDIC. 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 

The net interest margin declined for the second consecutive quarter. 

5 
 

Percent of Tota I Assets 

40 

35 

30 

25 

20 

15 

10 

5 

Liquid Assets & Wholesale Funds as a% of Total Assets 

• Liquid Assets 

• Wholesale Funds 

01---------------------------------------------------------------1 

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 

Source: FDIC. 

Note: Liquid assets are defined as cash, federal funds sold, securities purchased under agreements to resell, and securities (including unrealized gains/ losses on securities} less 

pledged securities. Wholesale funding includes federal funds purchased and securities sold under agreement to repurchase; Federal Home Loan Bank borrowings; brokered (net of 

reciprocal deposits}, municipal and state, and foreign deposits (which are not FDIC insured}; other borrowings; and listing services. For the period 2018 to 2021, reciprocal deposits 

were consolidated with brokered deposits. Data for listing services became ava ilable first quarter 2011. 

Liquid assets decreased and wholesale funding increased from the prior 

quarter. 

6 
$ Trillions 

1.6 

1.4 

1.2 

1.0 

0.8 

0.6 

0.4 

0.2 

-0.2 

-0.4 

2008 

Source: FDIC. 

2009 2010 2011 2012 

Quarterly Change in Asset Funding 

2013 

• Deposits 

• Nondeposit Liabilities 

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 

Deposits declined for the fifth consecutive quarter and borrowings 

decreased. 

7 
 

 

 

Funding and Interest Rate Risk Discussion 

• How is your bank being affected by rising interest rates? 

• How fast has your bank raised deposit rates? 

• Has your bank experienced a significant shift in deposit 

flows? 

• What concerns do you have about current funding 

conditions? 

8 
 

■ ■ ■ ■ 

Consumer credit outstanding continues to grow. 

$1.58T 

$1.03T 

$1.57T 

$0.53T 

0.0 

0.5 

1.0 

1.5 

2.0 

2.5 

3.0 

3.5 

4.0 

4.5 

5.0 

2Q03 2Q05 2Q07 2Q09 2Q11 2Q13 2Q15 2Q17 2Q19 2Q21 2Q23 

Auto Loan Credit Card Student Loan Other 

$ Volume 

(Trillions) 

Total Non-Housing Consumer Debt 

Source: FRBNY Consumer Credit Panel, Equifax (Haver Analytics). 9 
■ ■ 

Large shares of office leases in some metros expire in 2023 and 2024. 

Office Leases Expiring Through 2024 by Metro 

New York City 

Northen New Jersey 

DC 

Chicago 

Boston 

Philadelphia 

Stamford 

2023 2024 

Minneapolis 

Seattle 

Houston 

San Francisco 

Los Angeles 

Dallas 

Atlanta 

0% 10% 20% 30% 40% 50% 

Share as % of Metro's Office Space Expiring over 10 Years 

12% 

14% 

12% 

14% 

13% 

12% 

11% 

18% 

14% 

15% 

12% 

11% 

11% 

10% 

19% 

16% 

14% 

16% 

18% 

17% 

16% 

16% 

21% 16% 

23% 17% 

24% 16% 

Source: Costar data. 

10 
Tightening lending standards for commercial borrowers, along with higher 

rates could depress business investment. 

-40 

-20 

0 

20 

40 

60 

80 

100 

2015 2016 2017 2018 2019 2020 2021 2022 2023 

Large C&I Small C&I C&D CRE Multifamily 

Source: Federal Reserve Board (Haver Analytics). 

Net Percent Of Banks Tightening Lending Standards 

11 
 

 

 

Credit Risk Discussion 

• How have economic conditions affected the borrowers 

in your area? 

• Which portfolios are of most concern to you? 

• Have banks in your area tightened lending standards? 

12 
 

General Discussion 

• What other risks or concerns would you like to 

highlight? 

13