FDIC QUARTERLY A

Quarterly

2019

Volume 13, Number 4

Federal Deposit 

Insurance Corporation

Quarterly Banking Profile:

Third Quarter 2019

Bank and Nonbank Lending Over 

the Past 70 Years

Leveraged Lending and Corporate 

Borrowing: Increased Reliance on 

Capital Markets, With Important 

Bank Links

Trends in Mortgage Origination and 

Servicing: Nonbanks in the 

Post-Crisis Period
FDIC QUARTERLY

The FDIC Quarterly is published by the Division of Insurance and Research of the 

Federal Deposit Insurance Corporation and contains a comprehensive summary of the 

most current financial results for the banking industry. Feature articles appearing in the 

FDIC Quarterly range from timely analysis of economic and banking trends at the national 

and regional level that may affect the risk exposure of FDIC-insured institutions to research 

on issues affecting the banking system and the development of regulatory policy.

Single copy subscriptions of the FDIC Quarterly can be obtained through the FDIC Public 

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The FDIC Quarterly is available online by visiting the FDIC website at www.fdic.gov. 

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individual feature articles, subscribe at www.fdic.gov/about/subscriptions/index.html.

Chairman

Jelena McWilliams

Director, Division of Insurance and Research

Diane Ellis

Executive Editor

George French

Managing Editors

Rosalind Bennett

Alan Deaton

Patrick Mitchell

Shayna M. Olesiuk

Philip A. Shively

Editors

Clayton Boyce

Kathy Zeidler

Publication Manager

Lynne Montgomery

Media Inquiries

(202) 898-6993
FDIC QUARTERLY i

2019 FDIC QUARTERLY

Volume 13 • Number 4

Some of the information used in the preparation of this publication was obtained from publicly available sources that are considered reliable. However, the use of this information 

does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation. Articles may be reprinted or abstracted if the publication and author(s) are 

credited. Please provide the FDIC’s Division of Insurance and Research with a copy of any publications containing reprinted material.

Quarterly Banking Profile: Third Quarter 2019

FDIC-insured institutions reported aggregate net income of $57.4 billion in third quarter 

2019, a decline of $4.5 billion (7.3 percent) from a year earlier. The decline in quarterly 

net income was caused by nonrecurring events at three large institutions, which totaled 

$4.9 billion. These events resulted in higher noninterest expense and realized securities 

losses. Almost 62 percent of banks reported year-over-year increases in net income, and only 

about 4 percent of banks were unprofitable during the third quarter. See page 1.

Community Bank Performance Community banks—which represent 92 percent of insured institutions—reported net 

income of $6.9 billion in third quarter 2019, up $466.2 million (7.2 percent) from third 

quarter 2018. Higher net interest income, noninterest income, and realized gains on 

securities more than offset growth in noninterest expense, provision for loan and lease 

losses, and income tax expense. See page 15.

Insurance Fund Indicators The Deposit Insurance Fund (DIF) balance increased by $1.5 billion during the quarter 

to $108.9 billion on September 30, driven by assessment income and interest earned on 

investments. The DIF reserve ratio (the fund balance as a percent of estimated insured 

deposits) was 1.41 percent on September 30, 2019, up from 1.40 percent on June 30, 2019, and 

up from 1.36 percent on September 30, 2018. See page 23.

Featured Articles:

Bank and Nonbank Lending Over the Past 70 Years

Total lending in the U.S. has grown dramatically in the past 70 years and since the 1970s, 

the share of bank loans has generally fallen as nonbanks gained market share in residential 

mortgage and corporate lending. In other business lines, shifts in loan holdings from banks 

to nonbanks have been less pronounced as banks and nonbanks continue to play important 

roles in lending for commercial real estate, agricultural loans, and consumer credit. Studying 

the roles that banks and nonbanks play in lending markets allows for a better understanding 

of how banks respond to growth in nonbank lending and the implications of associated risks 

for the banking sector and the broader economy. See page 31.

Leveraged Lending and Corporate Borrowing: Increased 

Reliance on Capital Markets, With Important Bank Links

Over the past decade, U.S. nonfinancial corporate debt reached record highs as issuance of 

corporate bonds and leveraged loans grew rapidly while credit quality and lender protections 

deteriorated. Much of this growth in corporate borrowing came through capital markets, 

though important connections to the banking system remain. This article examines this 

shift in corporate borrowing to capital markets over the past several decades. It also details 

the ways corporate debt has grown, the resulting risks this shift poses to banks since the 

2008 financial crisis, and what factors could mitigate those risks. See page 41.

Trends in Mortgage Origination and Servicing: Nonbanks 

in the Post-Crisis Period

The mortgage market changed notably after the collapse of the U.S. housing market in 

2007 and the financial crisis that followed. A substantive share of mortgage origination 

and servicing, and some of the risk associated with these activities, migrated outside of the 

banking system. Some risk remains with banks or could be transmitted to banks through 

other channels, including bank lending to nonbank mortgage lenders and servicers. 

Changing mortgage market dynamics and new risks and uncertainties warrant investigation 

of potential implications for systemic risk. See page 51.

2019 FDIC QUARTERLY

QUARTERLY BANKING PROFILE Third Quarter 2019

FDIC QUARTERLY 1

INSURED INSTITUTION PERFORMANCE

Net Income Declines 7.3 Percent From Third Quarter 2018 to $57.4 Billion, Due to Nonrecurring Events at 

Three Large Institutions

Revenue Increases 2.2 Percent From 12 Months Ago, Led by Noninterest Income

Net Interest Margins Decline From Year-Ago Levels to 3.35 Percent

Annual Loan and Lease Growth Rate Increases to 4.6 Percent

Noncurrent Rate Declines, While Net Charge-Off Rate Increases Modestly

Four New Banks Are Added in Third Quarter 2019

Securities and Other Gains/Losses, Net

Net Operating Income

Quarterly Net Income

All FDIC-Insured Institutions

$ Billions

Source: FDIC.

0

10

-10

20

30

40

50

60

70

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

57.4

Chart 1

Quarterly Noninterest Income 

Quarterly Net Interest Income 

Quarterly Net Operating Revenue 

All FDIC-Insured Institutions

$ Billions

Source: FDIC.

0

20

40

60

80

100

120

140

160

180

200

220

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

208.2

Chart 2

1 Methodology used for calculating industry participation counts consists of institutions existing in both reporting periods.

Net Income Declines 

7.3 Percent From Third 

Quarter 2018 to $57.4 Billion, 

Due to Nonrecurring Events at 

Three Large Institutions

The aggregate net income for the 5,256 FDIC-insured commercial banks and savings 

institutions totaled $57.4 billion during the three months ended September 30, a decline 

of $4.5 billion (7.3 percent) from third quarter 2018. The decline in quarterly net income 

was caused by nonrecurring events at three large institutions, which totaled $4.9 billion. 

These events resulted in higher noninterest expense and realized securities losses. Almost 

62 percent of banks reported year-over-year increases in net income, and only about 

4 percent of banks were unprofitable during the third quarter.1

 The average return on assets 

declined from 1.41 percent in third quarter 2018 to 1.25 percent in third quarter 2019.

Net Interest Income 

Increases 1.2 Percent 

From a Year Ago

Net interest income totaled $138.8 billion in the third quarter, an increase of $1.7 billion 

(1.2 percent) from a year ago, the lowest annual growth rate since fourth quarter 2014. 

Slightly more than two-thirds of all banks (70.9 percent) reported year-over-year increases 

in net interest income. Net interest margin (NIM) for the banking industry declined from 

3.45 percent in third quarter 2018 to 3.35 percent in third quarter 2019. The slowdown 

in NIM was broad-based and declined for all five asset groups featured in the Quarterly 

Banking Profile. For all size groups, the decline was caused by increases to funding costs 

exceeding the rise in yields on earning assets.
2019 • Volume 1 3 • Number 4

2 FDIC QUARTERLY

Loan-Loss Provisions 

Increase but Remain 

Relatively Low

Banks allocated $13.9 billion in loan-loss provisions during the third quarter, an increase of 

$2 billion (16.9 percent) from a year ago. The increase in loan-loss provisions was not broadbased, as less than 40 percent of all banks (38.1 percent) reported annual growth. Loan-loss 

provisions as a percentage of net operating revenue was 6.7 percent during the third quarter, 

with the annual increase primarily at banks with assets greater than $250 billion.

Noninterest Income 

Increases 4.3 Percent 

From a Year Ago

Noninterest income rose by $2.8 billion (4.3 percent) from a year ago, as almost two-thirds of 

all banks (63.9 percent) reported increases. The year-over-year growth in noninterest income 

was attributable to higher other noninterest income (up $3.6 billion, or 11.8 percent) and net 

gains on loan sales (up $1.1 billion, or 34 percent).2

Noninterest Expense 

Increases 5.7 Percent From 

Third Quarter 2018

Noninterest expense totaled $120.1 billion during the three months ended September 30, 

up $6.4 billion (5.7 percent) from third quarter 2018. The annual increase was broad-based, 

with 70.8 percent of all banks contributing to the growth. Salary and employee benefits 

(up $2.7 billion, or 5 percent), goodwill impairment charges (up $2 billion from a low base 

$7.2 million), and other noninterest expense (up $1.7 billion, or 3.6 percent) led the increase. 

The average assets per employee increased from $8.5 million in third quarter 2018 to 

$8.9 million.

Net Charge-Offs Increase 

by $1.9 Billion From 

12 Months Ago

Banks charged off $13.1 billion in uncollectable loans during the third quarter, an increase 

of $1.9 billion (17.2 percent) from a year earlier. This was the largest annual dollar increase 

since first quarter 2010, but the charge-off rate remained low. The largest contributors to the 

annual increase in net charge-offs were the commercial and industrial (C&I) loan portfolio 

(up $1 billion, or 78.7 percent) and the credit card portfolio (up $513.7 million, or 6.7 percent). 

The average net charge-off rate increased by 6 basis points from third quarter 2018 to 

0.51 percent. The C&I net charge-off rate increased to 0.41 percent from 0.25 percent a year 

earlier, but remains below the recent high of 0.50 percent reported in fourth quarter 2016.

Source: FDIC.

Percent

Noncurrent Loan Rate and Quarterly Net Charge-O
 Rate

All FDIC-Insured Institutions

0

1

2

3

4

5

6

Quarterly Net Charge-O Rate

Noncurrent Rate

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart 3

Source: FDIC.

Note: Loan-loss reserves to noncurrent loans and leases.

$ Billions Coverage Ratio (Percent)

Reserve Coverage Ratio

All FDIC-Insured Institutions

0

50

100

150

200

250

300

350

400

450

0

20

40

60

80

100

120

140

160

180

 Loan-Loss Reserves ($) 

 Noncurrent Loans ($)

 Noncurrents Adjusted for GNMA Guaranteed Loans ($)

 Coverage Ratio (%) 

 Coverage Adjusted for GNMA Guaranteed Loans (%)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart 4

2 Other noninterest income includes service charges, commissions, and fees for services such as the rental of safe deposit boxes, 

notarization of forms and documents, and the use of ATMs. The category also includes interchange fees earned from bank card 

and credit card transactions and credits resulting from litigation or other claims.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 3

Noncurrent Loan Rate 

Remains Steady at 

0.92 Percent

Noncurrent loan balances (90 days or more past due or in nonaccrual status) were almost 

unchanged from the previous quarter (down $184.8 million, or 0.2 percent). The average noncurrent rate remained stable at 0.92 percent. About half of all banks (47.6 percent) 

reported declines in noncurrent loan balances. Increases in noncurrent credit card 

balances (up $940.9 million, or 8.1 percent) and noncurrent C&I loans (up $263.5 million, 

or 1.5 percent) were partially offset by lower noncurrent residential mortgages (down 

$407.4 million, or 1 percent).

Loan-Loss Reserves Increase 

Modestly From Second 

Quarter 2019

Banks increased loan-loss reserves (up $251.6 million, or 0.2 percent) from the previous 

quarter, as quarterly loan-loss provisions of $13.9 billion exceeded quarterly net charge-offs 

of $13.1 billion. Almost two-thirds of all banks (62.1 percent) reported quarterly increases 

in loan-loss reserves. At banks that itemize their loan-loss reserves, which are banks with 

total assets of $1 billion or more and represent 90 percent of total industry loan-loss reserves, 

residential real estate reserves fell by $686 million (6.2 percent) and commercial real estate 

reserves declined by $547.2 million (3.8 percent). Loan-loss reserves for credit card portfolios 

increased by $618.3 million (1.5 percent) from the previous quarter.

Total Assets Increase 

1.2 Percent From the 

Previous Quarter

Total assets rose by $213.2 billion (1.2 percent) from second quarter 2019. Banks increased 

securities holdings by $156.9 billion (4.2 percent), as mortgage-backed securities increased 

by $86.8 billion (3.8 percent) and holdings of U.S. Treasury securities rose by $74.2 billion 

(13.5 percent). Unrealized gains on available-for-sale securities increased by $10 billion 

(44.6 percent), while unrealized gains on held-to-maturity securities increased by $7.6 billion 

(58.1 percent).

Loan Balances Increase 

From the Previous Quarter 

and a Year Ago

Total loan and lease balances increased by $99.5 billion (1 percent) from the previous quarter. Almost two-thirds of all banks (63.5 percent) grew loan and lease balances from the 

second quarter. All major loan categories reported quarterly aggregate increases, led by 

consumer loans (up $31.3 billion, or 1.8 percent), residential mortgage loans (up $22 billion, 

or 1 percent), and nonfarm nonresidential loans (up $18 billion, or 1.2 percent).3 Over the 

past 12 months, total loan and lease balances increased by $460.2 billion (4.6 percent), 

slightly above the 4.5 percent annual growth rate reported in second quarter 2019. C&I loans 

reported the largest dollar increase from third quarter 2018 (up $131.9 billion, or 6.3 percent).

Held-to-Maturity Securities

Available-for-Sale Securities

Unrealized Gains (Losses) on Investment Securities

All FDIC-Insured Institutions

$ Billions

Source: FDIC.

-100

-80

-60

-40

-20

 0

20

40

60

80

100

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

53

Chart 5

Quarterly Change in Loan Balances

All FDIC-Insured Institutions

Source: FDIC.

Note: FASB Statements 166 and 167 resulted in the consolidation of large amounts of securitized 

loan balances back onto banks’ balance sheets in the rst quarter of 2010. Although the total amount 

consolidated cannot be precisely quantied, the industry would have reported a decline in loan 

balances for the quarter absent this change in accounting standards.

$ Billions Percent

-300

-200

-100

0

100

200

300

-10

-8

-6

-4

-2

0

2

4

6

8

Quarterly Change (Le Axis)

12-Month Growth Rate (Right Axis)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart 6

3 Consumer loans include credit card balances. 
2019 • Volume 1 3 • Number 4

4 FDIC QUARTERLY

Deposits Increase 

1.7 Percent From 

Second Quarter 2019

Total deposit balances rose by $235.9 billion (1.7 percent) from the second quarter, as 

deposits in domestic offices increased by $232.1 billion (1.8 percent) and deposits in foreign 

offices grew by $3.8 billion (0.3 percent). Interest-bearing accounts grew by $165.3 billion 

(1.7 percent) and noninterest-bearing accounts rose by $66.8 billion (2.2 percent). Nondeposit liabilities declined by $26.2 billion (1.2 percent) from the previous quarter, as Federal 

Home Loan Bank advances fell by $34.4 billion (6.5 percent) and other secured borrowings 

declined by $16.5 billion (7.5 percent).4

Equity Capital Remains 

Stable From Second 

Quarter 2019

Equity capital increased by $3.5 billion (0.2 percent) from the previous quarter. Declared 

dividends of $47.8 billion were below quarterly net income of $57.4 billion during the third 

quarter. Fifteen insured institutions with $2 billion in total assets were below the requirements for the well-capitalized category as defined for Prompt Corrective Action purposes.

Four New Banks Are Added 

in Third Quarter 2019

The number of FDIC-insured commercial banks and savings institutions fell from 5,303 to 

5,256 during the third quarter. Four new banks were added, 46 institutions were absorbed 

by mergers, and no banks failed. The number of institutions on the FDIC’s “Problem Bank 

List” fell from 56 to 55 at the end of third quarter. The list now contains the fewest institutions since first quarter 2007. Total assets of problem banks rose slightly from $48.5 billion 

to $48.8 billion.

Author:

Benjamin Tikvina

Senior Financial Analyst

Division of Insurance and Research

Source: FDIC.

Number

Number and Assets of Banks on the “Problem Bank List” 

0

100

200

300

400

500

600

700

800

900

1,000

0

50

100

150

200

250

300

350

400

450

500

Assets ($ Billions)

Number of Problem Banks

Assets of Problem Banks 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart 7

4 Other noninterest expense includes retainer fees, legal fees, data processing expense, and accounting and auditing expenses. 
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 5

TABLE I-A. Selected Indicators, All FDIC-Insured Institutions*

2019** 2018** 2018 2017 2016 2015 2014

Return on assets (%) 1.33 1.35 1.35 0.97 1.04 1.04 1.01

Return on equity (%) 11.67 12.03 11.98 8.60 9.27 9.29 9.01

Core capital (leverage) ratio (%) 9.68 9.77 9.70 9.63 9.48 9.59 9.44

Noncurrent assets plus other real estate owned to assets (%) 0.56 0.62 0.60 0.73 0.86 0.97 1.20

Net charge-offs to loans (%) 0.50 0.48 0.48 0.50 0.47 0.44 0.49

Asset growth rate (%) 4.57 2.50 3.03 3.79 5.09 2.66 5.59

Net interest margin (%) 3.38 3.38 3.40 3.25 3.13 3.07 3.14

Net operating income growth (%) 1.04 28.70 45.45 -3.27 4.43 7.11 -0.73

Number of institutions reporting 5,256 5,477 5,406 5,670 5,913 6,182 6,509

Commercial banks 4,587 4,774 4,715 4,918 5,112 5,338 5,607

Savings institutions 669 703 691 752 801 844 902

Percentage of unprofitable institutions (%) 3.46 3.40 3.42 5.61 4.48 4.82 6.27

Number of problem institutions 55 71 60 95 123 183 291

Assets of problem institutions (in billions) $49 $53 $48 $14 $28 $47 $87

Number of failed institutions 1 0 0 8 5 8 18

* Excludes insured branches of foreign banks (IBAs).

** Through September 30, ratios annualized where appropriate. Asset growth rates are for 12 months ending September 30.

TABLE II-A. Aggregate Condition and Income Data, All FDIC-Insured Institutions

(dollar figures in millions)  3rd Quarter

2019

2nd Quarter

2019

3rd Quarter

2018

%Change 

18Q3-19Q3

Number of institutions reporting 5,256 5,303 5,477 -4.0

Total employees (full-time equivalent) 2,065,576 2,069,198 2,070,600 -0.2

CONDITION DATA

Total assets $18,480,422 $18,267,203 $17,672,832 4.6

Loans secured by real estate 5,002,351 4,963,906 4,862,796 2.9

 1-4 Family residential mortgages 2,182,308 2,160,308 2,112,199 3.3

 Nonfarm nonresidential 1,491,704 1,473,730 1,426,248 4.6

 Construction and development 359,843 357,222 351,299 2.4

 Home equity lines 349,801 358,451 381,638 -8.3

Commercial & industrial loans 2,215,838 2,214,560 2,083,943 6.3

Loans to individuals 1,779,331 1,747,993 1,690,648 5.3

 Credit cards 892,881 881,143 856,327 4.3

Farm loans 80,288 81,607 82,345 -2.5

Other loans & leases 1,323,677 1,293,967 1,221,644 8.4

Less: Unearned income 2,275 2,347 2,330 -2.4

Total loans & leases 10,399,209 10,299,686 9,939,046 4.6

Less: Reserve for losses 125,156 124,905 123,727 1.2

Net loans and leases 10,274,053 10,174,782 9,815,319 4.7

Securities 3,936,058 3,779,175 3,630,098 8.4

Other real estate owned 6,189 6,365 7,187 -13.9

Goodwill and other intangibles 394,024 397,156 397,116 -0.8

All other assets 3,870,098 3,909,725 3,823,113 1.2

Total liabilities and capital 18,480,422 18,267,203 17,672,832 4.6

Deposits 14,275,592 14,039,671 13,573,628 5.2

 Domestic office deposits 12,979,742 12,747,614 12,321,793 5.3

 Foreign office deposits 1,295,850 1,292,057 1,251,835 3.5

Other borrowed funds 1,460,169 1,496,825 1,497,303 -2.5

Subordinated debt 69,325 68,946 68,844 0.7

All other liabilities 574,108 564,069 535,741 7.2

Total equity capital (includes minority interests) 2,101,228 2,097,692 1,997,316 5.2

 Bank equity capital 2,098,110 2,094,579 1,993,823 5.2

Loans and leases 30-89 days past due 64,013 60,731 63,198 1.3

Noncurrent loans and leases 95,543 95,728 101,255 -5.6

Restructured loans and leases 51,069 52,891 56,382 -9.4

Mortgage-backed securities 2,369,458 2,282,677 2,157,479 9.8

Earning assets 16,685,260 16,485,294 15,959,314 4.6

FHLB Advances 498,867 533,284 553,364 -9.9

Unused loan commitments 8,133,004 8,049,055 7,842,636 3.7

Trust assets 21,365,786 20,621,589 20,428,706 4.6

Assets securitized and sold 539,466 550,767 625,982 -13.8

Notional amount of derivatives 203,447,068 207,258,169 209,769,422 -3.0

INCOME DATA

First Three 

Quarters 2019

First Three 

Quarters 2018 %Change

3rd Quarter 

2019

3rd Quarter 

2018

%Change 

18Q3-19Q3

Total interest income $539,435 $484,959 11.2 $180,844 $169,022 7.0

Total interest expense 123,508 83,176 48.5 42,081 31,927 31.8

Net interest income 415,927 401,783 3.5 138,764 137,095 1.2

Provision for loan and lease losses 40,600 35,976 12.9 13,872 11,863 16.9

Total noninterest income 200,824 201,832 -0.5 69,462 66,627 4.3

Total noninterest expense 349,501 342,143 2.2 120,102 113,671 5.7

Securities gains (losses) 1,044 557 87.5 -956 130 -832.7

Applicable income taxes 47,361 47,980 -1.3 15,878 16,332 -2.8

Extraordinary gains, net* 167 -227 N/M -2 -39 N/M

Total net income (includes minority interests) 180,501 177,844 1.5 57,416 61,947 -7.3

 Bank net income 180,309 177,626 1.5 57,354 61,877 -7.3

Net charge-offs 38,545 34,894 10.5 13,088 11,164 17.2

Cash dividends 134,884 112,150 20.3 47,757 43,843 8.9

Retained earnings 45,425 65,476 -30.6 9,597 18,034 -46.8

Net operating income 179,474 177,625 1.0 58,173 61,883 -6.0

* See Notes to Users for explanation. N/M - Not Meaningful
2019 • Volume 1 3 • Number 4

6 FDIC QUARTERLY

TABLE III-A. Third Quarter 2019, All FDIC-Insured Institutions

Asset Concentration Groups*

THIRD QUARTER

(The way it is...)

All Insured 

Institutions

Credit 

Card 

Banks

International 

Banks

Agricultural 

Banks

Commercial 

Lenders

Mortgage 

Lenders

Consumer 

Lenders

Other 

Specialized 

<$1 Billion

All Other 

<$1 Billion

All Other 

>$1 Billion

Number of institutions reporting 5,256 12 5 1,324 2,753 393 68 217 434 50

Commercial banks 4,587 11 5 1,312 2,481 112 47 196 380 43

Savings institutions 669 1 0 12 272 281 21 21 54 7

Total assets (in billions) $18,480.4 $521.8 $4,509.3 $285.2 $6,672.2 $386.1 $225.8 $38.2 $76.9 $5,764.9

Commercial banks 17,308.0 429.8 4,509.3 278.9 6,237.3 113.0 114.3 34.6 64.1 5,526.6

Savings institutions 1,172.4 91.9 0.0 6.3 434.9 273.0 111.6 3.7 12.8 238.3

Total deposits (in billions) 14,275.6 351.7 3,253.2 235.4 5,227.9 301.0 184.7 30.0 64.2 4,627.8

Commercial banks 13,346.9 283.4 3,253.2 232.2 4,904.1 87.5 91.6 27.7 54.0 4,413.3

Savings institutions 928.7 68.3 0.0 3.2 323.8 213.5 93.0 2.3 10.2 214.6

Bank net income (in millions) 57,354 4,470 13,871 1,028 18,931 1,237 855 322 237 16,404

Commercial banks 53,096 3,544 13,871 974 17,892 553 479 136 206 15,441

Savings institutions 4,258 926 0 53 1,039 683 376 186 31 963

Performance Ratios (annualized, %)

Yield on earning assets 4.37 13.29 3.79 4.87 4.47 3.80 5.31 3.52 4.39 3.81

Cost of funding earning assets 1.02 2.30 1.03 1.00 1.01 0.98 1.04 0.62 0.71 0.90

Net interest margin 3.35 10.99 2.76 3.88 3.46 2.83 4.27 2.89 3.68 2.92

Noninterest income to assets 1.51 4.49 1.86 0.70 1.09 1.51 1.50 7.62 1.08 1.47

Noninterest expense to assets 2.62 7.21 2.42 2.56 2.61 2.55 3.12 6.06 3.05 2.32

Loan and lease loss provision to assets 0.30 3.29 0.29 0.15 0.19 0.02 0.66 0.06 0.08 0.19

Net operating income to assets 1.27 3.43 1.21 1.42 1.13 1.26 1.36 3.33 1.22 1.25

Pretax return on assets 1.60 4.48 1.59 1.65 1.46 1.66 2.00 4.25 1.40 1.46

Return on assets 1.25 3.43 1.23 1.45 1.15 1.30 1.53 3.42 1.24 1.14

Return on equity 10.96 27.35 11.98 12.21 9.42 11.62 13.93 18.88 9.45 10.20

Net charge-offs to loans and leases 0.51 3.94 0.71 0.15 0.24 0.03 0.78 0.17 0.14 0.37

Loan and lease loss provision to 

net charge-offs 105.99 102.09 106.95 147.15 109.68 119.55 121.47 119.93 99.74 104.26

Efficiency ratio 56.23 47.67 56.27 58.84 58.69 60.48 54.99 58.91 67.43 55.57

% of unprofitable institutions 4.13 0.00 0.00 3.55 3.78 7.89 0.00 9.22 3.23 2.00

% of institutions with earnings gains 62.14 50.00 60.00 58.69 66.36 53.18 69.12 52.07 59.68 50.00

Structural Changes

New reporters 4 0 0 0 0 0 0 4 0 0

Institutions absorbed by mergers 46 0 0 13 31 0 0 0 1 1

Failed institutions 0 0 0 0 0 0 0 0 0 0

PRIOR THIRD QUARTERS

(The way it was...)

Return on assets (%) 2018 1.41 3.09 1.21 1.42 1.31 1.22 1.38 3.82 1.22 1.48

 2016 1.10 2.26 0.90 1.29 1.01 1.03 1.02 2.68 0.95 1.21

 2014 1.01 3.10 0.79 1.28 0.95 0.83 1.18 2.12 0.92 0.96

Net charge-offs to loans & leases (%) 2018 0.45 3.70 0.44 0.13 0.17 0.01 0.69 0.23 0.14 0.37

 2016 0.44 3.11 0.48 0.09 0.22 0.04 0.66 0.16 0.19 0.41

 2014 0.46 2.62 0.68 0.09 0.25 0.15 0.57 0.30 0.24 0.26

* See Table V-A (page 10) for explanations.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 7

TABLE III-A. Third Quarter 2019, All FDIC-Insured Institutions 

Asset Size Distribution Geographic Regions*

THIRD QUARTER

(The way it is...)

All Insured 

Institutions

Less Than 

$100 

Million

$100 

Million to 

$1 Billion

$1 Billion 

to $10 

Billion

$10 Billion 

to $250 

Billion

Greater 

Than $250 

Billion

New 

York Atlanta Chicago

Kansas 

City Dallas

San 

Francisco

Number of institutions reporting 5,256 1,206 3,247 660 134 9 635 603 1,132 1,343 1,157 386

Commercial banks 4,587 1,068 2,854 539 117 9 333 550 971 1,298 1,085 350

Savings institutions 669 138 393 121 17 0 302 53 161 45 72 36

Total assets (in billions) $18,480.4 $71.6 $1,083.1 $1,722.0 $6,435.6 $9,168.1 $3,357.4 $3,784.3 $4,240.1 $3,797.9 $1,193.3 $2,107.4

Commercial banks 17,308.0 63.6 936.2 1,405.8 5,734.3 9,168.1 2,953.2 3,682.5 4,135.2 3,752.3 1,039.3 1,745.5

Savings institutions 1,172.4 8.0 146.9 316.3 701.2 0.0 404.2 101.8 104.9 45.6 154.0 361.9

Total deposits (in billions) 14,275.6 59.0 900.9 1,387.8 4,949.9 6,977.9 2,596.7 2,975.1 3,091.3 2,974.5 961.0 1,677.0

Commercial banks 13,346.9 53.1 784.7 1,144.2 4,387.0 6,977.9 2,291.7 2,896.6 3,015.2 2,940.2 839.6 1,363.5

Savings institutions 928.7 5.9 116.3 243.6 562.9 0.0 305.0 78.5 76.0 34.3 121.5 313.5

Bank net income (in millions) 57,354 185 3,618 5,940 20,324 27,287 9,197 11,092 14,302 10,836 4,263 7,664

Commercial banks 53,096 161 3,134 5,105 17,410 27,287 8,285 10,863 13,838 10,704 3,767 5,641

Savings institutions 4,258 24 484 835 2,914 0 912 230 464 132 497 2,023

Performance Ratios (annualized, %)

Yield on earning assets 4.37 4.67 4.79 4.79 4.83 3.91 4.32 4.37 3.92 4.31 4.77 5.18

Cost of funding earning assets 1.02 0.79 0.94 1.03 1.14 0.94 1.23 0.90 0.91 1.06 0.90 1.09

Net interest margin 3.35 3.87 3.86 3.76 3.69 2.97 3.09 3.46 3.01 3.26 3.87 4.09

Noninterest income to assets 1.51 1.41 1.33 1.22 1.45 1.63 1.30 1.44 1.89 1.31 1.38 1.67

Noninterest expense to assets 2.62 3.68 3.23 2.79 2.73 2.43 2.41 2.54 2.62 2.53 3.00 3.03

Loan and lease loss provision to assets 0.30 0.18 0.15 0.18 0.43 0.25 0.29 0.31 0.23 0.29 0.21 0.53

Net operating income to assets 1.27 1.00 1.32 1.37 1.25 1.26 1.09 1.35 1.34 1.12 1.40 1.44

Pretax return on assets 1.60 1.18 1.58 1.76 1.67 1.52 1.40 1.49 1.73 1.47 1.76 1.99

Return on assets 1.25 1.04 1.35 1.39 1.28 1.19 1.10 1.18 1.36 1.15 1.45 1.47

Return on equity 10.96 7.19 11.24 11.52 10.60 11.13 9.16 9.64 12.31 11.21 11.92 12.94

Net charge-offs to loans and leases 0.51 0.25 0.13 0.21 0.67 0.51 0.47 0.53 0.43 0.51 0.26 0.79

Loan and lease loss provision to 

net charge-offs 105.99 120.74 165.44 119.86 103.39 104.78 109.10 99.29 105.77 108.54 116.55 106.48

Efficiency ratio 56.23 73.42 65.30 58.76 53.55 56.43 58.37 54.65 56.95 58.93 60.43 48.96

% of unprofitable institutions 4.13 9.87 2.77 0.76 2.24 0.00 3.78 6.14 4.68 2.46 3.72 6.99

% of institutions with earnings gains 62.14 54.64 63.50 70.45 56.72 44.44 56.69 63.18 65.19 62.25 61.28 62.69

Structural Changes

New reporters 4 3 1 0 0 0 1 2 0 0 0 1

Institutions absorbed by mergers 46 17 22 5 2 0 5 7 8 16 8 2

Failed institutions 0 0 0 0 0 0 0 0 0 0 0 0

PRIOR THIRD QUARTERS

(The way it was...)

Return on assets (%) 2018 1.41 1.09 1.28 1.42 1.50 1.36 1.28 1.48 1.29 1.37 1.49 1.74

 2016 1.10 0.97 1.13 1.10 1.09 1.09 0.87 1.25 1.00 1.09 1.16 1.40

 2014 1.01 0.88 1.04 1.12 1.06 0.95 0.87 0.89 0.82 1.14 1.17 1.61

Net charge-offs to loans & leases (%) 2018 0.45 0.19 0.13 0.19 0.65 0.41 0.55 0.53 0.19 0.48 0.24 0.68

 2016 0.44 0.15 0.12 0.23 0.62 0.43 0.50 0.51 0.27 0.47 0.28 0.58

 2014 0.46 0.22 0.18 0.25 0.66 0.41 0.68 0.35 0.32 0.55 0.21 0.45

* See Table V-A (page 11) for explanations.
2019 • Volume 1 3 • Number 4

8 FDIC QUARTERLY

TABLE IV-A. First Three Quarters 2019, All FDIC-Insured Institutions

Asset Concentration Groups*

FIRST THREE QUARTERS

(The way it is...)

All Insured 

Institutions

Credit 

Card 

Banks

International 

Banks

Agricultural 

Banks

Commercial 

Lenders

Mortgage 

Lenders

Consumer 

Lenders

Other 

Specialized 

<$1 Billion

All Other 

<$1 Billion

All Other 

>$1 Billion

Number of institutions reporting 5,256 12 5 1,324 2,753 393 68 217 434 50

Commercial banks 4,587 11 5 1,312 2,481 112 47 196 380 43

Savings institutions 669 1 0 12 272 281 21 21 54 7

Total assets (in billions) $18,480.4 $521.8 $4,509.3 $285.2 $6,672.2 $386.1 $225.8 $38.2 $76.9 $5,764.9

Commercial banks 17,308.0 429.8 4,509.3 278.9 6,237.3 113.0 114.3 34.6 64.1 5,526.6

Savings institutions 1,172.4 91.9 0.0 6.3 434.9 273.0 111.6 3.7 12.8 238.3

Total deposits (in billions) 14,275.6 351.7 3,253.2 235.4 5,227.9 301.0 184.7 30.0 64.2 4,627.8

Commercial banks 13,346.9 283.4 3,253.2 232.2 4,904.1 87.5 91.6 27.7 54.0 4,413.3

Savings institutions 928.7 68.3 0.0 3.2 323.8 213.5 93.0 2.3 10.2 214.6

Bank net income (in millions) 180,309 12,921 41,722 2,860 58,386 3,395 2,368 925 678 57,053

Commercial banks 168,305 10,374 41,722 2,757 55,381 1,503 1,487 359 584 54,138

Savings institutions 12,004 2,547 0 103 3,005 1,892 881 567 94 2,915

Performance Ratios (annualized, %)

Yield on earning assets 4.39 13.02 3.81 4.79 4.49 3.81 5.26 3.53 4.33 3.88

Cost of funding earning assets 1.01 2.32 1.03 0.95 1.00 0.95 1.01 0.61 0.68 0.88

Net interest margin 3.38 10.70 2.78 3.84 3.49 2.86 4.25 2.92 3.65 2.99

Noninterest income to assets 1.48 4.42 1.82 0.65 1.07 1.31 1.33 7.13 1.01 1.43

Noninterest expense to assets 2.57 7.08 2.44 2.55 2.56 2.48 2.99 5.82 3.01 2.23

Loan and lease loss provision to assets 0.30 3.29 0.28 0.16 0.18 0.02 0.60 0.04 0.08 0.20

Net operating income to assets 1.32 3.30 1.22 1.34 1.19 1.19 1.36 3.20 1.16 1.36

Pretax return on assets 1.67 4.27 1.58 1.54 1.52 1.54 1.90 4.09 1.35 1.69

Return on assets 1.33 3.30 1.24 1.36 1.21 1.20 1.43 3.32 1.19 1.34

Return on equity 11.67 26.69 12.02 11.67 9.96 10.88 13.31 18.72 9.28 11.95

Net charge-offs to loans and leases 0.50 4.19 0.71 0.15 0.20 0.02 0.79 0.12 0.12 0.38

Loan and lease loss provision to 

net charge-offs 105.33 96.79 101.38 159.51 125.72 117.27 110.18 125.89 120.77 104.64

Efficiency ratio 55.86 47.89 56.80 60.01 59.04 61.30 54.25 59.30 68.06 53.29

% of unprofitable institutions 3.46 0.00 0.00 2.34 3.31 8.40 1.47 7.83 2.07 0.00

% of institutions with earnings gains 64.23 58.33 40.00 62.16 66.98 54.20 57.35 59.91 66.59 58.00

Condition Ratios (%)

Earning assets to total assets 90.29 95.40 87.37 93.20 90.66 95.00 95.20 91.63 93.01 90.97

Loss allowance to:

Loans and leases 1.20 4.47 1.44 1.40 0.96 0.61 1.07 1.46 1.21 1.01

Noncurrent loans and leases 130.99 276.58 164.24 129.54 125.61 32.19 158.46 118.69 127.35 100.48

Noncurrent assets plus

other real estate owned to assets 0.56 1.33 0.36 0.86 0.60 1.15 0.48 0.40 0.68 0.54

Equity capital ratio 11.35 12.72 10.14 11.94 12.18 11.03 11.05 18.10 13.19 11.16

Core capital (leverage) ratio 9.68 12.31 8.73 11.40 10.19 10.79 11.04 17.24 12.89 9.28

Common equity tier 1 capital ratio 13.25 14.34 13.61 14.90 12.29 21.53 17.75 37.72 21.66 13.31

Tier 1 risk-based capital ratio 13.33 14.48 13.69 14.91 12.37 21.54 17.97 37.73 21.68 13.38

Total risk-based capital ratio 14.67 16.39 15.22 16.02 13.58 22.25 18.99 38.56 22.73 14.76

Net loans and leases to deposits 71.97 116.66 51.27 82.05 88.99 74.65 84.18 34.13 68.29 63.02

Net loans to total assets 55.59 78.63 36.99 67.71 69.72 58.19 68.83 26.74 56.99 50.59

Domestic deposits to total assets 70.24 66.45 47.92 82.52 77.99 77.68 81.76 78.37 83.45 77.27

Structural Changes

New reporters 10 0 0 0 1 0 0 8 1 0

Institutions absorbed by mergers 149 0 1 31 109 1 1 1 4 1

Failed institutions 1 0 0 1 0 0 0 0 0 0

PRIOR FIRST THREE QUARTERS

(The way it was...)

Number of institutions 2018 5,477 12 5 1,366 2,878 408 70 233 453 52

 2016 5,980 13 5 1,461 3,012 478 62 304 585 60

 2014 6,589 16 3 1,501 3,284 570 50 371 729 65

Total assets (in billions) 2018 $17,672.8 $640.0 $4,245.9 $285.2 $6,232.8 $352.0 $212.8 $36.0 $78.0 $5,590.2

 2016 16,766.6 500.8 4,145.8 273.5 5,678.8 386.7 205.5 54.7 103.3 5,417.6

 2014 15,348.7 605.5 3,690.9 254.1 5,186.3 435.5 167.5 60.5 128.5 4,819.9

Return on assets (%) 2018 1.35 2.83 1.22 1.35 1.27 1.12 1.46 3.82 1.16 1.39

 2016 1.04 2.30 0.90 1.24 0.99 0.98 1.01 2.57 0.96 1.07

 2014 1.03 3.20 0.81 1.20 0.97 0.86 1.10 2.08 0.89 0.97

Net charge-offs to loans & leases (%) 2018 0.48 3.90 0.50 0.13 0.17 0.01 0.74 0.15 0.13 0.38

 2016 0.45 3.21 0.53 0.11 0.20 0.05 0.65 0.16 0.18 0.42

 2014 0.49 2.86 0.73 0.09 0.26 0.19 0.62 0.24 0.23 0.29

Noncurrent assets plus 

OREO to assets (%) 2018 0.62 1.13 0.39 0.89 0.65 1.39 0.49 0.46 0.77 0.65

 2016 0.88 1.01 0.62 0.78 0.88 1.78 0.87 0.59 1.00 1.01

 2014 1.29 0.82 0.90 0.88 1.30 2.27 1.10 0.75 1.46 1.58

Equity capital ratio (%) 2018 11.28 15.27 9.98 11.32 11.96 10.99 10.67 16.87 12.05 11.06

 2016 11.21 15.16 9.79 11.61 11.98 11.32 10.00 15.49 12.01 11.10

 2014 11.20 14.90 9.50 11.40 11.97 12.02 9.96 14.30 11.91 11.09

* See Table V-A (page 10) for explanations.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 9

TABLE IV-A. First Three Quarters 2019, All FDIC-Insured Institutions 

Asset Size Distribution Geographic Regions*

FIRST THREE QUARTERS

(The way it is...)

All Insured 

Institutions

Less Than 

$100 

Million

$100 

Million to 

$1 Billion

$1 Billion 

to $10 

Billion

$10 Billion 

to $250 

Billion

Greater 

Than $250 

Billion

New 

York Atlanta Chicago

Kansas 

City Dallas

San 

Francisco

Number of institutions reporting 5,256 1,206 3,247 660 134 9 635 603 1,132 1,343 1,157 386

Commercial banks 4,587 1,068 2,854 539 117 9 333 550 971 1,298 1,085 350

Savings institutions 669 138 393 121 17 0 302 53 161 45 72 36

Total assets (in billions) $18,480.4 $71.6 $1,083.1 $1,722.0 $6,435.6 $9,168.1 $3,357.4 $3,784.3 $4,240.1 $3,797.9 $1,193.3 $2,107.4

Commercial banks 17,308.0 63.6 936.2 1,405.8 5,734.3 9,168.1 2,953.2 3,682.5 4,135.2 3,752.3 1,039.3 1,745.5

Savings institutions 1,172.4 8.0 146.9 316.3 701.2 0.0 404.2 101.8 104.9 45.6 154.0 361.9

Total deposits (in billions) 14,275.6 59.0 900.9 1,387.8 4,949.9 6,977.9 2,596.7 2,975.1 3,091.3 2,974.5 961.0 1,677.0

Commercial banks 13,346.9 53.1 784.7 1,144.2 4,387.0 6,977.9 2,291.7 2,896.6 3,015.2 2,940.2 839.6 1,363.5

Savings institutions 928.7 5.9 116.3 243.6 562.9 0.0 305.0 78.5 76.0 34.3 121.5 313.5

Bank net income (in millions) 180,309 539 10,409 16,515 64,276 88,569 27,485 37,348 42,703 35,153 12,067 25,553

Commercial banks 168,305 468 9,002 14,159 56,106 88,569 24,864 36,748 41,473 34,764 10,784 19,671

Savings institutions 12,004 71 1,407 2,356 8,171 0 2,621 600 1,230 389 1,282 5,882

Performance Ratios (annualized, %)

Yield on earning assets 4.39 4.57 4.74 4.76 4.83 3.96 4.34 4.42 3.91 4.37 4.77 5.15

Cost of funding earning assets 1.01 0.75 0.90 1.00 1.13 0.93 1.20 0.89 0.91 1.05 0.88 1.08

Net interest margin 3.38 3.82 3.84 3.75 3.71 3.03 3.14 3.53 3.01 3.32 3.89 4.07

Noninterest income to assets 1.48 1.36 1.23 1.13 1.44 1.59 1.29 1.43 1.83 1.26 1.27 1.63

Noninterest expense to assets 2.57 3.63 3.19 2.80 2.65 2.39 2.44 2.52 2.61 2.44 2.97 2.81

Loan and lease loss provision to assets 0.30 0.15 0.14 0.18 0.43 0.25 0.29 0.33 0.22 0.29 0.19 0.50

Net operating income to assets 1.32 0.98 1.27 1.29 1.36 1.31 1.10 1.39 1.34 1.23 1.37 1.62

Pretax return on assets 1.67 1.16 1.53 1.66 1.77 1.63 1.42 1.69 1.70 1.57 1.69 2.17

Return on assets 1.33 1.01 1.31 1.32 1.37 1.30 1.12 1.34 1.35 1.26 1.39 1.65

Return on equity 11.67 7.15 11.12 11.00 11.43 12.12 9.30 11.01 12.38 12.26 11.60 14.68

Net charge-offs to loans and leases 0.50 0.18 0.11 0.20 0.66 0.51 0.46 0.55 0.41 0.52 0.23 0.78

Loan and lease loss provision to 

net charge-offs 105.33 136.85 176.90 126.89 103.55 102.38 110.14 103.10 103.68 105.80 122.64 101.83

Efficiency ratio 55.86 73.95 66.05 60.33 53.29 55.47 58.40 54.08 57.42 56.70 60.75 49.25

% of unprofitable institutions 3.46 9.04 2.16 0.30 0.75 0.00 3.62 5.14 3.80 2.16 3.03 5.44

% of institutions with earnings gains 64.23 57.46 65.35 70.45 67.91 55.56 60.16 66.67 66.34 61.95 64.56 67.88

Condition Ratios (%)

Earning assets to total assets 90.29 92.63 93.16 92.31 90.95 89.08 89.92 89.78 88.86 90.46 91.17 93.84

Loss allowance to:

Loans and leases 1.20 1.39 1.24 1.08 1.22 1.22 1.14 1.17 1.20 1.26 1.01 1.39

Noncurrent loans and leases 130.99 106.58 151.36 147.00 131.14 124.87 126.01 127.45 132.12 115.27 100.51 216.34

Noncurrent assets plus

other real estate owned to assets 0.56 0.98 0.73 0.61 0.60 0.49 0.54 0.57 0.52 0.61 0.76 0.42

Equity capital ratio 11.35 14.47 12.03 12.12 12.04 10.63 12.01 12.21 10.88 10.22 12.11 11.34

Core capital (leverage) ratio 9.68 14.13 11.67 11.09 10.20 8.78 10.16 9.62 9.25 9.17 10.49 10.37

Common equity tier 1 capital ratio 13.25 22.58 16.01 14.23 13.00 12.82 13.58 12.96 13.16 12.68 13.29 14.45

Tier 1 risk-based capital ratio 13.33 22.60 16.04 14.24 13.15 12.85 13.62 13.06 13.20 12.77 13.38 14.56

Total risk-based capital ratio 14.67 23.66 17.11 15.20 14.46 14.34 14.90 14.30 14.53 14.56 14.39 15.59

Net loans and leases to deposits 71.97 71.70 81.90 87.76 79.72 62.05 72.02 72.97 68.87 67.42 82.06 78.11

Net loans to total assets 55.59 59.05 68.13 70.73 61.32 47.23 55.70 57.37 50.21 52.80 66.09 62.16

Domestic deposits to total assets 70.24 82.37 83.18 80.33 74.48 63.74 71.47 76.16 63.92 62.29 80.50 78.84

Structural Changes

New reporters 10 9 1 0 0 0 3 3 2 0 1 1

Institutions absorbed by mergers 149 36 85 22 6 0 24 20 31 38 26 10

Failed institutions 1 1 0 0 0 0 0 0 0 0 1 0

PRIOR FIRST THREE QUARTERS

(The way it was...)

Number of institutions 2018 5,477 1,335 3,369 635 129 9 671 633 1,180 1,397 1,193 403

 2016 5,980 1,589 3,656 621 104 10 731 731 1,287 1,500 1,280 451

 2014 6,589 1,940 3,966 575 100 8 816 823 1,427 1,614 1,387 522

Total assets (in billions) 2018 $17,672.8 $79.2 $1,107.7 $1,694.4 $6,036.1 $8,755.5 $3,275.4 $3,654.9 $3,996.3 $3,641.5 $1,119.5 $1,985.3

 2016 16,766.6 94.1 1,171.9 1,741.0 4,983.0 8,776.7 3,158.4 3,478.0 3,785.4 3,644.3 1,001.6 1,698.9

 2014 15,348.7 114.2 1,227.5 1,531.3 4,795.9 7,679.9 3,045.0 3,134.2 3,503.2 3,363.6 884.9 1,417.9

Return on assets (%) 2018 1.35 1.05 1.25 1.32 1.45 1.31 1.21 1.43 1.29 1.27 1.42 1.71

 2016 1.04 0.95 1.09 1.06 1.08 1.01 0.85 1.03 0.98 1.09 1.10 1.43

 2014 1.03 0.84 0.99 1.08 1.12 0.97 0.95 0.89 0.89 1.14 1.15 1.50

Net charge-offs to loans & leases (%) 2018 0.48 0.17 0.11 0.21 0.69 0.43 0.59 0.54 0.23 0.50 0.22 0.71

 2016 0.45 0.15 0.11 0.21 0.62 0.46 0.48 0.53 0.27 0.51 0.30 0.55

 2014 0.49 0.21 0.20 0.28 0.70 0.45 0.73 0.40 0.35 0.60 0.21 0.48

Noncurrent assets plus 

OREO to assets (%) 2018 0.62 1.01 0.77 0.68 0.63 0.58 0.61 0.66 0.56 0.71 0.76 0.45

 2016 0.88 1.19 1.02 0.84 0.82 0.89 0.70 1.07 0.81 1.04 1.04 0.53

 2014 1.29 1.56 1.53 1.50 0.87 1.47 0.92 1.71 1.19 1.60 1.29 0.69

Equity capital ratio (%) 2018 11.28 13.48 11.41 11.85 12.21 10.50 12.67 11.95 10.38 10.21 11.68 11.31

 2016 11.21 13.15 11.47 11.80 12.18 10.50 12.03 12.39 10.18 10.08 11.22 12.04

 2014 11.20 12.35 11.19 11.97 12.68 10.10 12.02 12.11 9.92 10.30 11.15 12.72

* See Table V-A (page 11) for explanations.
2019 • Volume 1 3 • Number 4

10 FDIC QUARTERLY

TABLE V-A. Loan Performance, All FDIC-Insured Institutions

Asset Concentration Groups*

September 30, 2019 All Insured 

Institutions

Credit 

Card 

Banks

International 

Banks

Agricultural 

Banks

Commercial 

Lenders

Mortgage 

Lenders

Consumer 

Lenders

Other 

Specialized 

<$1 Billion

All Other 

<$1 Billion

All Other 

>$1 Billion

Percent of Loans 30-89 Days Past Due

All loans secured by real estate 0.55 0.18 0.65 0.63 0.42 0.78 0.36 0.91 0.94 0.76

Construction and development 0.33 0.00 0.05 0.62 0.37 0.66 0.71 0.54 0.47 0.16

Nonfarm nonresidential 0.26 0.00 0.24 0.59 0.23 0.23 0.50 0.56 0.80 0.30

Multifamily residential real estate 0.09 0.00 0.01 0.41 0.10 0.07 0.20 0.07 0.31 0.10

Home equity loans 0.60 0.00 1.06 0.45 0.49 0.39 0.42 0.84 0.56 0.65

Other 1-4 family residential 0.89 0.20 0.94 1.02 0.76 0.89 0.33 1.36 1.14 1.04

Commercial and industrial loans 0.33 0.78 0.42 0.94 0.31 0.47 0.58 1.48 0.97 0.25

Loans to individuals 1.46 1.74 1.04 1.11 1.46 1.05 0.86 1.72 1.29 1.73

Credit card loans 1.40 1.77 1.10 0.87 1.48 0.95 0.81 3.19 1.00 1.22

Other loans to individuals 1.52 1.27 0.82 1.13 1.46 1.06 0.88 1.62 1.30 2.04

All other loans and leases (including farm) 0.23 0.35 0.29 0.56 0.21 0.44 0.11 0.76 0.43 0.16

Total loans and leases 0.62 1.65 0.60 0.67 0.46 0.75 0.72 1.07 0.94 0.69

Percent of Loans Noncurrent**

All real estate loans 1.15 1.06 1.42 1.03 0.79 2.05 1.32 1.35 1.02 1.74

Construction and development 0.44 0.28 0.66 0.48 0.44 0.50 0.86 1.06 0.82 0.35

Nonfarm nonresidential 0.55 38.67 0.51 0.83 0.52 0.46 1.43 1.27 1.10 0.64

Multifamily residential real estate 0.12 0.00 0.05 0.45 0.13 0.65 0.17 1.48 0.70 0.11

Home equity loans 1.78 0.00 3.97 0.35 1.12 0.89 1.86 0.39 0.43 2.25

Other 1-4 family residential 1.79 0.55 1.85 0.86 1.33 2.41 1.29 1.48 1.00 2.29

Commercial and industrial loans 0.81 0.66 0.87 1.40 0.86 0.85 0.21 0.85 0.98 0.68

Loans to individuals 0.97 1.71 0.91 0.65 0.77 0.43 0.51 1.25 0.48 0.69

Credit card loans 1.40 1.79 1.09 0.36 1.24 0.76 1.34 1.61 0.41 1.17

Other loans to individuals 0.53 0.57 0.28 0.67 0.74 0.40 0.32 1.23 0.48 0.40

All other loans and leases (including farm) 0.20 0.01 0.10 1.13 0.31 0.58 0.16 0.54 0.69 0.12

Total loans and leases 0.92 1.61 0.87 1.08 0.77 1.89 0.67 1.23 0.95 1.01

Percent of Loans Charged-Off (net, YTD)

All real estate loans 0.00 0.02 0.00 0.05 0.02 -0.02 -0.01 0.04 0.04 -0.04

Construction and development -0.01 0.18 0.04 0.04 -0.01 -0.04 0.03 0.02 -0.02 -0.04

Nonfarm nonresidential 0.04 0.00 0.06 0.06 0.04 0.00 0.18 0.01 0.06 0.02

Multifamily residential real estate 0.00 0.00 0.00 0.01 0.00 0.01 -0.02 0.78 -0.02 0.00

Home equity loans -0.09 0.00 -0.08 0.02 0.03 -0.20 -0.02 0.05 0.03 -0.29

Other 1-4 family residential 0.00 0.01 -0.01 0.04 0.02 -0.01 -0.02 0.03 0.04 -0.03

Commercial and industrial loans 0.34 2.28 0.33 0.36 0.32 0.11 0.50 0.18 0.23 0.26

Loans to individuals 2.40 4.39 2.80 0.46 1.17 1.07 1.07 0.51 0.56 1.82

Credit card loans 3.87 4.51 3.43 1.37 4.27 1.82 2.84 2.15 2.00 3.37

Other loans to individuals 0.90 2.50 0.64 0.38 0.95 1.02 0.66 0.39 0.53 0.88

All other loans and leases (including farm) 0.14 0.98 0.08 0.25 0.19 0.24 0.01 0.22 0.38 0.13

Total loans and leases 0.50 4.19 0.71 0.15 0.20 0.02 0.79 0.12 0.12 0.38

Loans Outstanding (in billions)

All real estate loans $5,002.4 $1.3 $548.9 $121.1 $2,855.3 $200.6 $35.3 $7.3 $34.2 $1,198.4

Construction and development 359.8 0.1 16.2 7.8 275.8 5.3 0.5 0.7 2.2 51.4

Nonfarm nonresidential 1,491.7 0.0 56.9 32.6 1,114.4 17.9 2.0 2.5 7.8 257.6

Multifamily residential real estate 452.0 0.0 83.7 4.1 308.7 5.5 0.3 0.2 0.9 48.6

Home equity loans 349.8 0.0 39.6 2.4 187.2 10.5 3.1 0.3 1.2 105.5

Other 1-4 family residential 2,182.3 1.1 304.0 28.6 919.8 160.4 29.1 3.3 19.2 716.8

Commercial and industrial loans 2,215.8 39.5 353.2 23.4 1,071.6 6.4 6.4 1.4 3.8 710.1

Loans to individuals 1,779.3 388.4 384.2 6.9 386.0 4.8 112.4 1.2 3.7 491.7

Credit card loans 892.9 364.8 296.6 0.6 24.9 0.4 20.5 0.1 0.1 184.9

Other loans to individuals 886.5 23.6 87.6 6.3 361.0 4.4 91.8 1.2 3.7 306.9

All other loans and leases (including farm) 1,404.0 0.3 406.6 44.5 385.6 14.4 3.2 0.5 2.7 546.2

Total loans and leases (plus unearned income) 10,401.5 429.4 1,692.9 195.9 4,698.6 226.1 157.3 10.4 44.4 2,946.5

Memo: Other Real Estate Owned (in millions)

All other real estate owned 6,189.1 0.6 437.2 324.6 3,987.7 166.3 26.5 24.6 98.3 1,123.3

Construction and development 1,479.2 0.4 4.0 54.9 1,263.3 25.2 5.0 5.8 14.5 106.1

Nonfarm nonresidential 1,995.6 0.0 74.0 101.8 1,422.2 18.8 6.3 10.6 41.2 320.8

Multifamily residential real estate 71.7 0.0 0.0 7.9 63.0 0.6 0.0 0.0 0.2 0.0

1-4 family residential 2,386.8 0.3 321.2 51.5 1,141.0 119.1 15.2 8.0 38.9 691.6

Farmland 217.7 0.0 0.0 108.5 98.2 2.6 0.0 0.2 3.5 4.7

* Asset Concentration Group Definitions (Groups are hierarchical and mutually exclusive):

Credit-card Lenders - Institutions whose credit-card loans plus securitized receivables exceed 50 percent of total assets plus securitized receivables.

International Banks - Banks with assets greater than $10 billion and more than 25 percent of total assets in foreign offices.

Agricultural Banks - Banks whose agricultural production loans plus real estate loans secured by farmland exceed 25 percent of the total loans and leases.

Commercial Lenders - Institutions whose commercial and industrial loans, plus real estate construction and development loans, plus loans secured by commercial real estate properties 

exceed 25 percent of total assets.

Mortgage Lenders - Institutions whose residential mortgage loans, plus mortgage-backed securities, exceed 50 percent of total assets.

Consumer Lenders - Institutions whose residential mortgage loans, plus credit-card loans, plus other loans to individuals, exceed 50 percent of total assets.

Other Specialized < $1 Billion - Institutions with assets less than $1 billion, whose loans and leases are less than 40 percent of total assets.

All Other < $1 billion - Institutions with assets less than $1 billion that do not meet any of the definitions above, they have significant lending activity with no identified asset 

concentrations.

All Other > $1 billion - Institutions with assets greater than $1 billion that do not meet any of the definitions above, they have significant lending activity with no identified asset 

concentrations.

** Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 11

TABLE V-A. Loan Performance, All FDIC-Insured Institutions

Asset Size Distribution Geographic Regions*

September 30, 2019 All Insured 

Institutions

Less Than 

$100 

Million

$100 

Million to 

$1 Billion

$1 Billion 

to 

$10 Billion

$10 Billion 

to $250 

Billion

Greater 

Than $250 

Billion

New 

York Atlanta Chicago

Kansas 

City Dallas

San 

Francisco

Percent of Loans 30-89 Days Past Due 

All loans secured by real estate 0.55 1.06 0.56 0.33 0.50 0.72 0.45 0.59 0.55 0.76 0.72 0.22

Construction and development 0.33 0.83 0.53 0.34 0.35 0.11 0.45 0.23 0.22 0.32 0.39 0.37

Nonfarm nonresidential 0.26 0.89 0.41 0.27 0.18 0.28 0.28 0.25 0.22 0.31 0.37 0.10

Multifamily residential real estate 0.09 0.55 0.26 0.11 0.08 0.04 0.08 0.04 0.08 0.23 0.11 0.06

Home equity loans 0.60 0.56 0.51 0.42 0.50 0.74 0.49 0.57 0.72 0.78 0.48 0.29

Other 1-4 family residential 0.89 1.43 0.79 0.46 0.90 1.02 0.75 0.94 0.82 1.16 1.47 0.33

Commercial and industrial loans 0.33 1.28 0.67 0.47 0.28 0.31 0.24 0.23 0.38 0.36 0.42 0.42

Loans to individuals 1.46 1.56 1.45 1.38 1.46 1.47 1.30 2.05 0.93 1.28 0.92 1.71

Credit card loans 1.40 1.17 2.25 3.17 1.65 1.15 1.49 1.55 1.02 1.26 0.80 1.83

Other loans to individuals 1.52 1.56 1.39 1.01 1.28 1.88 1.14 2.54 0.82 1.33 0.97 1.61

All other loans and leases (including farm) 0.23 0.50 0.50 0.28 0.17 0.24 0.14 0.13 0.25 0.36 0.19 0.17

Total loans and leases 0.62 1.04 0.60 0.40 0.61 0.67 0.51 0.72 0.52 0.68 0.63 0.62

Percent of Loans Noncurrent** 

All real estate loans 1.15 1.24 0.79 0.69 1.03 1.67 1.03 1.23 1.32 1.61 1.13 0.35

Construction and development 0.44 1.15 0.73 0.48 0.35 0.32 0.54 0.43 0.48 0.33 0.36 0.52

Nonfarm nonresidential 0.55 1.35 0.72 0.61 0.43 0.61 0.65 0.55 0.66 0.55 0.55 0.32

Multifamily residential real estate 0.12 0.71 0.26 0.17 0.11 0.07 0.12 0.23 0.12 0.10 0.14 0.07

Home equity loans 1.78 0.67 0.53 0.54 1.11 2.84 1.89 1.19 2.04 2.86 1.02 0.57

Other 1-4 family residential 1.79 1.17 0.83 0.97 1.83 2.21 1.63 1.88 1.86 2.38 2.43 0.37

Commercial and industrial loans 0.81 1.73 0.99 1.02 0.89 0.68 0.88 0.61 0.81 0.80 0.98 1.02

Loans to individuals 0.97 0.76 0.69 0.88 1.14 0.81 1.06 1.13 0.63 0.95 0.78 1.08

Credit card loans 1.40 0.58 1.83 3.08 1.69 1.12 1.66 1.44 0.98 1.26 1.31 1.80

Other loans to individuals 0.53 0.77 0.61 0.44 0.62 0.43 0.56 0.82 0.26 0.43 0.55 0.45

All other loans and leases (including farm) 0.20 1.52 0.99 0.38 0.22 0.12 0.16 0.17 0.15 0.28 0.32 0.21

Total loans and leases 0.92 1.30 0.82 0.73 0.93 0.97 0.91 0.92 0.91 1.09 1.00 0.64

Percent of Loans Charged-Off (net, YTD) 

All real estate loans 0.00 0.06 0.03 0.03 0.02 -0.04 0.04 -0.03 0.01 0.00 0.02 -0.01

Construction and development -0.01 0.01 0.00 -0.01 -0.01 -0.02 0.02 -0.02 0.03 -0.04 0.00 -0.07

Nonfarm nonresidential 0.04 0.10 0.03 0.05 0.04 0.03 0.06 0.05 0.03 0.03 0.05 0.00

Multifamily residential real estate 0.00 -0.03 0.00 0.00 0.01 0.00 0.00 0.01 0.00 0.01 0.00 0.00

Home equity loans -0.09 0.11 0.03 0.03 0.02 -0.22 0.03 -0.34 -0.01 -0.05 -0.02 -0.03

Other 1-4 family residential 0.00 0.04 0.02 0.03 0.02 -0.03 0.03 -0.03 -0.01 0.00 0.01 -0.01

Commercial and industrial loans 0.34 0.64 0.29 0.38 0.41 0.27 0.24 0.33 0.34 0.26 0.41 0.58

Loans to individuals 2.40 0.57 1.06 1.88 2.66 2.25 2.45 2.41 1.94 2.74 1.38 2.72

Credit card loans 3.87 3.03 5.53 6.98 4.34 3.39 3.92 3.93 3.29 3.73 2.68 4.71

Other loans to individuals 0.90 0.56 0.77 0.82 1.01 0.79 1.19 0.89 0.51 1.02 0.82 0.93

All other loans and leases (including farm) 0.14 0.21 0.19 0.21 0.13 0.13 0.13 0.14 0.15 0.13 0.19 0.06

Total loans and leases 0.50 0.18 0.11 0.20 0.66 0.51 0.46 0.55 0.41 0.52 0.23 0.78

Loans Outstanding (in billions) 

All real estate loans $5,002.4 $29.1 $575.4 $900.0 $1,852.1 $1,645.7 $1,032.5 $941.0 $985.9 $897.4 $509.1 $636.4

Construction and development 359.8 1.7 54.5 89.5 149.8 64.4 69.2 59.5 59.9 50.8 79.0 41.6

Nonfarm nonresidential 1,491.7 6.6 217.8 370.0 605.1 292.2 342.1 293.1 222.7 205.0 210.1 218.7

Multifamily residential real estate 452.0 0.8 31.4 98.9 191.1 129.9 157.9 46.2 113.3 40.8 23.5 70.3

Home equity loans 349.8 0.6 20.4 38.7 135.9 154.1 72.2 84.5 86.2 60.2 19.9 26.8

Other 1-4 family residential 2,182.3 13.6 199.1 276.5 753.4 939.6 386.2 444.6 479.4 446.1 157.5 268.5

Commercial and industrial loans 2,215.8 5.0 92.8 195.5 853.6 1,069.1 344.9 548.8 487.9 441.8 152.1 240.3

Loans to individuals 1,779.3 2.8 30.6 69.1 824.5 852.3 300.0 421.1 342.4 319.0 68.0 328.7

Credit card loans 892.9 0.0 1.9 11.7 401.5 477.8 135.6 208.1 174.7 201.1 19.8 153.5

Other loans to individuals 886.5 2.8 28.7 57.4 423.0 374.5 164.4 213.0 167.7 117.9 48.2 175.2

All other loans and leases (including farm) 1,404.0 6.0 48.7 67.1 465.7 816.5 215.0 285.8 339.0 373.4 67.6 123.3

Total loans and leases 

(plus unearned income) 10,401.5 42.9 747.5 1,231.7 3,995.8 4,383.6 1,892.4 2,196.7 2,155.2 2,031.6 796.9 1,328.7

Memo: Other Real Estate Owned 

(in millions) 

All other real estate owned 6,189.1 144.5 1,687.8 1,337.4 1,643.4 1,376.1 1,063.2 1,357.0 1,199.9 1,112.2 1,124.5 332.4

Construction and development 1,479.2 25.3 663.6 413.4 287.4 89.5 188.0 407.2 175.8 254.6 353.4 100.3

Nonfarm nonresidential 1,995.6 47.5 561.9 542.1 479.2 364.9 276.1 400.2 367.3 386.4 482.7 82.8

Multifamily residential real estate 71.7 5.1 40.3 20.7 3.9 1.8 11.9 21.3 13.7 12.2 8.2 4.4

1-4 family residential 2,386.8 46.9 317.3 282.2 858.6 881.8 577.0 515.3 594.6 346.9 228.0 125.1

Farmland 217.7 19.8 104.7 78.9 14.3 0.0 10.1 13.0 24.4 98.1 52.3 19.9

* Regions:

New York - Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont, 

U.S. Virgin Islands

Atlanta - Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia

Chicago - Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin

Kansas City - Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota

Dallas - Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Tennessee, Texas

San Francisco - Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Pacific Islands, Utah, Washington, Wyoming

** Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status.
2019 • Volume 1 3 • Number 4

12 FDIC QUARTERLY

Table VI-A. Derivatives, All FDIC-Insured Call Report Filers

3rd 

Quarter 

2019

2nd 

Quarter 

2019

1st

Quarter 

2019

4th

Quarter 

2018

3rd 

Quarter 

2018

% 

Change 

18Q3-

19Q3

Asset Size Distribution

(dollar figures in millions;

notional amounts unless otherwise indicated)

Less 

Than 

$100 

Million

$100 

Million 

to $1 

Billion

$1 

Billion 

to $10 

Billion

$10 

Billion 

to $250 

Billion

Greater 

Than 

$250 

Billion

ALL DERIVATIVE HOLDERS 

Number of institutions reporting derivatives 1,337 1,343 1,322 1,311 1,347 -0.7 37 724 442 125 9

Total assets of institutions reporting derivatives $16,897,616 $16,696,505 $16,499,238 $16,296,560 $16,058,176 5.2 $2,525 $317,701 $1,285,695 $6,123,641 $9,168,054

Total deposits of institutions reporting derivatives 13,004,386 12,778,822 12,647,947 12,555,763 12,291,565 5.8 2,066 261,867 1,032,474 4,730,071 6,977,909

Total derivatives 203,447,067 207,258,169 203,961,688 178,089,335 209,769,422 -3.0 250 28,094 159,494 60,347,026 142,912,203

Derivative Contracts by Underlying Risk Exposure 

Interest rate 147,099,769 151,863,618 149,193,449 128,182,078 156,781,236 -6.2 249 27,684 151,104 48,171,518 98,749,214

Foreign exchange* 46,666,516 46,115,633 45,570,306 40,948,207 43,473,496 7.3 0 0 6,161 11,556,284 35,104,071

Equity 3,835,456 3,722,531 3,675,244 3,374,363 3,644,559 5.2 0 19 186 173,062 3,662,189

Commodity & other (excluding credit derivatives) 1,662,059 1,482,094 1,377,390 1,314,571 1,525,680 8.9 0 0 92 106,190 1,555,778

Credit 4,182,691 4,073,984 4,145,034 4,269,954 4,341,695 -3.7 0 8 1,758 339,972 3,840,953

Total 203,446,491 207,257,860 203,961,423 178,089,173 209,766,666 -3.0 249 27,711 159,301 60,347,026 142,912,203

Derivative Contracts by Transaction Type 

Swaps 108,934,914 110,905,216 106,833,011 97,930,420 104,801,209 3.9 2 8,818 89,099 29,570,031 79,266,964

Futures & forwards 46,957,953 46,206,834 46,165,354 36,143,797 47,051,282 -0.2 6 3,488 31,232 14,637,679 32,285,548

Purchased options 20,727,431 21,893,579 21,854,715 18,707,980 25,031,776 -17.2 1 392 11,710 7,772,034 12,943,294

Written options 20,338,281 21,794,090 22,283,518 19,300,817 25,769,336 -21.1 2 2,501 17,330 7,362,372 12,956,076

Total 196,958,578 200,799,718 197,136,597 172,083,014 202,653,603 -2.8 11 15,199 149,371 59,342,116 137,451,881

Fair Value of Derivative Contracts 

Interest rate contracts 54,196 55,924 53,806 47,131 53,594 1.1 0 208 -67 15,971 38,084

Foreign exchange contracts 2,817 -2,565 10,800 11,282 25,827 -89.1 0 0 21 3,673 -877

Equity contracts 1,597 -1,110 -272 6,407 1,975 -19.1 0 2 2 529 1,064

Commodity & other (excluding credit derivatives) -4,100 -2,161 -778 -1,873 2,948 N/M 0 0 0 -12 -4,088

Credit derivatives as guarantor** 20,454 18,529 16,412 6,715 26,237 -22.0 0 0 8 669 19,777

Credit derivatives as beneficiary** -22,966 -21,734 -18,387 -6,765 -26,912 N/M 0 0 -10 -1,252 -21,703

Derivative Contracts by Maturity*** 

Interest rate contracts < 1 year 88,724,441 90,569,101 87,928,755 71,493,447 93,168,889 -4.8 1 2,872 29,762 24,531,533 64,160,272

 1-5 years 37,506,725 39,191,526 38,988,277 36,682,682 42,735,097 -12.2 0 1,515 38,637 9,351,503 28,115,069

 > 5 years 24,490,557 24,216,180 24,263,088 23,246,059 24,228,390 1.1 8 7,286 53,089 7,205,770 17,224,404

Foreign exchange and gold contracts < 1 year 33,602,158 32,804,737 32,626,686 28,891,823 29,674,897 13.2 0 0 4,009 8,167,235 25,430,914

 1-5 years 4,279,836 4,340,277 4,364,397 4,218,682 4,928,405 -13.2 0 0 779 860,179 3,418,877

 > 5 years 2,148,934 2,170,971 2,181,911 2,095,962 2,470,383 -13.0 0 0 0 612,348 1,536,586

Equity contracts < 1 year 2,687,265 2,725,454 2,714,590 2,448,707 2,825,222 -4.9 0 7 52 75,307 2,611,899

 1-5 years 994,632 972,497 957,790 863,793 963,096 3.3 0 12 33 47,759 946,828

 > 5 years 147,521 149,222 143,076 139,158 135,954 8.5 0 0 2 12,005 135,514

 Commodity & other contracts (including credit 

derivatives, excluding gold contracts) < 1 year 1,960,750 2,008,663 1,754,422 1,745,343 1,896,551 3.4 0 0 45 66,421 1,894,284

 1-5 years 2,819,249 2,803,027 2,847,105 3,105,744 3,017,006 -6.6 0 1 424 227,371 2,591,453

 > 5 years 430,569 260,548 528,263 298,075 537,194 -19.8 0 5 619 35,726 394,220

Risk-Based Capital: Credit Equivalent Amount 

Total current exposure to tier 1 capital (%) 27.4 23.9 22.0 22.7 23.9 0.0 1.0 1.6 17.0 41.0

Total potential future exposure to tier 1 capital (%) 35.0 36.6 37.6 36.0 40.9 0.0 0.4 0.8 18.4 55.0

Total exposure (credit equivalent amount) 

to tier 1 capital (%) 62.4 60.5 59.5 58.8 64.8 0.1 1.3 2.4 35.4 96.0

Credit losses on derivatives  22.0 26.0 9.0 12.0 12.0 83.3 0.0 0.0 -2.0 14.0 9.0

HELD FOR TRADING 

Number of institutions reporting derivatives 174 189 187 193 197 -11.7 0 24 76 66 8

Total assets of institutions reporting derivatives 13,311,871 13,222,401 12,931,735 12,768,696 12,612,012 5.5 0 11,832 278,454 4,164,568 8,857,016

Total deposits of institutions reporting derivatives 10,146,691 10,023,986 9,864,375 9,799,266 9,613,504 5.5 0 9,793 220,174 3,204,925 6,711,799

Derivative Contracts by Underlying Risk Exposure 

Interest rate 144,445,439 149,515,929 147,070,054 126,222,239 154,523,852 -6.5 0 550 37,788 47,407,516 96,999,585

Foreign exchange 43,902,530 43,278,150 42,441,525 38,768,802 40,241,704 9.1 0 0 5,416 10,858,222 33,038,892

Equity 3,817,653 3,704,416 3,659,003 3,359,405 3,628,434 5.2 0 0 26 162,316 3,655,311

Commodity & other 1,631,150 1,451,571 1,347,235 1,285,123 1,496,650 9.0 0 0 73 77,019 1,554,058

Total 193,796,771 197,950,066 194,517,817 169,635,569 199,890,639 -3.0 0 550 43,303 58,505,072 135,247,846

Trading Revenues: Cash & Derivative Instruments 

Interest rate**  1,526 2,730 4,080 2,306 1,998 -23.6 0 0 6 -757 2,277

Foreign exchange** 2,718 2,900 2,254 1,971 3,130 -13.2 0 0 4 903 1,811

Equity** 1,805 2,464 2,895 -43 1,444 25.0 0 0 7 116 1,682

Commodity & other (including credit derivatives)** 1,152 -14 808 -202 487 136.6 0 0 0 525 627

Total trading revenues** 7,201 8,080 10,037 4,031 7,059 2.0 0 0 17 787 6,397

Share of Revenue 

Trading revenues to gross revenues (%)** 4.3 4.8 6.2 2.5 4.5 0.0 0.0 0.4 1.6 5.6

Trading revenues to net operating revenues (%)** 18.6 19.0 24.4 10.1 16.8 0.0 0.0 2.0 8.2 22.6

HELD FOR PURPOSES OTHER THAN TRADING 

Number of institutions reporting derivatives 661 719 724 734 750 -11.9 5 193 336 118 9

Total assets of institutions reporting derivatives 16,312,457 16,229,106 16,008,092 15,816,221 15,575,002 4.7 389 92,263 1,094,973 5,956,778 9,168,054

Total deposits of institutions reporting derivatives 12,531,168 12,402,057 12,251,856 12,172,535 11,903,875 5.3 331 76,083 876,704 4,600,141 6,977,909

Derivative Contracts by Underlying Risk Exposure 

Interest rate 2,633,516 2,335,640 2,113,244 1,950,783 2,249,741 17.1 11 14,629 105,244 764,002 1,749,629

Foreign exchange 479,579 465,373 459,140 452,256 468,068 2.5 0 0 645 33,125 445,809

Equity 17,803 18,116 16,241 14,959 16,125 10.4 0 19 160 10,746 6,878

Commodity & other 30,910 30,523 30,155 29,448 29,030 6.5 0 0 19 29,171 1,720

Total notional amount 3,161,807 2,849,652 2,618,781 2,447,445 2,762,964 14.4 11 14,649 106,068 837,044 2,204,035

All line items are reported on a quarterly basis. N/M - Not Meaningful

* Includes spot foreign exchange contracts. All other references to foreign exchange contracts in which notional values or fair values are reported exclude spot foreign exchange contracts.

** Does not include banks filing the FFIEC 051 report form, which was introduced in first quarter 2017.

*** Derivative contracts subject to the risk-based capital requirements for derivatives.

**** Credit losses on derivatives is applicable to all banks filing the FFIEC 031 report form and banks filing the FFIEC 041 report form that have $300 million or more in total assets, but is 

not applicaable to banks filing the FFIEC 051 form.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 13

TABLE VII-A. Servicing, Securitization, and Asset Sales Activities (All FDIC-Insured Call Report Filers)*

Asset Size Distribution

(dollar figures in millions)

3rd 

Quarter 

2019

2nd 

Quarter

2019

1st 

Quarter

2019

4th 

Quarter

2018

3rd 

Quarter

2018

% 

Change 

18Q3-

19Q3

Less 

Than 

$100 

Million

$100 

Million 

to $1 

Billion

$1 

Billion 

to $10 

Billion

$10 

Billion 

to $250 

Billion

Greater 

Than 

$250 

Billion

Assets Securitized and Sold with Servicing Retained or with 

Recourse or Other Seller-Provided Credit Enhancements 

Number of institutions reporting securitization activities 67 65 65 64 64 4.7 0 5 19 36 7

Outstanding Principal Balance by Asset Type 

1-4 family residential loans $452,433 $465,275 $486,472 $520,030 $542,310 -16.6 $0 $1,033 $14,146 $87,594 $349,661

Home equity loans 11 12 13 14 15 -26.7 0 0 0 11 0

Credit card receivables 0 0 0 22 24 -100.0 0 0 0 0 0

Auto loans 1,793 2,494 3,062 3,710 4,415 -59.4 0 0 0 1,793 0

Other consumer loans 1,738 1,603 1,668 1,738 1,806 -3.8 0 0 0 882 855

Commercial and industrial loans 537 558 550 453 360 49.2 0 0 0 0 537

All other loans, leases, and other assets 76,770 73,791 72,857 71,416 68,646 11.8 0 4 9,405 4,345 63,016

Total securitized and sold 480,045 491,891 512,764 543,560 562,500 -14.7 0 0 0 65,976 414,069

Maximum Credit Exposure by Asset Type 

1-4 family residential loans 1,371 1,055 1,050 1,102 1,228 11.6 0 0 50 746 576

Home equity loans 0 0 0 0 0 0.0 0 0 0 0 0

Credit card receivables 0 0 0 0 0 0.0 0 0 0 0 0

Auto loans 66 86 94 104 114 -42.1 0 0 0 66 0

Other consumer loans 72 111 89 86 85 -15.3 0 0 0 0 72

Commercial and industrial loans 0 0 0 0 0 0.0 0 0 0 0 0

All other loans, leases, and other assets 1,324 1,230 1,257 1,208 1,112 19.1 0 0 210 49 1,064

Total credit exposure 2,489 2,209 2,205 2,221 2,301 8.2 0 0 0 778 1,711

Total unused liquidity commitments provided to institution’s own 

securitizations 203 185 230 213 226 -10.2 0 0 0 30 173

Securitized Loans, Leases, and Other Assets 30-89 Days Past Due (%) 

1-4 family residential loans 3.6 4.0 3.5 3.6 4.1 0.0 3.2 0.8 2.9 3.9

Home equity loans 7.8 7.1 5.7 8.0 8.9 0.0 0.0 0.0 7.8 0.0

Credit card receivables 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Auto loans 2.7 2.3 2.0 2.6 1.9 0.0 0.0 0.0 2.7 0.0

Other consumer loans 3.3 4.5 4.2 4.2 4.5 0.0 0.0 0.0 1.8 4.8

Commercial and industrial loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

All other loans, leases, and other assets 0.3 0.2 0.2 0.2 0.2 0.0 0.0 0.0 1.4 0.2

Total loans, leases, and other assets 3.2 3.6 3.2 3.3 3.8 0.0 0.0 0.0 2.4 3.4

Securitized Loans, Leases, and Other Assets 90 Days or More Past Due (%) 

1-4 family residential loans 1.1 1.1 1.1 1.1 1.1 0.0 1.1 1.2 1.1 1.0

Home equity loans 33.5 35.9 39.4 39.0 40.2 0.0 0.0 0.0 33.5 0.0

Credit card receivables 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Auto loans 0.5 0.5 0.5 0.5 0.4 0.0 0.0 0.0 0.5 0.0

Other consumer loans 3.4 4.0 4.1 4.3 4.3 0.0 0.0 0.0 1.4 5.6

Commercial and industrial loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

All other loans, leases, and other assets 0.3 0.2 0.3 0.5 0.6 0.0 0.0 1.2 0.4 0.2

Total loans, leases, and other assets 0.9 0.9 1.0 1.0 1.0 0.0 0.0 0.0 0.6 0.9

Securitized Loans, Leases, and Other Assets Charged-off 

(net, YTD, annualized, %) 

1-4 family residential loans 0.2 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.2

Home equity loans 6.9 3.6 0.9 18.2 13.9 0.0 0.0 0.0 6.9 0.0

Credit card receivables 0.0 0.0 0.0 9.1 4.2 0.0 0.0 0.0 0.0 0.0

Auto loans 1.2 0.7 0.3 1.4 1.0 0.0 0.0 0.0 1.2 0.0

Other consumer loans 0.5 0.4 0.2 1.0 0.8 0.0 0.0 0.0 0.5 0.5

Commercial and industrial loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

All other loans, leases, and other assets 0.2 0.1 0.1 1.1 0.4 0.0 0.0 0.0 0.6 0.2

Total loans, leases, and other assets 0.2 0.1 0.1 0.2 0.1 0.0 0.0 0.0 0.0 0.2

Seller’s Interests in Institution's Own Securitizations – Carried as Loans 

Home equity loans 0 0 0 0 0 0.0 0 0 0 0 0

Credit card receivables 0 0 0 0 0 0.0 0 0 0 0 0

Commercial and industrial loans 629 644 623 427 361 74.2 0 0 0 0 629

Seller’s Interests in Institution's Own Securitizations – Carried as Securities 

Home equity loans 0 0 0 0 0 0.0 0 0 0 0 0

Credit card receivables 0 0 0 0 0 0.0 0 0 0 0 0

Commercial and industrial loans 0 0 0 0 0 0.0 0 0 0 0 0

Assets Sold with Recourse and Not Securitized 

Number of institutions reporting asset sales 388 437 442 469 476 -18.5 9 146 166 59 8

Outstanding Principal Balance by Asset Type 

1-4 family residential loans 29,841 96,968 25,577 26,292 25,822 15.6 86 4,424 13,596 10,145 1,590

All other loans, leases, and other assets 122,896 121,462 118,898 116,452 112,296 9.4 0 7 167 41,946 80,776

Total sold and not securitized 152,737 218,430 144,475 142,744 138,118 10.6 86 4,431 13,763 52,090 82,366

Maximum Credit Exposure by Asset Type 

1-4 family residential loans 10,181 10,410 7,376 7,665 7,932 28.4 5 570 4,697 4,167 742

All other loans, leases, and other assets 34,483 34,162 33,545 32,781 31,286 10.2 0 7 38 12,178 22,259

Total credit exposure 44,665 44,572 40,922 40,446 39,218 13.9 5 578 4,735 16,345 23,002

Support for Securitization Facilities Sponsored by Other Institutions 

Number of institutions reporting securitization facilities sponsored by others 0 0 0 0 0 0.0 0 0 0 0 0

Total credit exposure 23,169 23,532 22,527 23,013 24,792 -6.5 0 0 0 1,874 21,296

Total unused liquidity commitments 411 658 492 604 1,313 -68.7 0 0 0 295 116

Other

Assets serviced for others** 6,102,608 6,079,397 6,128,925 6,061,102 5,984,042 2.0 4,100 143,310 310,931 1,593,302 4,050,965

Asset-backed commercial paper conduits 

Credit exposure to conduits sponsored by institutions and others 16,186 16,249 17,150 17,366 16,898 -4.2 0 0 0 0 16,186

Unused liquidity commitments to conduits sponsored by institutions 

 and others 30,536 29,907 29,998 31,491 30,447 0.3 0 0 0 874 29,662

Net servicing income (for the quarter) 324 -334 1,524 1,462 2,699 -88.0 7 209 140 167 -200

Net securitization income (for the quarter) 65 72 79 65 64 1.6 0 1 20 15 29

Total credit exposure to Tier 1 capital (%)*** 3.6 3.5 3.5 3.5 3.6 0.0 0.0 0.0 2.5 5.9

* Does not include banks filing the FFIEC 051 report form, which was introduced in first quarter 2017. N/M - Not Meaningful

** The amount of financial assets serviced for others, other than closed-end 1-4 family residential mortgages, is reported when these assets are greater than $10 million.

*** Total credit exposure includes the sum of the three line items titled “Total credit exposure” reported above.

QUARTERLY BANKING PROFILE

FDIC QUARTERLY 15

COMMUNITY BANK PERFORMANCE

Community banks are identified based on criteria defined in the FDIC’s Community Banking Study. When comparing 

community bank performance across quarters, prior-quarter dollar amounts are based on community banks designated 

as such in the current quarter, adjusted for mergers. In contrast, prior-quarter performance ratios are based on community 

banks designated during the previous quarter.

Community Bank Earnings Increase 7.2 Percent Year Over Year

The Pretax Return on Assets Ratio Climbs to Highest Level in More Than a Decade

Loan Balances Increase 6 Percent, Outpacing Growth at Noncommunity Banks

Asset Quality Metrics Remain Stable

Community Bank Earnings 

Increase 7.2 Percent 

Year Over Year

Net income increased among community banks in the year ending third quarter 2019 as 

higher net interest income, noninterest income, and realized gains on securities more than 

offset growth in noninterest expense, provision for loan and lease losses, and income tax 

expense. Third quarter 2019 net income totaled $6.9 billion, up $466.2 million (7.2 percent) 

from third quarter 2018. Nearly 62 percent of community banks reported annual net income 

growth. The quarterly pretax return on assets (ROA) ratio rose 3 basis points to 1.51 percent, 

marking the highest pretax ROA ratio reported by community banks since third quarter 

2006. The share of unprofitable institutions was 4.3 percent, up from 3.8 percent in the yearago quarter. There were 4,825 community banks at the end of the quarter, 48 less than the 

prior quarter. The quarterly decline was due to the fact that 43 fewer banks were operating, 

five banks were reclassified as noncommunity banks, two banks opened, and two banks had 

not filed a third quarter 2019 Call Report at the time this report was prepared.

Net Operating Revenue 

Increases at More Than 

70 Percent of 

Community Banks

Net operating revenue—the sum of net interest income and noninterest income—totaled 

$24.1 billion, up $1.5 billion (6.4 percent) year over year. Growth in both net interest 

income and noninterest income contributed to the increase. Net interest income increased 

$736.3 million (4 percent), while noninterest income increased $716.7 million (16.4 percent). 

The annual increase in net interest income was attributable to growth in earning assets 

(up $115.9 billion, or 5.9 percent). Greater net gains on loan sales (up $508.8 million, or 

66 percent) accounted for more than 70 percent of the total growth in noninterest income.

Contributors to the Year-Over-Year Change in Income 

FDIC-Insured Community Banks 

Source: FDIC.

$ Billions

Net

Income

Net

Interest

Income

Loan Loss

Provisions

Noninterest

Income

Noninterest

Expense

Realized

Gains on

Securities

Income

Taxes

Positive Factor Negative Factor

0.0

0.5

1.0

$0.47 $0.74 $0.15 $0.72 $0.83 $0.14 $0.15

+7% +4% +25% +16% +6% +675% +12%

Chart 1

Source: FDIC.

Net Interest Margin

Percent 

Community Banks (3.69)

Industry (3.35)

2.75

3.00

3.25

3.50

3.75

4.00

4.25

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart 2
2019 • Volume 1 3 • Number 4

16 FDIC QUARTERLY

Change in Loan Balances and Unused Commitments 

FDIC-Insured Community Banks 

Source: FDIC.

$ Billions Year-Over-Year Change

Quarter-Over-Quarter Change

Loan Balances

Unused

Commitments

Nonfarm

Nonresidential

RE

Commercial

& Industrial

1–4 Family

Residential

RE

Construction &

Development

Agricultural

Production

Commercial RE

& Construction

Commercial

& Industrial

0

-5

5

10

15

20

25

30

35

40

30.5

13.1

8.8

17.3

0.3

5.7 7.7 7.3

-0.3

5.8

2.2 0.4 1.7 3.3

Chart 3

Noncurrent Loan Rates for FDIC-Insured Community Banks

Source: FDIC.

Share of Loan Portfolio Noncurrent

Percent

0

2

4

6

8

10

12

14

16

C&D Loans

Nonfarm Nonresidential RE

1–4 Family RE

C&I Loans 

Farm Loans

Home Equity

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart 4

Net Interest Margin 

Declines as Funding 

Costs Rise Faster Than 

Asset Yields

The average community bank net interest margin (NIM) fell 5 basis points year over year to 

3.69 percent, as the growth in the yield on earning assets (up 18 basis points) was not enough 

to offset the growth in the cost of funding earning assets (up 23 basis points). More than 

half of community banks (56 percent) reported an annual decline in NIM. The growth in 

funding costs is mostly attributable to higher rates paid on interest-bearing deposit products 

rather than a change in deposit composition. Over the past 12 months, community banks 

reported no shift from noninterest-bearing deposits to interest-bearing deposits. Similarly, 

within interest-bearing deposits, there has been little shift from checking and savings deposits to higher-cost time deposits.

Noninterest Expense 

Increases, but Efficiency 

Ratio Falls to 

Post-Crisis Low

Noninterest expense increased $828 million (5.8 percent) to $15.2 billion over the past 

12 months. More than seven in ten community banks reported higher noninterest expense 

year over year. Growth in salaries and employee benefits of $681.3 million (8.3 percent) led 

the annual increase, while all other noninterest expenses rose $146.7 million (2.4 percent). 

The growth in salaries and benefit expense was a result of more employees (up 1.4 percent) 

and higher average expense per employee (up 6.8 percent). Nonetheless, community 

banks reported 2.7 percent growth in assets per employee and the lowest efficiency ratio 

(62.5 percent) since second quarter 2006.

Nearly Three-Quarters of 

Community Banks Report 

Annual Deposit Growth

Total community bank deposits increased 5.9 percent to $1.8 trillion from the prior 

year, outpacing the 5.1 percent annual growth rate reported by noncommunity banks. 

Deposit growth was broad-based as nearly 75 percent of community banks reported 

annual increases. Growth occurred in both interest-bearing deposits (up 5.8 percent) and 

noninterest-bearing deposits (up 6.2 percent). The third quarter 2019 annualized quarterly 

deposit growth rate was 6.2 percent, indicating deposit growth remains steady.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 17

Community Banks Report 

Quarterly and Annual 

Loan Growth

Community bank loan and lease balances rose $20.8 billion (1.3 percent) during the quarter 

to $1.6 trillion. More than 63 percent of community banks reported quarterly loan growth, 

which was led by the following categories: nonfarm nonresidential loans (up $7.7 billion, or 

1.7 percent), 1–4 family residential loans (up $5.9 billion, or 1.3 percent), and construction 

and development (C&D) loans (up $2.2 billion, or 2.0 percent). Community banks reported 

a slight decline in commercial and industrial (C&I) loans (down $0.3 billion, or 0.2 percent), 

the only major category to decline during the quarter.

Over the past 12 months, loan and lease balances increased $89.7 billion (6 percent). Annual 

loan growth was broad-based as every major loan category increased, and nearly threequarters of community banks reported higher loan balances year over year. Loan growth 

was led by the following categories: nonfarm nonresidential loans (up $30.5 billion, or 

6.9 percent), 1–4 family residential loans (up $17.4 billion, or 4.1 percent), C&I loans (up 

$13.1 billion, or 6.6 percent), and C&D loans (up $8.8 billion, or 8.4 percent). Both quarterly 

and annual community bank loan and lease growth rates outpaced the rate of loan and lease 

growth at noncommunity banks.

The Noncurrent Loan Rate 

Remains Stable for Most 

Loan Categories

The noncurrent rate for total loans and leases was 0.77 percent, down 3 basis points year 

over year but up 2 basis points quarter over quarter. Total noncurrent balances increased 

$193.1 million (1.6 percent) during the quarter to $12.2 billion. The quarter-over-quarter 

increase in the noncurrent rate was driven by growth in commercial real estate and C&I 

noncurrent balances. The annual decline in the noncurrent rate was driven by loan growth. 

Noncurrent balances remained roughly flat from the previous year, as declines in commercial and residential real estate noncurrent balances were largely offset by higher noncurrent 

balances in agriculture and C&I portfolios.

The agriculture loan noncurrent rate of 1.27 percent remains the highest among major loan 

categories at community banks. This rate increased 11 basis points year over year, marking 

the 15th consecutive quarter with an annual increase. Loans secured by farmland (up 6 basis 

points to 1.47 percent) and agricultural production loans (up 17 basis points to 0.97 percent) 

contributed to the increase.

The Net Charge-Off Rate 

Rises but Remains Low

The community bank net charge-off rate for total loans and leases increased 4 basis points 

from third quarter 2018 to 0.14 percent. Less than half (47 percent) of community banks 

reported an annual increase in net charge-offs. While net charge-off rates increased year 

over year in all major loan categories, the increase was driven by C&I loans. The C&I net 

charge-off rate climbed 21 basis points to 0.48 percent. Commercial real estate, residential 

real estate, and agriculture net charge-off rates increased by 1 basis point each, and the 

consumer loan net charge-off rate increased 4 basis points.

Community Bank Capital 

Ratios Post Quarterly and 

Annual Increases

Equity capital totaled $263.9 billion at the end of third quarter 2019, up $5.6 billion 

(2.2 percent) from the previous quarter and $26.2 billion (11 percent) from the prior year. 

The growth in capital supported increases in all regulatory capital ratios. The leverage capital ratio and total risk-based capital ratio increased 18 basis points each, while the common 

equity tier 1 capital ratio and tier 1 risk-based capital ratio increased 21 basis points each.

Author: 

Nathan L. Hinton

Senior Financial Analyst

Division of Insurance and Research
2019 • Volume 1 3 • Number 4

18 FDIC QUARTERLY

TABLE I-B. Selected Indicators, FDIC-Insured Community Banks

2019* 2018* 2018 2017 2016 2015 2014

Return on assets (%) 1.22 1.17 1.19 0.96 0.99 0.99 0.93

Return on equity (%) 10.46 10.49 10.58 8.65 8.81 8.85 8.45

Core capital (leverage) ratio (%) 11.24 11.05 11.09 10.80 10.69 10.67 10.57

Noncurrent assets plus other real estate owned to assets (%) 0.67 0.72 0.70 0.78 0.94 1.07 1.34

Net charge-offs to loans (%) 0.11 0.13 0.13 0.16 0.16 0.15 0.21

Asset growth rate (%) 0.51 -0.57 2.22 1.17 2.97 2.74 2.20

Net interest margin (%) 3.69 3.68 3.72 3.62 3.57 3.57 3.61

Net operating income growth (%) 0.29 14.38 28.02 0.21 2.42 9.57 4.78

Number of institutions reporting 4,825 5,044 4,980 5,228 5,462 5,736 6,037

Percentage of unprofitable institutions (%) 3.63 3.59 3.61 5.72 4.67 5.04 6.44

* Through September 30, ratios annualized where appropriate. Asset growth rates are for 12 months ending September 30.

TABLE II-B. Aggregate Condition and Income Data, FDIC-Insured Community Banks

(dollar figures in millions)  3rd Quarter

2019

2nd Quarter

2019

3rd Quarter

2018

%Change 

18Q3-19Q3

Number of institutions reporting 4,825 4,873 5,044 -4.3

Total employees (full-time equivalent) 402,653 407,787 411,389 -2.1

CONDITION DATA

Total assets $2,231,963 $2,265,552 $2,220,747 0.5

Loans secured by real estate 1,211,291 1,238,272 1,221,148 -0.8

 1-4 Family residential mortgages 397,600 399,566 395,846 0.4

 Nonfarm nonresidential 472,117 478,881 473,877 -0.4

 Construction and development 113,074 113,702 110,458 2.4

 Home equity lines 47,016 47,264 48,616 -3.3

Commercial & industrial loans 212,053 221,768 210,455 0.8

Loans to individuals 65,697 65,107 63,177 4.0

 Credit cards 2,103 2,025 1,801 16.8

Farm loans 53,553 53,417 53,722 -0.3

Other loans & leases 43,632 43,260 39,742 9.8

Less: Unearned income 542 639 652 -16.9

Total loans & leases 1,585,683 1,621,185 1,587,593 -0.1

Less: Reserve for losses 18,002 18,287 18,263 -1.4

Net loans and leases 1,567,681 1,602,899 1,569,330 -0.1

Securities 376,068 388,829 396,603 -5.2

Other real estate owned 2,717 2,838 3,267 -16.8

Goodwill and other intangibles 17,326 17,000 15,599 11.1

All other assets 268,170 253,987 235,948 13.7

Total liabilities and capital 2,231,963 2,265,552 2,220,747 0.5

Deposits 1,830,920 1,858,019 1,821,830 0.5

 Domestic office deposits 1,828,609 1,855,748 1,821,239 0.4

 Foreign office deposits 2,311 2,271 591 291.3

 Brokered deposits 69,827 75,388 73,148 -4.5

Estimated insured deposits 1,337,465 1,350,502 1,330,370 0.5

Other borrowed funds 116,362 123,165 131,529 -11.5

Subordinated debt 370 631 624 -40.7

All other liabilities 20,335 18,919 16,993 19.7

Total equity capital (includes minority interests) 263,976 264,817 249,772 5.7

 Bank equity capital 263,888 264,741 249,663 5.7

Loans and leases 30-89 days past due 7,833 8,027 7,775 0.7

Noncurrent loans and leases 12,240 12,184 12,744 -3.9

Restructured loans and leases 5,751 5,975 6,486 -11.3

Mortgage-backed securities 173,910 179,279 174,430 -0.3

Earning assets 2,075,732 2,113,048 2,071,583 0.2

FHLB Advances 94,816 100,694 109,153 -13.1

Unused loan commitments 314,509 315,860 306,211 2.7

Trust assets 259,743 276,541 296,616 -12.4

Assets securitized and sold 17,241 12,908 14,891 15.8

Notional amount of derivatives 104,552 99,333 75,858 37.8

INCOME DATA

First Three 

Quarters 2019

First Three 

Quarters 2018 %Change

3rd Quarter 

2019

3rd Quarter 

2018

%Change 

18Q3-19Q3

Total interest income $70,483 $66,231 6.4 $24,060 $23,124 4.0

Total interest expense 14,432 10,159 42.1 5,045 3,864 30.6

Net interest income 56,051 56,072 0.0 19,015 19,259 -1.3

Provision for loan and lease losses 2,043 2,089 -2.2 754 628 20.1

Total noninterest income 13,874 13,752 0.9 5,096 4,659 9.4

Total noninterest expense 44,690 44,688 0.0 15,164 15,086 0.5

Securities gains (losses) 580 119 386.7 165 23 630.0

Applicable income taxes 3,991 3,834 4.1 1,413 1,356 4.2

Extraordinary gains, net* 117 -195 N/M 2 -33 N/M

Total net income (includes minority interests) 19,899 19,138 4.0 6,946 6,838 1.6

 Bank net income 19,890 19,128 4.0 6,941 6,834 1.6

Net charge-offs 1,321 1,468 -10.0 559 413 35.3

Cash dividends 9,546 7,838 21.8 3,000 2,576 16.5

Retained earnings 10,344 11,289 -8.4 3,941 4,258 -7.4

Net operating income 19,290 19,235 0.3 6,802 6,853 -0.7

* See Notes to Users for explanation. N/M - Not Meaningful
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 19

TABLE II-B. Aggregate Condition and Income Data, FDIC-Insured Community Banks

Prior Periods Adjusted for Mergers

(dollar figures in millions)  3rd Quarter 

2019

2nd Quarter 

2019

3rd Quarter

2018

%Change 

18Q3-19Q3

Number of institutions reporting 4,825 4,823 4,816 0.2

Total employees (full-time equivalent) 402,653 403,094 397,010 1.4

CONDITION DATA

Total assets $2,231,963 $2,197,019 $2,103,445 6.1

Loans secured by real estate 1,211,291 1,194,019 1,145,160 5.8

 1-4 Family residential mortgages 397,600 391,814 380,258 4.6

 Nonfarm nonresidential 472,117 464,440 441,596 6.9

 Construction and development 113,074 110,867 104,301 8.4

 Home equity lines 47,016 46,899 46,938 0.2

Commercial & industrial loans 212,053 212,388 198,927 6.6

Loans to individuals 65,697 64,523 62,109 5.8

 Credit cards 2,103 2,041 2,027 3.7

Farm loans 53,553 53,201 53,228 0.6

Other loans & leases 43,632 41,270 37,081 17.7

Less: Unearned income 542 559 556 -2.4

Total loans & leases 1,585,683 1,564,841 1,495,950 6.0

Less: Reserve for losses 18,002 17,871 17,505 2.8

Net loans and leases 1,567,681 1,546,971 1,478,445 6.0

Securities 376,068 378,468 379,813 -1.0

Other real estate owned 2,717 2,823 3,131 -13.2

Goodwill and other intangibles 17,326 17,176 15,734 10.1

All other assets 268,170 251,582 226,321 18.5

Total liabilities and capital 2,231,963 2,197,019 2,103,445 6.1

Deposits 1,830,920 1,802,935 1,728,708 5.9

 Domestic office deposits 1,828,609 1,800,664 1,726,758 5.9

 Foreign office deposits 2,311 2,271 1,950 18.5

 Brokered deposits 69,827 73,898 70,866 -1.5

Estimated insured deposits 1,337,465 1,328,259 1,280,001 4.5

Other borrowed funds 116,362 117,116 120,395 -3.3

Subordinated debt 370 372 366 1.1

All other liabilities 20,335 18,239 16,145 26.0

Total equity capital (includes minority interests) 263,976 258,357 237,831 11.0

 Bank equity capital 263,888 258,281 237,722 11.0

Loans and leases 30-89 days past due 7,833 7,926 7,554 3.7

Noncurrent loans and leases 12,240 12,047 12,244 0.0

Restructured loans and leases 5,751 5,889 6,313 -8.9

Mortgage-backed securities 173,910 171,022 162,860 6.8

Earning assets 2,075,732 2,046,614 1,959,803 5.9

FHLB Advances 94,816 95,257 99,069 -4.3

Unused loan commitments 314,509 309,286 294,367 6.8

Trust assets 259,743 272,451 263,358 -1.4

Assets securitized and sold 17,241 16,730 18,566 -7.1

Notional amount of derivatives 104,552 95,210 69,133 51.2

INCOME DATA

First Three 

Quarters 2019

First Three 

Quarters 2018 %Change

3rd Quarter 

2019

3rd Quarter 

2018

%Change 

18Q3-19Q3

Total interest income $70,483 $62,608 12.6 $24,060 $21,906 9.8

Total interest expense 14,432 9,516 51.7 5,045 3,627 39.1

Net interest income 56,051 53,091 5.6 19,015 18,278 4.0

Provision for loan and lease losses 2,043 1,873 9.1 754 604 24.9

Total noninterest income 13,874 12,960 7.1 5,096 4,380 16.4

Total noninterest expense 44,690 42,398 5.4 15,164 14,336 5.8

Securities gains (losses) 580 108 436.5 165 21 675.1

Applicable income taxes 3,991 3,570 11.8 1,413 1,261 12.0

Extraordinary gains, net* 117 3 N/M 2 1 N/M

Total net income (includes minority interests) 19,899 18,322 8.6 6,946 6,479 7.2

 Bank net income 19,890 18,312 8.6 6,941 6,475 7.2

Net charge-offs 1,321 1,136 16.4 559 406 37.7

Cash dividends 9,546 7,746 23.2 3,000 2,583 16.1

Retained earnings 10,344 10,566 -2.1 3,941 3,892 1.3

Net operating income 19,290 18,231 5.8 6,802 6,461 5.3

* See Notes to Users for explanation. N/M - Not Meaningful
2019 • Volume 1 3 • Number 4

20 FDIC QUARTERLY

TABLE III-B. Aggregate Condition and Income Data by Geographic Region, FDIC-Insured Community Banks

Third Quarter 2019

(dollar figures in millions) All Community Banks

Geographic Regions*

New York Atlanta Chicago Kansas City Dallas San Francisco

Number of institutions reporting 4,825 547 551 1,063 1,287 1,077 300

Total employees (full-time equivalent) 402,653 81,171 45,096 83,755 70,363 88,487 33,781

CONDITION DATA

Total assets $2,231,963 $576,877 $228,216 $406,136 $372,469 $427,597 $220,668

Loans secured by real estate 1,211,291 357,354 125,997 213,647 182,697 215,414 116,183

 1-4 Family residential mortgages 397,600 137,221 38,956 69,150 54,818 70,444 27,011

 Nonfarm nonresidential 472,117 129,408 55,800 80,892 61,277 87,242 57,498

 Construction and development 113,074 25,182 14,182 17,306 16,286 29,886 10,233

 Home equity lines 47,016 14,661 6,236 10,026 5,216 4,964 5,912

Commercial & industrial loans 212,053 49,521 18,975 42,122 38,287 42,271 20,877

Loans to individuals 65,697 16,318 6,322 12,652 11,150 12,904 6,351

 Credit cards 2,103 440 142 242 608 211 460

Farm loans 53,553 647 1,513 8,363 29,921 9,952 3,157

Other loans & leases 43,632 11,225 3,269 9,539 6,495 8,712 4,392

Less: Unearned income 542 101 72 49 101 123 97

Total loans & leases 1,585,683 434,964 156,004 286,274 268,449 289,131 150,863

Less: Reserve for losses 18,002 4,157 1,734 3,218 3,523 3,465 1,905

Net loans and leases 1,567,681 430,807 154,269 283,056 264,926 285,665 148,958

Securities 376,068 82,976 40,243 71,868 62,938 81,324 36,719

Other real estate owned 2,717 458 527 511 474 614 134

Goodwill and other intangibles 17,326 4,853 1,218 3,277 2,472 3,163 2,342

All other assets 268,170 57,784 31,958 47,424 41,660 56,830 32,515

Total liabilities and capital 2,231,963 576,877 228,216 406,136 372,469 427,597 220,668

Deposits 1,830,920 459,755 189,888 334,040 306,958 357,725 182,555

 Domestic office deposits 1,828,609 459,040 189,887 333,904 306,958 357,725 181,095

 Foreign office deposits 2,311 715 1 135 0 0 1,460

 Brokered deposits 69,827 23,364 4,486 13,373 13,841 9,118 5,646

 Estimated insured deposits 1,337,465 336,330 137,306 259,612 236,327 253,925 113,966

Other borrowed funds 116,362 41,960 9,581 20,433 19,399 16,053 8,937

Subordinated debt 370 248 13 36 10 42 21

All other liabilities 20,335 6,634 1,863 3,321 2,840 3,308 2,369

Total equity capital (includes minority interests) 263,976 68,280 26,871 48,306 43,263 50,469 26,787

 Bank equity capital 263,888 68,253 26,867 48,271 43,262 50,449 26,786

Loans and leases 30-89 days past due 7,833 1,801 883 1,465 1,352 1,889 443

Noncurrent loans and leases 12,240 3,442 1,154 2,308 2,115 2,461 761

Restructured loans and leases 5,751 1,848 576 1,322 913 729 364

Mortgage-backed securities 173,910 45,578 19,229 30,067 23,534 34,173 21,329

Earning assets 2,075,732 538,778 211,323 377,933 346,827 396,628 204,244

FHLB Advances 94,816 36,575 8,075 15,866 15,271 12,697 6,332

Unused loan commitments 314,509 82,429 27,916 57,276 55,191 54,769 36,928

Trust assets 259,743 54,264 7,787 57,849 83,660 39,136 17,046

Assets securitized and sold 17,241 7,509 75 5,007 2,875 1,004 770

Notional amount of derivatives 104,552 40,565 9,118 16,647 16,535 13,798 7,889

INCOME DATA

Total interest income $24,060 $5,934 $2,473 $4,311 $4,135 $4,817 $2,390

Total interest expense 5,045 1,519 475 882 881 908 380

Net interest income 19,015 4,415 1,998 3,428 3,254 3,909 2,010

Provision for loan and lease losses 754 166 61 108 138 172 108

Total noninterest income 5,096 1,003 493 1,263 876 1,045 416

Total noninterest expense 15,164 3,476 1,670 2,923 2,508 3,151 1,435

Securities gains (losses) 165 54 12 31 26 37 5

Applicable income taxes 1,413 408 141 285 194 199 186

Extraordinary gains, net** 2 0 0 0 2 0 0

Total net income (includes minority interests) 6,946 1,422 630 1,406 1,318 1,468 702

 Bank net income 6,941 1,421 630 1,404 1,318 1,466 702

Net charge-offs 559 118 44 76 85 134 101

Cash dividends 3,000 391 240 702 566 688 413

Retained earnings 3,941 1,030 390 702 753 778 289

Net operating income 6,802 1,376 620 1,380 1,293 1,436 698

* See Table V-A for explanation.

** See Notes to Users for explanation.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 21

Table IV-B. Third Quarter 2019, FDIC-Insured Community Banks

Performance ratios (annualized, %)

All Community Banks Third Quarter 2019, Geographic Regions*

 3rd Quarter 

2019

2nd Quarter 

2019 New York Atlanta Chicago Kansas City Dallas San Francisco

Yield on earning assets 4.67 4.65 4.44 4.72 4.60 4.80 4.90 4.71

Cost of funding earning assets 0.98 0.97 1.14 0.91 0.94 1.02 0.92 0.75

Net interest margin 3.69 3.68 3.30 3.82 3.66 3.78 3.98 3.96

Noninterest income to assets 0.92 0.83 0.70 0.87 1.26 0.95 0.99 0.76

Noninterest expense to assets 2.74 2.73 2.43 2.96 2.91 2.72 2.98 2.62

Loan and lease loss provision to assets 0.14 0.12 0.12 0.11 0.11 0.15 0.16 0.20

Net operating income to assets 1.23 1.18 0.96 1.10 1.37 1.40 1.36 1.27

Pretax return on assets 1.51 1.48 1.28 1.37 1.68 1.64 1.57 1.62

Return on assets 1.25 1.23 0.99 1.11 1.40 1.43 1.38 1.28

Return on equity 10.64 10.63 8.41 9.51 11.79 12.33 11.76 10.57

Net charge-offs to loans and leases 0.14 0.11 0.11 0.11 0.11 0.13 0.19 0.27

Loan and lease loss provision to net charge-offs 134.95 157.84 140.08 139.95 141.77 161.92 128.73 106.97

Efficiency ratio 62.52 63.50 63.83 66.51 61.85 60.29 63.32 58.91

Net interest income to operating revenue 78.86 80.44 81.49 80.20 73.08 78.79 78.90 82.86

% of unprofitable institutions 4.27 4.06 4.02 6.35 4.80 2.49 3.81 8.33

% of institutions with earnings gains 62.03 59.74 57.59 62.98 64.82 62.24 61.28 60.33

Table V-B. First Three Quarters 2019, FDIC-Insured Community Banks

Performance ratios (%)

All Community Banks First Three Quarters 2019, Geographic Regions*

First Three 

Quarters 2019

First Three 

Quarters 2018 New York Atlanta Chicago Kansas City Dallas San Francisco

Yield on earning assets 4.64 4.35 4.43 4.71 4.55 4.72 4.85 4.70

Cost of funding earning assets 0.95 0.67 1.10 0.88 0.91 0.99 0.89 0.73

Net interest margin 3.69 3.68 3.32 3.83 3.64 3.74 3.95 3.97

Noninterest income to assets 0.85 0.84 0.65 0.81 1.15 0.86 0.91 0.72

Noninterest expense to assets 2.74 2.74 2.47 2.96 2.87 2.70 2.93 2.64

Loan and lease loss provision to assets 0.13 0.13 0.10 0.10 0.10 0.15 0.16 0.14

Net operating income to assets 1.18 1.18 0.92 1.06 1.30 1.31 1.32 1.28

Pretax return on assets 1.46 1.41 1.28 1.33 1.60 1.52 1.51 1.63

Return on assets 1.22 1.17 1.00 1.09 1.34 1.33 1.34 1.29

Return on equity 10.46 10.49 8.52 9.46 11.44 11.63 11.54 10.71

Net charge-offs to loans and leases 0.11 0.13 0.10 0.09 0.08 0.12 0.15 0.15

Loan and lease loss provision to net charge-offs 154.60 142.31 140.15 167.21 173.74 167.26 154.99 134.74

Efficiency ratio 63.53 63.67 65.40 67.29 62.84 61.64 63.72 59.69

Net interest income to operating revenue 80.16 80.30 82.75 81.49 74.70 80.13 80.05 83.67

% of unprofitable institutions 3.63 3.59 3.84 5.44 3.95 2.25 3.16 6.33

% of institutions with earnings gains 64.06 75.63 61.06 66.79 65.76 62.08 64.35 66.00

* See Table V-A for explanation.
2019 • Volume 1 3 • Number 4

22 FDIC QUARTERLY

Table VI-B. Loan Performance, FDIC-Insured Community Banks

September 30, 2019

Geographic Regions*

All Community Banks New York Atlanta Chicago Kansas City Dallas San Francisco

Percent of Loans 30-89 Days Past Due

All loans secured by real estate 0.45 0.38 0.52 0.51 0.44 0.60 0.21

Construction and development 0.45 0.36 0.49 0.46 0.48 0.50 0.39

Nonfarm nonresidential 0.33 0.33 0.33 0.35 0.34 0.42 0.14

Multifamily residential real estate 0.16 0.07 0.09 0.35 0.38 0.13 0.03

Home equity loans 0.45 0.46 0.51 0.48 0.36 0.49 0.33

Other 1-4 family residential 0.66 0.51 0.87 0.75 0.61 0.90 0.35

Commercial and industrial loans 0.52 0.35 0.65 0.49 0.62 0.61 0.48

Loans to individuals 1.36 1.56 1.42 0.82 0.95 2.05 1.19

Credit card loans 2.45 2.86 1.68 1.06 3.71 1.22 1.95

Other loans to individuals 1.32 1.52 1.42 0.81 0.79 2.06 1.13

All other loans and leases (including farm) 0.41 0.14 0.23 0.37 0.55 0.43 0.27

Total loans and leases 0.49 0.41 0.57 0.51 0.50 0.65 0.29

Percent of Loans Noncurrent

All loans secured by real estate 0.75 0.81 0.74 0.82 0.73 0.80 0.41

Construction and development 0.60 0.61 0.65 0.55 0.64 0.58 0.63

Nonfarm nonresidential 0.65 0.73 0.60 0.74 0.64 0.70 0.34

Multifamily residential real estate 0.22 0.21 0.28 0.37 0.21 0.21 0.05

Home equity loans 0.50 0.57 0.50 0.49 0.28 0.46 0.57

Other 1-4 family residential 0.94 1.12 0.93 0.98 0.58 1.04 0.43

Commercial and industrial loans 0.93 0.90 0.75 0.89 0.97 1.06 0.88

Loans to individuals 0.56 0.40 0.79 0.33 0.43 1.08 0.39

Credit card loans 1.20 1.33 0.48 0.62 1.58 0.58 1.39

Other loans to individuals 0.54 0.37 0.80 0.32 0.37 1.09 0.32

All other loans and leases (including farm) 0.80 0.20 0.57 0.78 1.01 0.78 0.95

Total loans and leases 0.77 0.79 0.74 0.81 0.79 0.85 0.50

Percent of Loans Charged-Off (net, YTD)

All loans secured by real estate 0.03 0.05 0.02 0.03 0.03 0.04 0.00

Construction and development 0.00 0.01 -0.02 -0.02 0.04 0.00 -0.04

Nonfarm nonresidential 0.05 0.06 0.03 0.05 0.05 0.07 0.01

Multifamily residential real estate 0.00 0.01 -0.09 -0.01 0.01 0.02 -0.01

Home equity loans 0.03 0.04 0.01 0.06 0.01 0.02 -0.02

Other 1-4 family residential 0.03 0.05 0.02 0.03 0.02 0.03 -0.01

Commercial and industrial loans 0.31 0.23 0.29 0.20 0.26 0.40 0.65

Loans to individuals 0.86 0.84 0.91 0.36 1.07 1.00 1.18

Credit card loans 5.92 3.29 3.83 1.81 14.15 1.74 2.81

Other loans to individuals 0.69 0.77 0.84 0.33 0.34 0.99 1.05

All other loans and leases (including farm) 0.18 0.10 0.16 0.23 0.13 0.27 0.25

Total loans and leases 0.11 0.10 0.09 0.08 0.12 0.15 0.15

Loans Outstanding (in billions)

All loans secured by real estate $1,211.3 $357.4 $126.0 $213.6 $182.7 $215.4 $116.2

Construction and development 113.1 25.2 14.2 17.3 16.3 29.9 10.2

Nonfarm nonresidential 472.1 129.4 55.8 80.9 61.3 87.2 57.5

Multifamily residential real estate 104.1 48.4 6.3 18.4 10.8 8.6 11.5

Home equity loans 47.0 14.7 6.2 10.0 5.2 5.0 5.9

Other 1-4 family residential 397.6 137.2 39.0 69.1 54.8 70.4 27.0

Commercial and industrial loans 212.1 49.5 19.0 42.1 38.3 42.3 20.9

Loans to individuals 65.7 16.3 6.3 12.7 11.2 12.9 6.4

Credit card loans 2.1 0.4 0.1 0.2 0.6 0.2 0.5

Other loans to individuals 63.6 15.9 6.2 12.4 10.5 12.7 5.9

All other loans and leases (including farm) 97.2 11.9 4.8 17.9 36.4 18.7 7.5

Total loans and leases 1,586.2 435.1 156.1 286.3 268.5 289.3 151.0

Memo: Unfunded Commitments (in millions)

Total Unfunded Commitments 314,509 82,429 27,916 57,276 55,191 54,769 36,928

Construction and development: 1-4 family residential 26,095 5,222 3,608 3,144 3,572 7,645 2,904

Construction and development: CRE and other 66,848 20,304 6,580 11,079 9,075 13,398 6,412

Commercial and industrial 101,265 25,512 7,512 20,913 17,219 17,878 12,232

* See Table V-A for explanation.

Note: Noncurrent loan rates represent the percentage of loans in each category that are past due 90 days or more or that are in nonaccrual status.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 23

Insurance Fund Indicators

Deposit Insurance Fund Increases by $1.5 Billion

DIF Reserve Ratio Rises 1 Basis Point to 1.41 Percent

Small Bank Credits Will Be Applied to Third Quarter Assessments

During the third quarter, the Deposit Insurance Fund (DIF) balance increased by 

$1.5 billion to $108.9 billion. Assessment income of $1.1 billion and interest earned on 

investments of $544 million were the largest drivers of the increase. Negative provisions 

for losses added $192 million and unrealized gains on available-for-sale securities added 

$86 million. Operating expenses reduced the fund by $443 million. There were no failures 

during the third quarter of 2019.

The deposit insurance assessment base—average consolidated total assets minus average tangible equity—increased by 1.4 percent in the third quarter and by 4.4 percent over 

12 months.1, 2 Total estimated insured deposits increased by 0.6 percent in the third quarter 

of 2019 and by 4.9 percent year over year.

The growth in the fund balance and relatively normal growth in insured deposits increased 

the DIF reserve ratio to 1.41 percent. The third quarter 2019 reserve ratio is 1 basis point 

higher than last quarter and 5 basis points higher than the previous year.

Small banks earned a total of $765 million in credits for the portion of their assessments that 

contributed to growth in the reserve ratio from 1.15 percent to 1.35 percent. The credits are 

automatically applied to offset the assessments of small banks when the reserve ratio is at 

least 1.35 percent.3 Therefore, the FDIC will apply approximately $239 million of credits to 

offset the third quarter assessments of small banks, which will be due December 30, 2019.

Author:

Kevin Brown

Senior Financial Analyst

Division of Insurance and Research

1 There are additional adjustments to the assessment base for banker’s banks and custodial banks.

2 Figures for estimated insured deposits and the assessment base include insured branches of foreign banks, in addition to insured 

commercial banks and savings institutions.

3 In November 2019, the FDIC Board of Directors authorized a rule change that would require the FDIC to apply the small bank 

credits in any assessment quarter in which the reserve ratio is at least 1.35 percent.
2019 • Volume 1 3 • Number 4

24 FDIC QUARTERLY

DIF Reserve Ratios

Percent of Insured Deposits

1.27 1.30 1.30 1.33 1.36 1.36 1.40

1.18 1.20 1.20 1.24

1.36

1.41

9/16 12/16 3/17 6/17 9/17 12/17 3/18 6/18 9/18 12/18 3/19 6/19 9/19

Table I-C. Insurance Fund Balances and Selected Indicators

(dollar figures in millions)

Deposit Insurance Fund*

3rd 

Quarter 

2019

2nd 

Quarter 

2019

1st 

Quarter 

2019

4th 

Quarter 

2018

3rd 

Quarter 

2018

2nd 

Quarter 

2018

1st 

Quarter 

2018

4th 

Quarter 

2017

3rd 

Quarter 

2017

2nd 

Quarter 

2017

1st 

Quarter 

2017

4th 

Quarter 

2016

3rd 

Quarter 

2016

Beginning Fund Balance $107,446 $104,870 $102,609 $100,204 $97,588 $95,072 $92,747 $90,506 $87,588 $84,928 $83,162 $80,704 $77,910

Changes in Fund Balance:

Assessments earned 1,111 1,187 1,369 1,351 2,728 2,598 2,850 2,656 2,568 2,634 2,737 2,688 2,643

Interest earned on 

investment securities 544 535 507 481 433 381 338 305 274 251 227 189 171

Realized gain on sale of

investments 0 0 0 0 0 0 0 0 0 0 0 0 0

Operating expenses 443 459 434 453 434 445 433 443 404 450 442 437 422

Provision for insurance 

losses -192 -610 -396 -236 -121 -141 -65 -203 -512 -233 765 -332 -566

All other income, 

net of expenses 4 9 2 2 2 3 1 3 1 4 2 3 3

Unrealized gain/(loss) on 

available-for-sale 

securities** 86 694 421 788 -234 -162 -496 -481 -33 -12 7 -317 -167

Total fund balance change 1,494 2,576 2,261 2,405 2,616 2,516 2,325 2,242 2,918 2,660 1,766 2,457 2,794

Ending Fund Balance 108,940 107,446 104,870 102,609 100,204 97,588 95,072 92,747 90,506 87,588 84,928 83,162 80,704

Percent change from 

 four quarters earlier 8.72 10.10 10.31 10.63 10.72 11.42 11.95 11.53 12.14 12.42 13.06 14.55 15.10

Reserve Ratio (%) 1.41 1.40 1.36 1.36 1.36 1.33 1.30 1.30 1.27 1.24 1.20 1.20 1.18

Estimated Insured 

Deposits 7,736,888 7,692,823 7,699,601 7,525,393 7,377,158 7,355,373 7,334,658 7,156,067 7,101,090 7,049,332 7,081,096 6,917,200 6,817,375

Percent change from 

 four quarters earlier 4.88 4.59 4.98 5.16 3.89 4.34 3.58 3.45 4.16 5.62 6.29 6.11 6.41

Domestic Deposits 13,018,939 12,788,773 12,725,363 12,659,395 12,367,954 12,280,904 12,305,817 12,129,503 11,966,478 11,827,933 11,856,691 11,693,371 11,506,877

Percent change from 

 four quarters earlier 5.26 4.14 3.41 4.37 3.36 3.83 3.79 3.73 3.99 5.20 6.28 6.76 7.56

Assessment Base*** 15,901,944 15,680,460 15,560,454 15,450,503 15,227,783 15,112,230 15,068,162 15,000,707 14,833,667 14,702,427 14,620,376 14,562,697 14,382,474

Percent change from 

 four quarters earlier 4.43 3.76 3.27 3.00 2.66 2.79 3.06 3.01 3.14 3.60 4.48 5.28 5.27

Number of Institutions 

Reporting 5,265 5,312 5,371 5,415 5,486 5,551 5,616 5,679 5,747 5,796 5,865 5,922 5,989

Deposit Insurance Fund Balance 

and Insured Deposits

($ Millions)

DIF 

Balance

DIF-Insured 

Deposits

9/16 $80,704 $6,817,375

12/16 83,162 6,917,200

3/17 84,928 7,081,096

6/17 87,588 7,049,332

9/17 90,506 7,101,090

12/17 92,747 7,156,067

3/18 95,072 7,334,658

6/18 97,588 7,355,373

9/18 100,204 7,377,158

12/18 102,609 7,525,393

3/19 104,870 7,699,601

6/19 107,446 7,692,823

9/19 108,940 7,736,888

Table II-C. Problem Institutions and Failed Institutions

(dollar figures in millions) 2019  2018** ** 2018 2017 2016 2015 2014 2013

Problem Institutions

Number of institutions 55 71 60 95 123 183 291 467

Total assets $48,779 $53,289 $48,489 $13,939 $27,624 $46,780 $86,712 $152,687

Failed Institutions

Number of institutions 1 0 0 8 5 8 18 24

Total assets***** $37 $0 $0 $5,082 $277 $6,706 $2,914 $6,044

* Quarterly financial statement results are unaudited.

** Includes unrealized postretirement benefit gain (loss).

*** Average consolidated total assets minus tangible equity, with adjustments for banker’s banks and custodial banks.

  Through September 30.

** *** Total assets are based on final Call Reports submitted by failed institutions.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 25

Table III-C. Estimated FDIC-Insured Deposits by Type of Institution

(dollar figures in millions)

September 30, 2019

Number of 

Institutions

Total 

Assets

Domestic 

Deposits*

Est. Insured 

Deposits

Commercial Banks and Savings Institutions

FDIC-Insured Commercial Banks 4,587 $17,307,998 $12,051,029 $6,943,568

 FDIC-Supervised 3,053 2,729,431 2,167,428 1,469,880

 OCC-Supervised 791 11,627,158 7,820,106 4,360,055

 Federal Reserve-Supervised 743 2,951,410 2,063,496 1,113,634

FDIC-Insured Savings Institutions 669 1,172,424 928,712 758,620

 OCC-Supervised 303 766,108 621,099 518,429

 FDIC-Supervised 331 380,229 286,432 222,958

 Federal Reserve-Supervised 35 26,086 21,181 17,233

Total Commercial Banks and Savings Institutions 5,256 18,480,422 12,979,742 7,702,188

Other FDIC-Insured Institutions

U.S. Branches of Foreign Banks 9 82,432 39,198 34,700

Total FDIC-Insured Institutions 5,265 18,562,854 13,018,939 7,736,888

* Excludes $1.3 trillion in foreign office deposits, which are not FDIC insured.

Table IV-C. Distribution of Institutions and Assessment Base by Assessment Rate Range

Quarter Ending June 30, 2019 (dollar figures in billions)

Annual Rate in Basis Points*

Number of 

Institutions

Percent of Total 

Institutions

Amount of 

Assessment Base**

Percent of Total 

Assessment Base

1.50 - 3.00 3,359 63.23 $9,146.7 58.33

3.01 - 6.00 1,389 26.15 5,584.2 35.61

6.01 - 10.00 438 8.25 822.2 5.24

10.01 - 15.00 61 1.15 99.4 0.63

15.01 - 20.00 54 1.02 15.0 0.10

20.01 - 25.00 6 0.11 1.3 0.01

> 25.00 5 0.09 11.7 0.07

* Assessment rates do not incorporate temporary surcharges on large banks.

** Beginning in the second quarter of 2011, the assessment base was changed to average consolidated total assets minus tangible equity, as required by the Dodd-Frank Act.
2019 • Volume 1 3 • Number 4

26 FDIC QUARTERLY

Notes to Users

This publication contains financial data and other information for 

depository institutions insured by the Federal Deposit Insurance 

Corporation (FDIC). These notes are an integral part of this publication and provide information regarding the comparability of source 

data and reporting differences over time.

Tables I-A through VIII-A.

The information presented in Tables I-A through VIII-A of the 

FDIC Quarterly Banking Profile is aggregated for all FDIC-insured 

Call Report filers, both commercial banks and savings institutions. 

Some tables are arrayed by groups of FDIC-insured institutions 

based on predominant types of asset concentration, while other tables 

aggregate institutions by asset size and geographic region. Quarterly 

and full-year data are provided for selected indicators, including 

aggregate condition and income data, performance ratios, condition 

ratios, and structural changes, as well as past due, noncurrent, and 

charge-off information for loans outstanding and other assets.

Tables I-B through VI-B.

The information presented in Tables I-B through VI-B is aggregated 

for all FDIC-insured commercial banks and savings institutions 

meeting the criteria for community banks that were developed for 

the FDIC’s Community Banking Study, published in December, 2012: 

http://www.fdic.gov/regulations/resources/cbi/report/cbi-full.pdf.

The determination of which insured institutions are considered 

community banks is based on five steps.

The first step in defining a community bank is to aggregate all 

charter-level data reported under each holding company into 

a single banking organization. This aggregation applies both to 

balance-sheet measures and the number and location of banking 

offices. Under the FDIC definition, if the banking organization is 

designated as a community bank, every charter reporting under that 

organization is also considered a community bank when working 

with data at the charter level.

The second step is to exclude any banking organization where more 

than 50 percent of total assets are held in certain specialty banking 

charters, including: credit card specialists, consumer nonbank banks, 

industrial loan companies, trust companies, bankers’ banks, and banks 

holding 10 percent or more of total assets in foreign offices.

Once the specialty organizations are removed, the third step involves 

including organizations that engage in basic banking activities as 

measured by the total loans-to-assets ratio (greater than 33 percent) 

and the ratio of core deposits to assets (greater than 50 percent). Core 

deposits are defined as non-brokered deposits in domestic offices. 

Analysis of the underlying data shows that these thresholds establish 

meaningful levels of basic lending and deposit gathering and still 

allow for a degree of diversity in how individual banks construct their 

balance sheets.

The fourth step includes organizations that operate within a limited geographic scope. This limitation of scope is used as a proxy 

measure for a bank’s relationship approach to banking. Banks that 

operate within a limited market area have more ease in managing 

relationships at a personal level. Under this step, four criteria are 

applied to each banking organization. They include both a minimum and maximum number of total banking offices, a maximum 

level of deposits for any one office, and location-based criteria. 

The limits on the number of and deposits per office are adjusted 

upward quarterly. For banking offices, banks must have more than 

one office, and the maximum number of offices is 40 in 1985 and 

reached 87 in 2016. The maximum level of deposits for any one 

office is $1.25 billion in deposits in 1985 and reached $6.97 billion 

in deposits in 2016. The remaining geographic limitations are also 

based on maximums for the number of states (fixed at 3) and large 

metropolitan areas (fixed at 2) in which the organization maintains 

offices. Branch office data are based on the most recent data from 

the annual June 30 Summary of Deposits Survey that are available at 

the time of publication. 

Finally, the definition establishes an asset-size limit, also adjusted 

upward quarterly and below which the limits on banking activities 

and geographic scope are waived. The asset-size limit is $250 million 

in 1985 and reached $1.39 billion in 2016. This final step acknowledges the fact that most of those small banks that are not excluded 

as specialty banks meet the requirements for banking activities and 

geographic limits in any event.

Summary of FDIC Research Definition of Community 

Banking Organizations

Community banks are designated at the level of the banking 

organization.

(All charters under designated holding companies are considered 

community banking charters.)

Exclude: Any organization with:

— No loans or no core deposits

— Foreign Assets ≥ 10% of total assets

— More than 50% of assets in certain specialty banks, including:

• credit card specialists

• consumer nonbank banks1

• industrial loan companies

• trust companies

• bankers’ banks

Include: All remaining banking organizations with:

— Total assets < indexed size threshold 

2

— Total assets ≥ indexed size threshold, where:

• Loan to assets > 33%

• Core deposits to assets > 50%

• More than 1 office but no more than the indexed maximum 

number of offices.3

• Number of large MSAs with offices ≤ 2

• Number of states with offices ≤ 3

• No single office with deposits > indexed maximum branch 

deposit size.4

Tables I-C through IV-C.

A separate set of tables (Tables I-C through IV-C) provides comparative quarterly data related to the Deposit Insurance Fund (DIF), 

problem institutions, failed institutions, estimated FDIC-insured 

deposits, as well as assessment rate information. Depository insti1 Consumer nonbank banks are financial institutions with limited charters that can 

make commercial loans or take deposits, but not both.

2 Asset size threshold indexed to equal $250 million in 1985 and $1.39 billion in 2016.

3 Maximum number of offices indexed to equal 40 in 1985 and 87 in 2016.

4 Maximum branch deposit size indexed to equal $1.25 billion in 1985 and $6.97 billion 

in 2016.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 27

tutions that are not insured by the FDIC through the DIF are not 

included in the FDIC Quarterly Banking Profile. U.S. branches of 

institutions headquartered in foreign countries and non-deposit trust 

companies are not included unless otherwise indicated. Efforts are 

made to obtain financial reports for all active institutions. However, 

in some cases, final financial reports are not available for institutions 

that have closed or converted their charters.

DATA SOURCES

The financial information appearing in this publication is obtained 

primarily from the Federal Financial Institutions Examination 

Council (FFIEC) Consolidated Reports of Condition and Income 

(Call Reports) and the OTS Thrift Financial Reports (TFR) submitted 

by all FDIC-insured depository institutions. (TFR filers began filing 

Call Reports effective with the quarter ending March 31, 2012.) This 

information is stored on and retrieved from the FDIC’s Research 

Information System (RIS) database.

COMPUTATION METHODOLOGY

Parent institutions are required to file consolidated reports, while 

their subsidiary financial institutions are still required to file separate reports. Data from subsidiary institution reports are included 

in the Quarterly Banking Profile tables, which can lead to doublecounting. No adjustments are made for any double-counting of subsidiary data. Additionally, certain adjustments are made to the OTS 

Thrift Financial Reports to provide closer conformance with the 

reporting and accounting requirements of the FFIEC Call Reports.

(TFR filers began filing Call Reports effective with the quarter 

ending March 31, 2012.)

All condition and performance ratios represent weighted averages, 

which is the sum of the individual numerator values divided by the 

sum of individual denominator values. All asset and liability figures 

used in calculating performance ratios represent average amounts for 

the period (beginning-of-period amount plus end-of-period amount 

plus any interim periods, divided by the total number of periods). For 

“pooling-of-interest” mergers, the assets of the acquired institution(s) 

are included in average assets, since the year-to-date income includes 

the results of all merged institutions. No adjustments are made for 

“purchase accounting” mergers. Growth rates represent the percentage change over a 12-month period in totals for institutions in the 

base period to totals for institutions in the current period. For the 

community bank subgroup, growth rates will reflect changes over 

time in the number and identities of institutions designated as community banks, as well as changes in the assets and liabilities, and 

income and expenses of group members. Unless indicated otherwise, 

growth rates are not adjusted for mergers or other changes in the 

composition of the community bank subgroup. When community 

bank growth rates are adjusted for mergers, prior period balances 

used in the calculations represent totals for the current group of community bank reporters, plus prior period amounts for any institutions 

that were subsequently merged into current community banks.

All data are collected and presented based on the location of each 

reporting institution’s main office. Reported data may include assets 

and liabilities located outside of the reporting institution’s home 

state. In addition, institutions may relocate across state lines or 

change their charters, resulting in an inter-regional or inter-industry 

migration; institutions can move their home offices between regions, 

savings institutions can convert to commercial banks, or commercial 

banks may convert to savings institutions.

ACCOUNTING CHANGES

Financial accounting pronouncements by the Financial Accounting 

Standards Board (FASB) can result in changes in an individual 

bank’s accounting policies and in the Call Reports they submit. Such 

accounting changes can affect the aggregate amounts presented in the 

QBP for the current period and the period-to-period comparability of 

such financial data. 

The current quarter’s Financial Institution Letter (FIL) and related 

Call Report supplemental instructions can provide additional explanation to the QBP reader beyond any material accounting changes 

discussed in the QBP analysis.

https://www.fdic.gov/news/news/financial/2019/fil19055.html

https://www.fdic.gov/news/news/financial/2019/fil19055.pdf

https://www.fdic.gov/regulations/resources/call/call.html

Further information on changes in financial statement presentation, 

income recognition and disclosure is available from the FASB. http://

www.fasb.org/jsp/FASB/Page/LandingPage&cid=1175805317350.

DEFINITIONS (in alphabetical order)

All other assets – total cash, balances due from depository institutions, premises, fixed assets, direct investments in real estate, 

investment in unconsolidated subsidiaries, customers’ liability on 

acceptances outstanding, assets held in trading accounts, federal 

funds sold, securities purchased with agreements to resell, fair market value of derivatives, prepaid deposit insurance assessments, and 

other assets.

All other liabilities – bank’s liability on acceptances, limited-life preferred stock, allowance for estimated off-balance-sheet credit losses, 

fair market value of derivatives, and other liabilities.

Assessment base – effective April 1, 2011, the deposit insurance 

assessment base changed to “average consolidated total assets minus 

average tangible equity” with an additional adjustment to the assessment base for banker’s banks and custodial banks, as permitted under 

Dodd-Frank. Previously the assessment base was “assessable deposits” and consisted of deposits in banks’ domestic offices with certain 

adjustments.

Assessment rate schedule – Initial base assessment rates for small 

institutions are based on a combination of financial ratios and 

CAMELS component ratings. Initial rates for large institutions—

generally those with at least $10 billion in assets—are also based 

on CAMELS component ratings and certain financial measures 

combined into two scorecards—one for most large institutions and 

another for the remaining very large institutions that are structurally 

and operationally complex or that pose unique challenges and risks 

in case of failure (highly complex institutions). The FDIC may take 

additional information into account to make a limited adjustment to 

a large institution’s scorecard results, which are used to determine a 

large institution’s initial base assessment rate.

While risk categories for small institutions (except new institutions) were eliminated effective July 1, 2016, initial rates for small 

institutions are subject to minimums and maximums based on an 

institution’s CAMELS composite rating. (Risk categories for large 

institutions were eliminated in 2011.)

The current assessment rate schedule became effective July 1, 2016. 

Under the current schedule, initial base assessment rates range 

from 3 to 30 basis points. An institution’s total base assessment rate 
2019 • Volume 1 3 • Number 4

28 FDIC QUARTERLY

may differ from its initial rate due to three possible adjustments: 

(1) Unsecured Debt Adjustment: An institution’s rate may decrease 

by up to 5 basis points for unsecured debt. The unsecured debt 

adjustment cannot exceed the lesser of 5 basis points or 50 percent 

of an institution’s initial base assessment rate (IBAR). Thus, for 

example, an institution with an IBAR of 3 basis points would have a 

maximum unsecured debt adjustment of 1.5 basis points and could 

not have a total base assessment rate lower than 1.5 basis points. 

(2) Depository Institution Debt Adjustment: For institutions that 

hold long-term unsecured debt issued by another insured depository institution, a 50 basis point charge is applied to the amount of 

such debt held in excess of 3 percent of an institution’s Tier 1 capital. 

(3) Brokered Deposit Adjustment: Rates for large institutions that are 

not well capitalized or do not have a composite CAMELS rating of 

1 or 2 may increase (not to exceed 10 basis points) if their brokered 

deposits exceed 10 percent of domestic deposits.

The assessment rate schedule effective July 1, 2016, is shown in the 

following table:

Total Base Assessment Rates*

Established Small Banks Large and 

Highly 

Complex 

Institutions**

CAMELS Composite

1 or 2 3 4 or 5

Initial Base 

Assessment Rate 3 to 16 6 to 30 16 to 30 3 to 30

Unsecured Debt 

Adjustment -5 to 0 -5 to 0 -5 to 0 -5 to 0

Brokered Deposit 

Adjustment N/A N/A N/A 0 to 10

Total Base 

Assessment Rate 1.5 to 16 3 to 30 11 to 30 1.5 to 40

* All amounts for all categories are in basis points annually. Total base rates that 

are not the minimum or maximum rate will vary between these rates. Total base 

assessment rates do not include the depository institution debt adjustment.

 ** Effective July 1, 2016, large institutions are also subject to temporary 

assessment surcharges in order to raise the reserve ratio from 1.15 percent to 

1.35  percent. The surcharges amount to 4.5 basis points of a large institution’s 

assessment base (after making certain adjustments).

Each institution is assigned a risk-based rate for a quarterly assessment period near the end of the quarter following the assessment 

period. Payment is generally due on the 30th day of the last month 

of the quarter following the assessment period. Supervisory rating 

changes are effective for assessment purposes as of the examination 

transmittal date.

Assets securitized and sold – total outstanding principal balance 

of assets securitized and sold with servicing retained or other sellerprovided credit enhancements.

Capital Purchase Program (CPP) – as announced in October 2008 

under the TARP, the Treasury Department purchase of noncumulative perpetual preferred stock and related warrants that is treated as 

Tier 1 capital for regulatory capital purposes is included in “Total 

equity capital.” Such warrants to purchase common stock or noncumulative preferred stock issued by publicly-traded banks are 

reflected as well in “Surplus.” Warrants to purchase common stock or 

noncumulative preferred stock of not-publicly-traded bank stock are 

classified in a bank’s balance sheet as “Other liabilities.”

Common equity Tier 1 capital ratio – ratio of common equity 

Tier 1 capital to risk-weighted assets. Common equity Tier 1 capital 

includes common stock instruments and related surplus, retained 

earnings, accumulated other comprehensive income (AOCI), and 

limited amounts of common equity Tier 1 minority interest, minus 

applicable regulatory adjustments and deductions. Items that are fully 

deducted from common equity Tier 1 capital include goodwill, other 

intangible assets (excluding mortgage servicing assets) and certain 

deferred tax assets; items that are subject to limits in common equity 

Tier 1 capital include mortgage servicing assets, eligible deferred tax 

assets, and certain significant investments.

Construction and development loans – includes loans for all 

property types under construction, as well as loans for land acquisition and development.

Core capital – common equity capital plus noncumulative perpetual 

preferred stock plus minority interest in consolidated subsidiaries, 

less goodwill and other ineligible intangible assets. The amount of 

eligible intangibles (including servicing rights) included in core capital is limited in accordance with supervisory capital regulations.

Cost of funding earning assets – total interest expense paid on 

deposits and other borrowed money as a percentage of average 

earning assets.

Credit enhancements – techniques whereby a company attempts to 

reduce the credit risk of its obligations. Credit enhancement may be 

provided by a third party (external credit enhancement) or by the 

originator (internal credit enhancement), and more than one type of 

enhancement may be associated with a given issuance.

Deposit Insurance Fund (DIF) – the Bank (BIF) and Savings 

Association (SAIF) Insurance Funds were merged in 2006 by the 

Federal Deposit Insurance Reform Act to form the DIF.

Derivatives notional amount – the notional, or contractual, amounts 

of derivatives represent the level of involvement in the types of 

derivatives transactions and are not a quantification of market risk or 

credit risk. Notional amounts represent the amounts used to calculate 

contractual cash flows to be exchanged.

Derivatives credit equivalent amount – the fair value of the derivative plus an additional amount for potential future credit exposure 

based on the notional amount, the remaining maturity and type of 

the contract.

Derivatives transaction types:

Futures and forward contracts – contracts in which the buyer 

agrees to purchase and the seller agrees to sell, at a specified future 

date, a specific quantity of an underlying variable or index at a 

specified price or yield. These contracts exist for a variety of variables or indices, (traditional agricultural or physical commodities, 

as well as currencies and interest rates). Futures contracts are 

standardized and are traded on organized exchanges which set 

limits on counterparty credit exposure. Forward contracts do not 

have standardized terms and are traded over the counter.

Option contracts – contracts in which the buyer acquires the right 

to buy from or sell to another party some specified amount of an 

underlying variable or index at a stated price (strike price) during 

a period or on a specified future date, in return for compensation 

(such as a fee or premium). The seller is obligated to purchase or 

sell the variable or index at the discretion of the buyer of the 

contract.

Swaps – obligations between two parties to exchange a series of 

cash flows at periodic intervals (settlement dates), for a specified 

period. The cash flows of a swap are either fixed, or determined 

for each settlement date by multiplying the quantity (notional 

principal) of the underlying variable or index by specified reference rates or prices. Except for currency swaps, the notional principal is used to calculate each payment but is not exchanged.
QUARTERLY BANKING PROFILE

FDIC QUARTERLY 29

Derivatives underlying risk exposure – the potential exposure characterized by the level of banks’ concentration in particular underlying 

instruments, in general. Exposure can result from market risk, credit 

risk, and operational risk, as well as, interest rate risk.

Domestic deposits to total assets – total domestic office deposits as 

a percent of total assets on a consolidated basis.

Earning assets – all loans and other investments that earn interest or 

dividend income.

Efficiency ratio – Noninterest expense less amortization of intangible 

assets as a percent of net interest income plus noninterest income. 

This ratio measures the proportion of net operating revenues that 

are absorbed by overhead expenses, so that a lower value indicates 

greater efficiency.

Estimated insured deposits – in general, insured deposits are total 

domestic deposits minus estimated uninsured deposits. Beginning 

March 31, 2008, for institutions that file Call Reports, insured deposits are total assessable deposits minus estimated uninsured deposits. 

Beginning September 30, 2009, insured deposits include deposits in 

accounts of $100,000 to $250,000 that are covered by a temporary 

increase in the FDIC’s standard maximum deposit insurance amount 

(SMDIA). The Dodd-Frank Wall Street Reform and Consumer 

Protection Act enacted on July 21, 2010, made permanent the standard maximum deposit insurance amount (SMDIA) of $250,000. 

Also, the Dodd-Frank Act amended the Federal Deposit Insurance 

Act to include noninterest-bearing transaction accounts as a new 

temporary deposit insurance account category. All funds held in 

noninterest-bearing transaction accounts were fully insured, without 

limit, from December 31, 2010, through December 31, 2012.

Failed/assisted institutions – an institution fails when regulators 

take control of the institution, placing the assets and liabilities into a 

bridge bank, conservatorship, receivership, or another healthy institution. This action may require the FDIC to provide funds to cover 

losses. An institution is defined as “assisted” when the institution 

remains open and receives assistance in order to continue operating.

Fair Value – the valuation of various assets and liabilities on the 

balance sheet—including trading assets and liabilities, available-forsale securities, loans held for sale, assets and liabilities accounted for 

under the fair value option, and foreclosed assets—involves the use 

of fair values. During periods of market stress, the fair values of some 

financial instruments and nonfinancial assets may decline.

FHLB advances – all borrowings by FDIC-insured institutions from 

the Federal Home Loan Bank System (FHLB), as reported by Call 

Report filers, and by TFR filers prior to March 31, 2012.

Goodwill and other intangibles – intangible assets include servicing 

rights, purchased credit card relationships, and other identifiable 

intangible assets. Goodwill is the excess of the purchase price over the 

fair market value of the net assets acquired, less subsequent impairment adjustments. Other intangible assets are recorded at fair value, 

less subsequent quarterly amortization and impairment adjustments.

Loans secured by real estate – includes home equity loans, junior 

liens secured by 1-4 family residential properties, and all other loans 

secured by real estate.

Loans to individuals – includes outstanding credit card balances and 

other secured and unsecured consumer loans.

Long-term assets (5+ years) – loans and debt securities with remaining maturities or repricing intervals of over five years.

Maximum credit exposure – the maximum contractual credit 

exposure remaining under recourse arrangements and other sellerprovided credit enhancements provided by the reporting bank to 

securitizations.

Mortgage-backed securities – certificates of participation in pools 

of residential mortgages and collateralized mortgage obligations 

issued or guaranteed by government-sponsored or private enterprises. Also, see “Securities,” below.

Net charge-offs – total loans and leases charged off (removed from 

balance sheet because of uncollectability), less amounts recovered on 

loans and leases previously charged off.

Net interest margin – the difference between interest and dividends 

earned on interest-bearing assets and interest paid to depositors and 

other creditors, expressed as a percentage of average earning assets. 

No adjustments are made for interest income that is tax exempt.

Net loans to total assets – loans and lease financing receivables, net 

of unearned income, allowance and reserves, as a percent of total 

assets on a consolidated basis.

Net operating income – income excluding discretionary transactions such as gains (or losses) on the sale of investment securities and 

extraordinary items. Income taxes subtracted from operating income 

have been adjusted to exclude the portion applicable to securities 

gains (or losses).

Noncurrent assets – the sum of loans, leases, debt securities, and 

other assets that are 90 days or more past due, or in nonaccrual status.

Noncurrent loans & leases – the sum of loans and leases 90 days or 

more past due, and loans and leases in nonaccrual status.

Number of institutions reporting – the number of institutions that 

actually filed a financial report.

New reporters – insured institutions filing quarterly financial reports 

for the first time.

Other borrowed funds – federal funds purchased, securities sold with 

agreements to repurchase, demand notes issued to the U.S. Treasury, 

FHLB advances, other borrowed money, mortgage indebtedness, 

obligations under capitalized leases and trading liabilities, less revaluation losses on assets held in trading accounts.

Other real estate owned – primarily foreclosed property. Direct and 

indirect investments in real estate ventures are excluded. The amount 

is reflected net of valuation allowances. For institutions that filed a 

Thrift Financial Report (TFR), the valuation allowance subtracted also 

includes allowances for other repossessed assets. Also, for TFR filers 

the components of other real estate owned are reported gross of valuation allowances. (TFR filers began filing Call Reports effective with 

the quarter ending March 31, 2012.)

Percent of institutions with earnings gains – the percent of institutions that increased their net income (or decreased their losses) compared to the same period a year earlier.

“Problem” institutions – federal regulators assign a composite rating 

to each financial institution, based upon an evaluation of financial 

and operational criteria. The rating is based on a scale of 1 to 5 in 

ascending order of supervisory concern. “Problem” institutions are 

those institutions with financial, operational, or managerial weaknesses that threaten their continued financial viability. Depending 

upon the degree of risk and supervisory concern, they are rated 

either a “4” or “5.” The number and assets of “problem” institutions 

are based on FDIC composite ratings. Prior to March 31, 2008, for 

institutions whose primary federal regulator was the OTS, the OTS 

composite rating was used.
2019 • Volume 1 3 • Number 4

30 FDIC QUARTERLY

Recourse – an arrangement in which a bank retains, in form or in 

substance, any credit risk directly or indirectly associated with an 

asset it has sold (in accordance with generally accepted accounting 

principles) that exceeds a pro rata share of the bank’s claim on the 

asset. If a bank has no claim on an asset it has sold, then the retention 

of any credit risk is recourse.

Reserves for losses – the allowance for loan and lease losses on a 

consolidated basis.

Restructured loans and leases – loan and lease financing receivables with terms restructured from the original contract. Excludes 

restructured loans and leases that are not in compliance with the 

modified terms.

Retained earnings – net income less cash dividends on common and 

preferred stock for the reporting period.

Return on assets – bank net income (including gains or losses on 

securities and extraordinary items) as a percentage of average total 

(consolidated) assets. The basic yardstick of bank profitability.

Return on equity – bank net income (including gains or losses on 

securities and extraordinary items) as a percentage of average total 

equity capital.

Risk-weighted assets – assets adjusted for risk-based capital definitions which include on-balance-sheet as well as off-balance-sheet 

items multiplied by risk-weights that range from zero to 200 percent. 

A conversion factor is used to assign a balance sheet equivalent 

amount for selected off-balance-sheet accounts.

Securities – excludes securities held in trading accounts. Banks’ securities portfolios consist of securities designated as “held-to-maturity” 

(reported at amortized cost (book value)), securities designated as 

“available-for-sale” (reported at fair (market) value), and equity 

securities with readily determinable fair values not held for trading.

Securities gains (losses) – realized gains (losses) on held-tomaturity and available-for-sale securities, before adjustments for 

income taxes. Thrift Financial Report (TFR) filers also include gains 

(losses) on the sales of assets held for sale. (TFR filers began filing 

Call Reports effective with the quarter ending March 31, 2012.)

Seller’s interest in institution’s own securitizations – the reporting 

bank’s ownership interest in loans and other assets that have been 

securitized, except an interest that is a form of recourse or other 

seller-provided credit enhancement. Seller’s interests differ from 

the securities issued to investors by the securitization structure. The 

principal amount of a seller’s interest is generally equal to the total 

principal amount of the pool of assets included in the securitization 

structure less the principal amount of those assets attributable to 

investors, i.e., in the form of securities issued to investors.

Small Business Lending Fund – The Small Business Lending Fund 

(SBLF) was enacted into law in September 2010 as part of the Small 

Business Jobs Act of 2010 to encourage lending to small businesses 

by providing capital to qualified community institutions with assets 

of less than $10 billion. The SBLF Program is administered by the 

U.S. Treasury Department (http://www.treasury.gov/resource-center/

sb-programs/Pages/Small-Business-Lending-Fund.aspx).

Under the SBLF Program, the Treasury Department purchased 

noncumulative perpetual preferred stock from qualifying depository 

institutions and holding companies (other than Subchapter S and 

mutual institutions). When this stock has been issued by a depository 

institution, it is reported as “Perpetual preferred stock and related 

surplus.” For regulatory capital purposes, this noncumulative 

perpetual preferred stock qualifies as a component of Tier 1 capital. 

Qualifying Subchapter S corporations and mutual institutions issue 

unsecured subordinated debentures to the Treasury Department 

through the SBLF. Depository institutions that issued these 

debentures report them as “Subordinated notes and debentures.” 

For regulatory capital purposes, the debentures are eligible for 

inclusion in an institution’s Tier 2 capital in accordance with their 

primary federal regulator’s capital standards. To participate in the 

SBLF Program, an institution with outstanding securities issued 

to the Treasury Department under the Capital Purchase Program 

(CPP) was required to refinance or repay in full the CPP securities 

at the time of the SBLF funding. Any outstanding warrants that an 

institution issued to the Treasury Department under the CPP remain 

outstanding after the refinancing of the CPP stock through the SBLF 

Program unless the institution chooses to repurchase them.

Subchapter S corporation – a Subchapter S corporation is treated 

as a pass-through entity, similar to a partnership, for federal income 

tax purposes. It is generally not subject to any federal income taxes at 

the corporate level. This can have the effect of reducing institutions’ 

reported taxes and increasing their after-tax earnings.

Trust assets – market value, or other reasonably available value of 

fiduciary and related assets, to include marketable securities, and 

other financial and physical assets. Common physical assets held in 

fiduciary accounts include real estate, equipment, collectibles, and 

household goods. Such fiduciary assets are not included in the assets 

of the financial institution.

Unearned income and contra accounts – unearned income for Call 

Report filers only.

Unused loan commitments – includes credit card lines, home equity 

lines, commitments to make loans for construction, loans secured 

by commercial real estate, and unused commitments to originate 

or purchase loans. (Excluded are commitments after June 2003 for 

originated mortgage loans held for sale, which are accounted for as 

derivatives on the balance sheet.)

Yield on earning assets – total interest, dividend, and fee income 

earned on loans and investments as a percentage of average 

earning assets.
FDIC QUARTERLY 31

1 We combine the categories of GSEs and agency- and GSE-backed mortgage pools because Financial Accounting Standards Board 

Statements No. 166 and No. 167 resulted in the consolidation of a large amount of securitized loan balances back onto lender 

balance sheets in first quarter 2010. Ginnie Mae mortgage pools are classified as agency- and GSE-backed mortgage pools.

2 The complete list of other financial companies is monetary authority, property-casualty insurance company, life insurance 

company, private pension fund, federal government retirement fund, state or local government retirement fund, mutual fund, 

ABS issuer, finance company, real estate investment trust, broker-dealer, holding company, and funding corporation.

BANK AND NONBANK LENDING OVER THE PAST 70 YEARS

Introduction In recent years, some banking activities and their inherent risks have migrated from banks 

to nonbanks. While banks have increased their share of outstanding loans since the financial crisis, a significant portion of residential mortgage lending and leveraged lending has 

migrated out of banks. Government-sponsored enterprises (GSEs) loosened their residential 

mortgage underwriting criteria, and nonbanks markedly increased their residential mortgage origination and servicing, which may increase risks to the financial system.

Banks’ origination and distribution to nonbanks of a large volume of covenant-lite leveraged loans also have the potential to create unexpected vulnerabilities during a downturn. 

Competition between banks and nonbank financial companies may affect lending standards 

and strategies. Banks also have nonbank financial companies as customers, and this may 

expose banks to risk in many ways.

The FDIC continues to study the changing nature of the lending market and specific sectors, 

how banks are responding to the growth of nonbank lenders in certain lending areas, and 

the implications of these potential risks for the banking sector and the economy. This article 

provides an overview of broad trends in lending markets. The first two sections describe 

the lenders that are active in the market and summarize lending from 1952 to 2018. The last 

three sections discuss bank and nonbank lending in specific lending markets. Accompanying articles discuss residential mortgage lending and corporate debt in more detail.

Types of Lenders and 

Loan Holders

Many types of companies lend money, and some companies fund lending markets by 

purchasing loans. Some companies, like banks and credit unions, originate loans and either 

hold them on their balance sheets as assets or sell them to other investors. Other businesses, 

such as nonbank mortgage lenders and other finance companies, tend to have more limited 

balance sheet capacity and generally follow an originate-to-distribute model. These institutions originate loans to sell them immediately to investors. Other investors—like life insurance companies and some issuers of asset-backed securities (ABS)—do not originate many 

loans but purchase existing loans from originators. Life insurance companies purchase loans 

to hold as assets, while issuers of ABS buy and bundle the loans into securities, which they 

sell to investors.

In this article, loan holders are grouped according to Federal Reserve Flow of Funds categories. The main categories are banks, credit unions, GSEs, issuers of ABS, other financial 

companies, and nonfinancial companies. We separate banks and credit unions because their 

business lines and strategies differ in some ways. GSEs are federally chartered corporations: 

Fannie Mae, Freddie Mac, Federal Home Loan Banks, Farmer Mac, and the Farm Credit 

System, following the definitions in the Flow of Funds for GSEs and agency- and GSEbacked mortgage pools, unless otherwise noted. Ginnie Mae is wholly owned by the federal 

government and guarantees mortgage-backed securities (MBS) backed by mortgages that are 

insured by federal agencies.1 Other financial companies include entities like finance companies, which make loans to hold or to sell; insurance companies, which tend to purchase loans 

as assets; and issuers of ABS, which purchase loans to securitize them.2 The nonfinancial 

group includes the government, nonprofits, nonfinancial businesses, and households, and all 

of these hold loans as assets.
2019 • Volume 1 3 • Number 4

32 FDIC QUARTERLY

Historic Perspective of the 

Lending Market

Total lending has grown dramatically since the 1950s, with the largest growth in loan holdings in banks and the GSEs (Chart 1). The bank share peaked at 62 percent in 1974. It then 

fell fairly consistently and bottomed out in fourth quarter 2009 at 32 percent. Over the same 

period, corporations also shifted toward market-based financing and issued debt securities 

like bonds and commercial paper. Debt securities are a significantly larger portion of nonfinancial corporations’ overall debt obligations than they were in past decades. Since 2008, the 

bank share of loans outstanding has increased modestly and has stabilized around 37 percent 

since first quarter 2016. In 2018, the total of corporate debt securities outstanding was about 

twice the sum of corporate bank loans and commercial mortgages.

The shifts in bank lending also reflect the growth of nonbank loan holders, primarily in the 

mortgage market. GSEs hold an increasing share of residential mortgages. The growth of 

mortgage securitization played a major role in the shift (see accompanying article, “Trends 

in Mortgage Origination and Servicing: Nonbanks in the Post-Crisis Period”). GSEs were 

created to serve as a secondary market for residential mortgages by purchasing mortgages 

from originators.3 This allowed originators to make more loans. In the 1970s, Fannie Mae and 

Freddie Mac began securitizing the mortgages they had purchased into MBS, which contributed to the growth of the secondary market for mortgages. The rise of securitization enabled a 

broader range of investors to fund the mortgage market, generating growth in mortgages held 

by the GSEs. In second quarter 2019, the GSEs held about 31 percent of all loans outstanding. 

From the 1980s to about 2005, the bank share of non-GSE loans fell and then recovered, with 

a more pronounced rebound since the financial crisis that started in 2007.

e Bank Share of Loans Fell in the 1980s and 1990s as Securitization Developed,

but Started Rising Aer 2009

Source: Federal Reserve Flow of Funds (Haver Analytics).

Note: Dollar values are adjusted for ination.

Loans Outstanding 

$ Billion 2012

0

5,000

10,000

15,000

20,000

25,000

30,000

1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017

Banks Credit Unions

GSEs and Agency Pools Issuers of ABS

Other Financial Nonnancial

Bank Share of Loans

Percent

0

10

20

30

40

50

60

70

80

Bank Share of Loans

Bank Share of Non-GSE Loans

Chart 1

Lending Trends by Sector Nonbank lending also plays an important role over time in other markets. Except for leveraged loans, the bank shares of loans outstanding have been generally stable or increasing since 2010. Pre-financial crisis, bank shares of outstanding loans in several categories 

declined. In 1–4 family mortgage lending, bank shares decreased from 40 percent in 1990 

to 25 percent in 2010, and in multifamily residential mortgages, from 44 percent in 1990 to 

29 percent in 2010. As shown in the table on the following page, bank shares of commercial 

mortgages and agricultural loans grew over this period.

3 For a history of the GSEs, see “A Brief History of the Housing Government-Sponsored Enterprises,” Federal Housing Finance 

Agency Office of Inspector General, www.fhfaoig.gov/Content/Files/History%20of%20the%20Government%20Sponsored%20

Enterprises.pdf, and “Our History,” Farm Credit, https://farmcredit.com/history.
FDIC QUARTERLY 33

BA N K A N D NON BA N K L E N DI NG OV E R T H E PAST 7 0 Y E A R S

Many factors contributed to growth in the nonbank share of loans before the financial 

crisis, but the development and growth of loan securitization was an important one. Some 

investors prefer to or must hold rated, more-liquid securities like ABS rather than unrated, 

less-liquid assets such as loans. In the common securitization model, lenders originate loans 

and sell them to nonbanks that package the loans and issue ABS. Loan types with more 

standardized terms and more forecastable outcomes—like residential mortgages and some 

commercial real estate (CRE) mortgages—are easier to securitize, enabling greater participation by nonbanks that rely on an originate-to-distribute model. Securitization of other loan 

types—like large leveraged loans—involve pools with fewer but larger loans that are rated, 

which makes them more easily securitized. On the other hand, commercial and industrial 

loans tend to be smaller and more idiosyncratic than the larger leveraged loans, so they are 

generally not rated and have not been securitized to the same degree. The following sections 

describe the changes in different lending categories.

Bank Share of Loans by Type of Loan

Type of Loans

Bank Share of Loans Outstanding (%)

1990 2000 2010 2018

1–4 family mortgages 40 30 25 24

Leveraged loans NA 25 8 3

CRE mortgages 50 49 47 50

 Commercial mortgages 52 54 54 58

 Multifamily residential mortgages 44 34 29 33

Consumer credit 52 35 45 42

Agriculture loans 35 46 39 42

Sources: Federal Reserve Flow of Funds (Haver Analytics), S&P Leveraged Commentary and Data, and USDA Economic Research Service.

Notes: Leveraged loans exclude revolving credit-only loans and left and right agent commitments (including administrative, syndication and 

documentation agent, and arranger). Data are as of the fourth quarter.

I. 1–4 Family Mortgages

One-to-four family mortgages, including home equity loans and home equity lines of credit, 

are loans that are secured by residential units. The share of 1–4 family mortgages outstanding held by banks declined dramatically from 74 percent in 1978 to 24 percent in second 

quarter 2019 as securitization of mortgages became an increasingly larger part of the market. 

From 1980 to 2000, the majority of MBS were issued by the GSEs, but private-label MBS 

(PLMBS) grew rapidly before the financial crisis.4 Demand for PLMBS dried up during the 

financial crisis and remains well below pre-financial crisis levels, despite recent growth.5

Government-backed MBS issuance, including GSE issuance, has continued to grow. In 

second quarter 2019, GSEs held 63 percent of residential mortgages outstanding.

Because of the demand for GSE MBS, both banks and nonbanks sell mortgages to the GSEs. 

Since the financial crisis, nonbanks have predominantly offered mortgages that conform to 

the criteria established by the GSEs, as nonbanks rely on an originate-to-distribute business 

model.6 Banks are more likely to make jumbo and nonconforming loans that cannot be sold 

to the GSEs, and tend to hold more of their residential mortgages. As these banks retain the 

risk of the loans, they may perform more thorough underwriting than nonbank lenders who 

quickly sell their loans.

4 PLMBS are MBS issued by private financial institutions. They are also called non-agency MBS.

5 PLMBS issuance fell from $1.3 trillion in 2006 to $28 billion in 2012. As of second quarter 2019, private pools held $454 billion in 

residential mortgages, about 4 percent of the outstanding residential mortgages.

6 These mortgages are known as conforming loans, since they conform to standards set by the GSEs and are eligible to be 

purchased by the GSEs.
2019 • Volume 1 3 • Number 4

34 FDIC QUARTERLY

In the early 2000s, bank and nonbank mortgage lenders loosened underwriting standards, 

and residential mortgage originations grew rapidly, partly driven by the demand for MBS. 

In the financial crisis that began in 2007, PLMBS issuance fell and many nonbank mortgage 

lenders failed or merged. The nonbank share of mortgage originations among Home Mortgage Disclosure Act (HMDA) report filers fell from 36 percent in 2006 to 24 percent in 2008 

(Chart 2). After the financial crisis, new nonbank lenders entered the market, increasing 

from 820 lenders in 2011 to 919 in 2017. The number of bank mortgage lenders fell during 

that period. In 2017, nonbanks accounted for 53 percent of mortgages originated by HMDA 

filers.7 Nonbanks originate a significant volume of loans for sale to GSEs. GSEs have loosened underwriting criteria in recent years, which could increase financial system vulnerability if pronounced housing market stress occurs (see accompanying article, “Trends in 

Mortgage Origination and Servicing: Nonbanks in the Post-Crisis Period”).

Mortgage servicing also has shifted from banks to nonbanks. Nonbanks held 42 percent of 

mortgage servicing rights held by the top 25 servicers in 2018, up from 4 percent in 2008 

and 38 percent in 2000. Large bank sales of financial crisis-era legacy servicing portfolios 

contributed to the shift in servicing from banks to nonbanks. Fines, legal fees, and other 

heightened expenses associated with litigation and with nonperforming loans in financial 

crisis-era servicing portfolios negatively affected profitability at some banks and may have 

deterred growth in servicing portfolios after the financial crisis.8 Changes in the regulatory capital treatment of mortgage servicing assets may have contributed to the reduction in 

mortgage servicing rights by large banks.9 Overall servicing volume rebounded to $10.9 trillion in 2018, only slightly below the peak of $11.2 trillion in 2007 and more than double the 

$5.1 trillion reported in 2000.10

Nonbanks Increased Mortgage Originations Aer the Financial Crisis

Source: FDIC analysis of Home Mortgage Disclosure Act data.

Notes: Nonbanks include all Department of Housing and Urban Development reporters. Banks include banks, credit unions, and their aliates.

Data are limited to single-family residential mortgage originations, dened as rst-lien purchase or renance loans secured by an owner-occupied, 

1–4 family unit, site-built property.

Market Share

Percent

Origination Volume

$ Billions

47.5

52.5

0

20

40

60

80

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0

200

400

600

800

1,000

1,200

1,400

1,600

Bank Volume (Right Axis) Nonbank Volume (Right Axis)

Bank Share (Le Axis) Nonbank Share (Le Axis)

Chart 2

7 FDIC analysis of HMDA data. Bank mortgage lenders are banks that file HMDA reports.

8 FDIC, Board of Governors of the Federal Reserve System (FRB), Office of the Comptroller of the Currency (OCC), National 

Credit Union Administration (NCUA), “Report to the Congress on the Effect of Capital Rules on Mortgage Servicing Assets,” 

June 2016, pages 23–25, https://www.federalreserve.gov/publications/other-reports/files/effect-capital-rules-mortgage-servicingassets-201606.pdf. 9 FDIC, FRB, OCC, NCUA: 29–31.

10 FDIC analysis of Inside Mortgage Finance data.
FDIC QUARTERLY 35

BA N K A N D NON BA N K L E N DI NG OV E R T H E PAST 7 0 Y E A R S

II. Corporate Debt and Leveraged Lending

Loans to corporations, including leveraged loans, have shifted out of banks over the past 

60 years, and corporations have increased their use of debt securities to fund their businesses. Leveraged loans are syndicated loans made to below-investment-grade corporate 

borrowers.11 Corporate debt securities include corporate bonds and commercial paper.

Institutional syndicated leveraged loans outstanding increased from $100 billion in 2000 

to $1 trillion in 2018. Originations fell to $77 billion in 2009 but recovered to $625 billion 

in 2018. The share of primary leveraged loan purchases made by banks declined from 

30 percent in 1994 to 3 percent in 2018 (Chart 3). Banks arrange almost all of the loans by 

providing information about the loan to investors and putting together a group of buyers. 

Banks often administer the loans. Of the top 20 leveraged loan administrative agents in the 

Leveraged Commentary and Data database for 2018, 18 were commercial banks or investment banks.

Over the past ten years, nonfinancial corporate debt securities grew from $4 trillion in first 

quarter 2009 to $6 trillion in first quarter 2019. Nonbank investors hold the majority of 

outstanding financial and nonfinancial corporate bonds. As of second quarter 2019, banks 

held only 3 percent of outstanding corporate bonds. Banks also underwrite corporate debt 

securities and provide other investment banking services.

Corporate debt has grown since 2008. Investors increased their demand for high-yielding 

leveraged loans and corporate debt securities, as they were willing to accept greater risk. To 

help satisfy the demand, underwriting standards deteriorated in this market and lenders 

issued loans to riskier corporations. The share of leveraged loans that lack strong covenants 

grew from near zero percent in the early 2000s, to 29 percent in 2007, and to 85 percent in 

2018.12 The leverage of the borrowers also increased over the same period.13 Therefore, 

U.S. Bank Share of Primary Leveraged Loan Purchases Has Declined Signicantly,

ough Risk Exposure Remains

Source: S&P LCD.

Notes: Excludes revolving credit-only loans as well as le and right agent commitments (including administrative, syndication and documentation agent, 

and arranger). Data are through second quarter 2019. 

Share of Primary Leveraged Loan Purchases

Percent

0

10

20

30

40

50

60

70

80

90

100

1994 1997 2000 2003 2006 2009 2012 2015 2018

CLOs, Insurance Companies, 

and Loan, Hedge, and High-Yield Funds

Finance Companies and Securities Firms

Foreign Banks

U.S. Banks

Chart 3

11 Unless otherwise noted, we follow the S&P Global Market Intelligence Leveraged Commentary and Data definition of leveraged 

loans, which includes all syndicated loans that are below investment grade, are senior secured, and have a minimum spread of 125 

basis points over LIBOR.

12 Leveraged loans with strong covenants have both “incurrence covenants,” which require financial tests if the borrower wants 

to perform certain actions such as paying dividends, and “maintenance covenants,” which require the borrower to regularly pass 

financial health tests such as maximum leverage levels and minimum interest coverage, or risk defaulting on the loan. Covenantlite leveraged loans have incurrence covenants but lack maintenance covenants.

13 Leverage is measured as the ratio of total debt to earnings before interest, tax, depreciation, and amortization (EBITDA). The 

average debt-to-EBITDA ratio for leveraged loan borrowers was 5.2 at year-end 2018, its highest level since at least 2002 and well 

above the 4.9 level that it reached in 2007.
2019 • Volume 1 3 • Number 4

36 FDIC QUARTERLY

future recoveries on defaulted leveraged loans are likely to be lower than previously experienced because of lower credit quality and weakened lender protections. Risks have been 

building in corporate debt securities as well. Most of the change in corporate debt outstanding over the past ten years was from lower-rated investment grade bonds and the highestrated high-yield bonds, rather than from higher-rated investment grade bonds.14

Banks’ direct exposure to institutional leveraged loans has fallen during the past 20 years. 

But some banks still have direct exposure to revolving credit facilities that are often part of 

a leveraged loan deal and additional indirect exposure to institutional leveraged loans. This 

exposure includes (1) pro rata leveraged loans, (2) warehouse lines of credit used for collateralized loan obligations, and (3) subscription finance loans. Bank exposure to risk from 

nonbanks that participate in leveraged lending is opaque, and the nature and size of the risk 

is obscured. Risk is difficult to quantify because it is not reported in a standardized manner.

III. Other Lending Sectors

The migration of risks and activities between banks and nonbanks in lending sectors other 

than 1–4 family mortgages and leveraged lending has been less pronounced. This section 

summarizes market share developments in commercial real estate lending, agriculture lending, and consumer credit. Bank shares of outstanding loans in these sectors are significantly 

higher than in 1–4 family mortgage lending and in leveraged loans. Moreover, bank shares of 

outstanding commercial real estate loans and agriculture loans have increased, rather than 

decreased, since 2010.15

CRE Loans. CRE loans include loans secured by commercial or multifamily residential 

properties and unsecured loans to finance CRE activities. Banks have regained market share 

of CRE mortgages after a decline during the financial crisis (Chart 4). The bank share of 

commercial mortgages has been relatively steady at around 50 to 55 percent since the mid1970s. In second quarter 2019, banks held 59 percent of commercial mortgages. In contrast, 

the bank share of multifamily residential mortgages decreased substantially between 1990 

and 2012 and has modestly recovered since. Changes in bank share are largely attributable to 

GSE securitization activity. In second quarter 2019, GSEs held about half of the outstanding 

multifamily residential mortgages and banks held 33 percent.

e Bank Share of Commercial Real Estate Mortgages Has Been Around 50 Percent 

Since the 1990s

Source: Federal Reserve Flow of Funds (Haver Analytics).

Note: Dollar values are adjusted for ination.

Loans Outstanding

$ Billion 2012

Bank Bank Share

Nonbank

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Bank Share of Loans

Percent

1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

0

10

20

30

40

50

60

Chart 4

14 ICE data services.

15 For discussion of risks in these lending sectors see “FDIC 2019 Risk Review,” https://www.fdic.gov/bank/analytical/risk-review/

index.html.
FDIC QUARTERLY 37

BA N K A N D NON BA N K L E N DI NG OV E R T H E PAST 7 0 Y E A R S

Agriculture Lending. Quarterly Reports of Condition and Income (Call Reports) filed by 

FDIC-insured banks classify agricultural loans as (1) loans secured by agricultural land and 

(2) operating loans to farms and agricultural businesses. Agriculture loans are made primarily through banks and the Farm Credit System, a government-sponsored system of borrowerowned lenders that provide loans and related services to many rural customers. The bank 

share of agriculture lending is 42 percent and has varied between 37 and 45 percent since 

the early 1990s (Chart 5). The share of loans held by the Farm Credit System grew through 

the 1990s and early 2000s and is now around 41 percent of outstanding agriculture loans. In 

2018, commercial banks and the Farm Credit System held 83 percent of farm sector loans, 

and the Farm Service Agency, Farmer Mac, life insurance companies, and individuals held 

the remainder of loans outstanding.16

e Bank Share of Agricultural Loans Has Been Around 40 Percent Since the Mid-1990s, 

While the Farm Credit System Share Has Risen

Source: USDA Economics Research Service.

Note: Dollar values are adjusted for ination.

Farm Debt Outstanding

$ Billions 2012 

Commercial Banks Bank Share

Farm Credit System

Other

Share of Debt

Percent

0

50

100

150

200

250

300

350

400

450

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Farm Credit System Share

0

5

10

15

20

25

30

35

40

45

50

Chart 5

Consumer Credit. The bank share of consumer credit—loans to consumers that are not 

backed by real estate—fell from the late 1980s to the early 2000s because of securitization. 

Starting in the late 1980s, ABS backed by credit card debt, auto loans, and private student 

loans became widely used.17 The bank share of consumer credit fell from 52 percent in fourth 

quarter 1990 to 35 percent in fourth quarter 2000. An accounting change in first quarter 

2010, however, moved most ABS back onto the balance sheets of the firms that controlled 

the securities, causing a jump in the reported share of consumer credit held by banks from 

35 percent in fourth quarter 2009 to 49 percent in first quarter 2010.18 Because many of these 

loans are still securitized, some of the credit risk passes to the purchasers of the ABS even 

if the loans are on the bank’s balance sheet. And in 2010, the federal government stopped 

subsidizing private lenders to make student loans and instead originates all federally subsidized loans itself.19 This shift caused another decline in the bank share of consumer credit 

because only the federal government can make federally subsidized student loans (Chart 6). 

If student loans continue to grow faster than other forms of consumer credit, the bank share 

of consumer credit may continue to decline.

16 USDA/ERS Farm Income and Wealth Statistics, https://data.ers.usda.gov/reports.aspx?ID=17835. 17 Sumit Agarwal, Jacqueline Barett, Crystal Cun, and Mariacristina De Nardi, “The Asset-Backed Securities Market, the 

Crisis, and TALF,” Federal Reserve Bank of Chicago Economic Perspectives 34, no. 4 (2010), www.chicagofed.org/publications/

economic-perspectives/2010/4q-agarwal-barrett-cun-denardi. 18 The accounting change was released in Financial Accounting Standards Board Statements 166 and 167. See https://www.fasb.

org/jsp/FASB/FASBContent_C/NewsPage&cid=1176156240834 for a detailed explanation. 19 H.R. 4872: “Health Care and Education Reconciliation Act of 2010,” https://www.congress.gov/bill/111th-congress/

house-bill/4872.
2019 • Volume 1 3 • Number 4

38 FDIC QUARTERLY

While the shift of consumer credit from banks to nonbank financial companies has been 

less pronounced than in other bank lending categories, consumer lending within the banking industry has become more concentrated. The top ten credit card lending banks held 

34 percent of bank credit card loans in 1984 and 88 percent of bank credit card loans in 

second quarter 2019. The top two banks alone hold more than 30 percent of credit card 

loans.20 In auto lending, the bank share of outstanding auto loans changed little from first 

quarter 2011 (35 percent) to first quarter 2018 (33 percent).21 But the top ten large bank auto 

lenders hold 71 percent of outstanding bank auto loans, according to second quarter 2019 

Call Reports.

e Growth of ABS and Federal Student Loans Lowered the Bank Share of Consumer Credit

Source: Federal Reserve Flow of Funds (Haver Analytics).

Notes: Dollar values are adjusted for ination. Financial Accounting Standards Board Statements No. 166 and No. 167 resulted in the consolidation

of a large amount of securitized loan balances back onto lenders’ balance sheets in rst quarter 2010.

Loans Outstanding 

$ Billion 2012 Banks Credit Unions

Issuers of ABS Other Financial

Federal Government Other Nonnancial

Bank Share of Loans

Percent

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1980 1985 1990 1995 2000 2005 2010 2015 2019

Bank Share

Bank Share Excluding Fed. Student Loans

0

10

20

30

40

50

60

70

Chart 6

IV. Lending to Nondepository Financial Institutions

Although direct bank exposure to some lending categories has fallen, banks may still have 

indirect exposure through lending to nonbank financial institutions (NBFI). Bank lending to 

NBFIs grew from about $50 billion in 2010 to $442 billion in second quarter 2019 (Chart 7). 

NBFI loans include loans to special purpose vehicles, private equity funds, real estate investment trusts (REIT), and nonbank mortgage lenders. About 11 percent of banks held NBFI 

loans in second quarter 2019, and the four largest banks—JPMorgan Chase N.A., Bank of 

America N.A., Citibank N.A., and Wells Fargo N.A.—held about half of the total of NBFI 

loans outstanding.22 Bank supervisory experience suggests that outside of the large banks, 

most NBFI lending is to nonbank mortgage lenders or to MBS warehouse lines.23 Through 

these loans, banks retain exposure to many of the loans that have shifted to nonbanks.

Other potential exposure includes loans to business development companies, other business 

lenders, private equity funds, venture capital funds, real estate funds, and REITs. These loans 

may be accounted for under different loan categories on a bank balance sheet, which can 

make it difficult to identify a bank’s credit risk exposure to NBFIs.

20 Credit card data are based on Call Reports. Citibank held 17 percent of bank credit card loans, and JPMorgan Chase N.A. held 

16 percent of credit card loans.

21 Experian Automotive. In first quarter 2011, auto loans became a separate category on Call Reports. Before then, auto loans were 

included with other consumer loans and concentrations could not be identified.

22 FDIC analysis of Call Reports.

23 FDIC.
FDIC QUARTERLY 39

BA N K A N D NON BA N K L E N DI NG OV E R T H E PAST 7 0 Y E A R S

Banks may also hold securities that expose them to risks from nonbanks. For example, banks 

may hold collateralized loan obligations that include leveraged loans. Because Call Reports 

do not require detail about these asset classes, understanding the underlying credit risk of a 

bank’s portfolios of securities and loans to nonbank financial institutions is difficult.

Loans to Nonbank Financial Institutions Have Grown Dramatically Since Data Collection Began

Source: FDIC.

Note: Quarterly data through second quarter 2019. NBFI stands for nonbank nancial institution.

Loans to Nonbank Financial Institutions

$ Billions

Share of Banks With Loans to NBFIs

Percent

0

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0

2

4

6

8

10

12

Community Bank Loans to NBFIs (Le Axis)

Noncommunity Bank Loans to NBFIs (Le Axis)

Percent of Banks With Loans to NBFIs (Right Axis)

Chart 7

Conclusion The banking industry and its activities have changed dramatically in 70 years. Securitization 

is a primary cause of the shift in loan origination from banks to nonbanks. If less-regulated 

financial institutions play a larger role in lending, the shift may alter underwriting standards when loan demand increases. For private securities such as PLMBS, this shift creates 

a market that is more liquid but could dry up quickly in a financial crisis, as we saw in the 

Great Recession. Studying where loans have shifted in lending sectors and the linkages 

among lenders deepens our understanding of risk in the financial system. The FDIC will 

publish a series of articles that look closely at the factors driving these trends and the related 

risks of residential mortgages and corporate debt and leveraged lending.

Author:

Kathryn Fritzdixon

Senior Financial Economist

Division of Insurance and Research

FDIC QUARTERLY 41

LEVERAGED LENDING AND CORPORATE BORROWING:

Increased Reliance on Capital Markets, With Important Bank Links

1 The Federal Reserve defines nonfinancial corporate businesses as “private for-profit domestic nonfinancial corporations.” This 

includes both large and smaller incorporated firms, corporate farms, small S corporations, and foreign-owned U.S. corporations. 

It excludes foreign subsidiaries of U.S.-owned firms and financial firms, including banks, finance companies, holding companies, 

and real estate investment trusts, among others.

Introduction In the decade after the 2008 financial crisis, U.S. corporations have taken advantage of low 

interest rates to significantly increase their debt. The FDIC and other financial regulators are 

devoting significant attention to rising corporate debt as a potential source of economic and 

financial market risk.

Not only have the level of debt and the risks associated with it changed over the past decade, 

but the sources of borrowing have shifted from banks to nonbanks. Nonfinancial corporations are relying more on capital markets and less on bank loans as a funding source.1

Despite a modest increase in use of bank loans by nonfinancial corporations since the end of 

the financial crisis, bank loans make up a significantly lower share of nonfinancial corporate 

debt obligations than in past decades. Most of this broad historical shift has been toward 

greater use of corporate bonds and other debt securities, though in the past two decades the 

market for syndicated leveraged loans has also grown.

The term “leveraged loan” is used differently by different sources. This article focuses on 

broadly syndicated institutional term leveraged loans as defined by Standard & Poor’s Leveraged Commentary and Data (LCD). Other types of leveraged loans such as revolving “pro 

rata” loans are discussed but are not included in most of the analysis.

With leveraged loans, banks have increasingly used an originate-to-distribute model instead 

of holding loans they have originated. Nonbanks such as loan mutual funds and collateralized loan obligation (CLO) securitization vehicles are the ultimate holders of a growing share 

of these loans. This shift from bank financing to capital market financing through bonds 

and leveraged loans could have implications for banking system stability.

The shift may reduce banking risk, because when corporations rely less on direct bank loans, 

direct bank exposure to corporate borrower credit risk is reduced. However, banks are still 

vulnerable to corporate debt distress during an economic downturn in several ways:

• Higher corporate leverage built up through capital markets could reduce the ability of 

corporate borrowers to pay bank and nonbank debt in times of distress.

• Banks lend to nonbank financial firms that in turn lend to corporations, so if corporations 

default on loans from nonbank financial firms, then nonbank financial firms may default 

on loans from banks.

• In a downturn, bond issuances and leveraged loan syndications could decline, and any 

income that a bank had been earning from organizing bond issuances and leveraged loan 

syndications would be likely to decline.

• The migration of lending activity away from the regulated banking sector has increased 

competition for loans and facilitated looser underwriting standards and risky lending 

practices that could expose the financial system to new risks.

• Any macroeconomic effects of corporate debt distress could affect the ability of small businesses, which borrow more heavily from banks, to service their debt.

This article discusses the growing volume of corporate debt and the changes in its balance 

between bank lending and nonbank sources. The next section examines bank exposure 

to the growth and increasing risk of leveraged loans. The article then discusses corporate 

bonds, including the role of banks in these markets and developing risks. The final section 

details the macroeconomic risks banks face from corporate debt as well as potential riskmitigating factors.
2019 • Volume 1 3 • Number 4

42 FDIC QUARTERLY

2 Total C&I bank loans include those made to both corporate and noncorporate (such as single proprietorships and partnerships) 

borrowers. Banks hold only a portion of total outstanding commercial mortgages, according to the Federal Reserve Board, 

“Financial Accounts of the United States,” and FDIC, “Quarterly Banking Profile,” First Quarter 2019, https://www.fdic.gov/bank/

analytical/qbp/2019mar/qbp.pdf. 3 FDIC, “Quarterly Banking Profile,” First Quarter 2019, https://www.fdic.gov/bank/analytical/qbp/2019mar/qbp.pdf. 4 Bank loans exclude mortgages since only a portion of commercial mortgages are held by banks. The share of corporate debt 

represented by bank loans is larger when mortgages are included, but the trend in bank loans’ share of corporate borrowing 

remains the same.

Growth and Composition 

of Nonfinancial 

Corporate Debt

U.S. corporations have long relied on both banks and capital markets for debt financing. 

Banks finance corporations through commercial and industrial (C&I) loans and commercial 

mortgages. Businesses can be grouped into corporate and noncorporate. Corporations are 

generally larger businesses and are owned by shareholders. Larger corporations can raise 

funds by issuing shares of stock or bonds and can borrow from nonbank lenders and banks, 

but they rely less on banks for funding than do smaller, noncorporate businesses. Corporate 

borrowers account for less than half of total C&I bank loans and only 13 percent of commercial mortgages.2

 Noncorporate businesses are generally sole proprietorships and partnerships 

and rely more heavily on banks for financing because they cannot issue stock or bonds.

Community banks participate in both C&I and commercial mortgage lending and account 

for roughly 10 percent of C&I bank loans and 33 percent of commercial mortgage loans held 

by banks.3 Data on the portion of these community bank loans that go to corporate versus 

noncorporate borrowers are unavailable, but it is possible that small noncorporate businesses 

are more likely to turn to community banks for debt financing than are larger corporations.

The balance between corporate borrowing via banks and corporate borrowing via capital 

markets has shifted over the decades, with the percentage of corporate debt in bank loans 

on a declining trend since the mid-1980s (Chart 1).4 Since the financial crisis, nonfinancial 

corporations have used debt securities more and have used bank loans less than at any time 

since 1950. Bank loans recovered from a sharp decline in share after the financial crisis but 

remain around 12 percent of corporate borrowing, half the level in 1990. From 1990 through 

2017, debt securities increased their share of corporate borrowing from 48 percent to around 

69 percent.

Bank Loans Have Become a Smaller Part of Corporate Borrowing Since the 1980s,

as the Use of Debt Securities and Nonbank Loans Increased

Source: Federal Reserve Board (Haver Analytics).

Notes: Bank loans do not include mortgages. Data are through second quarter 2019.

Share of Corporate Debt

Percent Bank Loans Debt Securities Loans From Nonbanks

0

10

20

30

40

50

60

70

80

1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011 2017

Chart 1
FDIC QUARTERLY 43

LEVERAGED LENDING AND CORPORATE BORROWING:

INCREASED RELIANCE ON CAPITAL MARKETS, WITH IMPORTANT BANK LINKS

5 Leveraged loan arrangers do not necessarily fund the loans and hold them on their books before selling them, but they set the 

terms of the debt offering and recruit investors to fund the leveraged loan. In “best-efforts” syndications, the arranger is not 

required to fund any unsold loan balance. In “underwritten” syndications, the arranger pledges to fund any unsold portion of the 

loan offering, though they have the flexibility to adjust the loan terms within a set range (called market price flexing) to attract 

investors.

6 This article focuses on nonfinancial corporate debt as that is the area of debt which has grown substantially since the financial 

crisis.

Since the financial crisis, some of the most rapid corporate debt growth has occurred in the 

corporate bond and syndicated leveraged loan markets. Syndicated leveraged loans are made 

to highly indebted borrowers and are funded by groups of investors and lenders. Similar 

to bond issuances, the loan offerings are typically arranged by large banks, but most of the 

funding comes from nonbank investors.5

From the end of 2008 to first quarter 2019, nonfinancial corporate bonds outstanding grew 

by 91 percent in nominal terms while institutional leveraged loans outstanding grew by 

101 percent, not accounting for inflation. Corporate bonds were especially appealing to 

corporate borrowers during the prolonged post-crisis period of low interest rates. Floatingrate leveraged loans became appealing to lenders and investors as the Federal Reserve began 

raising interest rates in 2016.

While the composition of corporate debt has shifted over time, the level of debt relative to 

GDP has grown substantially over the past half century. Between 1951 and the 1970s, the 

nonfinancial corporate debt-to-GDP ratio ranged from 22 percent to 35 percent, growing 

steadily throughout the period (Chart 2).6 Starting in the 1980s, the corporate debt-to-GDP 

ratio grew rapidly to exceed 43 percent. Since then, the corporate debt-to-GDP ratio has 

fluctuated with the business cycle, peaking at about 45 percent near the end of economic 

expansions before falling to about 39 percent during recession and recovery. As of second 

quarter 2019, the nonfinancial corporate debt-to-GDP ratio had reached an all-time high of 

47 percent.

Nonnancial Corporate Debt-to-GDP Has Reached an All-Time High

Sources: Federal Reserve Board and Bureau of Economic Analysis (Haver Analytics).

Note: Data are through second quarter 2019.

Total Nonnancial Corporate Debt-to-GDP

Percent

0

5

10

15

20

25

30

35

40

45

50

1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011 2017

Chart 2
2019 • Volume 1 3 • Number 4

44 FDIC QUARTERLY

7 Moody’s Investor Service, “Leveraged Lending Risk Rising but Contained Barring Adverse Turn in Operating Conditions,” 

February 20, 2019.

8 S&P LCD.

Growth in Leveraged Loans 

Has Been Driven in Large 

Part by Nonbank Investors, 

as Riskiness of Loans Has 

Increased

The growth in corporate debt has been partly driven by significant growth in leveraged 

lending. The leveraged loan market has grown dramatically over the past 20 years from 

about $100 billion outstanding in 2000 to almost $1.2 trillion in 2019 (Chart 3). Risks have 

also increased in this market. Leveraged loans are generally made to lower-rated corporate 

borrowers, which typically have high debt levels. They are frequently used to finance mergers and acquisitions, including leveraged buyouts. In addition, they generally carry floating 

interest rates, typically based on a spread over LIBOR, versus the fixed interest rates in most 

corporate bonds. Floating interest rates made them appealing to investors throughout 2017 

and 2018 as the Federal Reserve accelerated the pace of interest rate increases. This increase 

in demand from nonbank investors with potentially greater tolerance for credit risk facilitated large increases in leveraged loan issuance, as well as deterioration in lender protections, 

which reached a record low in 2018, according to Moody’s Investor Service.7

Traditionally, leveraged loans have included “maintenance covenants” that required the 

borrower to meet certain financial performance metrics to remain in compliance with their 

loan agreement. In the early 2000s, virtually all leveraged loans contained these covenants. 

In 2007, the share of leveraged loans lacking these covenants (called “covenant-lite” loans) 

rose sharply to 29 percent of new loans (Chart 3). The share of covenant-lite leveraged loans 

fell after the financial crisis, but increased sharply again, passed the previous record high in 

2012, and reached 85 percent of new loans in 2018.8

Aside from covenants, other aspects of leveraged loan credit quality have deteriorated as 

well. Reported leverage for borrowers has risen significantly, with debt reaching 5.4 times 

earnings in the first half of 2019, up from 3.9 times in 2010. Actual leverage could be even 

higher, as the use of earnings “add-backs,” which inflate earnings to account for future 

anticipated cost savings or revenue increases, has become more prevalent. In the first half 

of 2019, 43 percent of leveraged loan deals contained earnings add-backs, up from only 

10 percent in 2010.

Outstanding U.S. Leveraged Loans Are Almost Double eir Pre-Crisis Level, and

Covenant-Lite Share Is Near an All-Time High

Source: S&P Leveraged Commentary and Data.

Notes: Outstanding loan data cover loans included in the S&P/Loan Syndications and Trading Association Leveraged Loan Index and thus

underestimate the full market. Covenant-lite share is of institutional leveraged loan issuance. Data are through July 2019. 

$ Billions Outstanding

Covenant-Lite Share

Percent

Total Leveraged Loans Outstanding (Le Axis)

Covenant-Lite Share (Right Axis)

0

200

400

600

800

1,000

1,200

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

0

10

20

30

40

50

60

70

80

90

Chart 3
FDIC QUARTERLY 45

LEVERAGED LENDING AND CORPORATE BORROWING:

INCREASED RELIANCE ON CAPITAL MARKETS, WITH IMPORTANT BANK LINKS

9 S&P LCD. Second-lien debt also provides loss-absorbing protection for first-lien debt, but growth in second-lien loans since the 

financial crisis has not been as large as the decline in subordinated debt.

10 Moody’s Investor Service, “Convergence of Bonds and Loans Sets Stage for Worse Recoveries in the Next Downturn,” 

August 8, 2018.

11 S&P LCD.

12 Revolving credits are lines of credit that the borrower can draw upon as needed. The term “pro rata” is simply a naming 

convention in the leveraged lending market. Data from LCD.

The composition of borrower debt has deteriorated as well, with loss-absorbing subordinated debt declining significantly, leaving less protection for senior lenders (Chart 4).9

Some borrowers have even been able to remove assets from the reach of creditors without 

violating the terms of their loans. All of these factors increase the risk to lenders in the leveraged loan market. Credit rating agency Moody’s predicts that recovery rates on defaulted 

leveraged loans will be significantly lower during the next default cycle than they have been 

historically.10

Banks have increasingly used an originate-to-distribute model for leveraged loans, with the 

result that nonbank investors increasingly are the ultimate holders of these loans. In the mid1990s, U.S. and foreign banks funded more than 70 percent of institutional leveraged loans. 

By the first half of 2019, they funded less than 11 percent (Chart 5).11 Banks continued to 

fund the revolving credit “pro rata” portions of leveraged loans. Over the past 20 years those 

have become a smaller portion of total leveraged lending, with pro rata loans falling from 

76 percent of leveraged loan issuance in 2000 to 30 percent in 2018.11 The shrinking bank 

share of institutional leveraged loans was largely replaced with funding from collateralized 

loan obligations (CLOs) and loan mutual funds. CLOs are securitization vehicles that bundle 

leveraged loans and then sell debt tranches with varying levels of risk to investors.

Leverage in Leveraged Loans Is High, and Loss-Absorbing Subordinated Debt Has 

Largely Disappeared

Source: S&P Leveraged Commentary and Data.

Notes: EBITDA refers to earnings before interest, taxes, depreciation, and amortization. Data are through second quarter 2019.

Debt/EBITDA Ratio

First-Lien Debt

Second-Lien Debt

Other Senior Debt

Subordinated Debt

0

1

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Chart 4
2019 • Volume 1 3 • Number 4

46 FDIC QUARTERLY

13 Analyses based on EFA data and other data sources may differ from the results presented in this article because of differences in 

market coverage, leveraged loan definitions, and other factors.

14 Federal Reserve Board.

15 S&P LCD. The largest banks are defined as those listed by the Financial Stability Board as global systemically important banks. 

Share is by loan amount.

U.S. Bank Share of Primary Leveraged Loan Purchases Has Declined Signicantly,

ough Risk Exposure Remains

Source: S&P LCD.

Notes: Excludes revolving credit-only loans as well as le and right agent commitments (including administrative, syndication and documentation agent, 

and arranger). Data are through second quarter 2019. 

Share of Primary Leveraged Loan Purchases

Percent

0

10

20

30

40

50

60

70

80

90

100

1994 1997 2000 2003 2006 2009 2012 2015 2018

CLOs, Insurance Companies, 

and Loan, Hedge, and High-Yield Funds

Finance Companies and Securities Firms

Foreign Banks

U.S. Banks

Chart 5

Banks Still Face Exposure to 

Leveraged Loans

Bank exposure to leveraged loans includes their “pro rata” leveraged lending, holdings of 

CLOs, lending to CLO arrangers, and participation in leveraged loan syndication. Precise 

data on bank holdings of pro rata leveraged loans are not available, but data from the Federal 

Reserve’s Enhanced Financial Accounts (EFA) provide insight. EFA data are not a perfect 

proxy for leveraged loans as they include a broader set of syndicated loans, not just those 

made to leveraged borrowers. However, these data can provide an estimate of the potential 

size of the pro rata lending market.13 As of second quarter 2019, banks held about $2 trillion 

in revolving syndicated credit lines, of which $515 billion were drawn. Undrawn credit lines 

represent exposure for banks, as they can be drawn upon as borrowers encounter financial 

difficulties. Banks also held $443 billion in syndicated term loans, which would include 

institutional leveraged loans as well as pro rata term loans to leveraged borrowers and syndicated term loans to non-leveraged borrowers. This exposure has grown over the past decade 

(Chart 6). Nonbank financial institutions also provide revolving credit lines to syndicated 

loan borrowers. According to EFA data, nonbank financial institutions provided $893 billion 

in revolving credit lines, with $155 billion drawn upon.14 Bank holdings of revolving and 

term loans to leveraged borrowers are a direct exposure to risk in the leveraged lending 

market.

Large banks also arrange the vast majority of leveraged loan issuances. In the first half of 

2019, banks arranged 93 percent of U.S. leveraged loans, and the largest banks arranged 

more than 92 percent.15 Arranging debt issuances provides banks with fee income but also 

exposes them to a degree of risk. When arranging leveraged loan issuances, banks face the 

possibility that market demand for the debt will contract, which could force the arranging 

bank to retain the debt on its books. This risk, known as “pipeline risk,” caused challenges in 

the mortgage-backed securities and leveraged loan markets during the 2008 financial crisis. 
FDIC QUARTERLY 47

LEVERAGED LENDING AND CORPORATE BORROWING:

INCREASED RELIANCE ON CAPITAL MARKETS, WITH IMPORTANT BANK LINKS

16 International Monetary Fund, “Global Financial Stability Report,” April 2019, https://www.imf.org/en/Publications/GFSR/

Issues/2019/03/27/Global-Financial-Stability-Report-April-2019. 17 Data from Quarterly Reports of Condition and Income (Call Reports). CLO holdings are approximated as the sum of the 

SCCIHA, SCCIAF, SCSCLNHA, SCSCLNAF, TRSCLN, and TRSCCI. Call Report data available on FDIC.gov. Data on CLO 

holdings are reported only by banks with $10 billion or more in assets, so this figure may underestimate total bank CLO holdings.

18 Citi Research, “U.S. CLO 2018 Midyear Outlook,” June 29, 2018.

19 Call Report data.

20 S&P Global Market Intelligence, “Those $700 billion in U.S. CLOs: Who Holds Them, What Risk They Pose,” June 21, 

2019; and Loan Syndications and Trading Association, “Risk Retention for CLOs,” https://www.fdic.gov/regulations/laws/

federal/2011/11c00ad74mem40-01.pdf. 21 International Monetary Fund, “Global Financial Stability Report,” April 2019.

Banks have since improved their pipeline risk management, and the International Monetary 

Fund estimates that pipeline risk in leveraged loan arranging is only about a third of what it 

was before the financial crisis.16 In addition, leveraged loans now typically contain “market 

flex pricing” provisions, which allow the arranger to adjust the loan terms to attract investor 

demand. Banks also face loss of the fee income they earn from arranging leveraged loan sales 

should demand for these products wane during periods of market turmoil.

Another source of exposure is bank ownership of tranches of CLOs containing leveraged 

loans. As of early 2019, the FDIC estimates that U.S. banks held about $95 billion in CLOs.17

Bank CLO holdings are generally lower risk than direct leveraged loan holdings, since 

banks generally hold the safer, senior portions of CLOs.18 Most of these CLO holdings are 

also concentrated in the largest banks; banks with at least $250 billion in assets account for 

86 percent of estimated bank CLO holdings.19 While banks primarily own the most senior 

tranches, they still could be affected by distress in the leveraged loan market. CLO market 

liquidity could decline during periods of corporate debt distress, exposing banks to market 

and liquidity risks. For example, while originally AAA-rated CLOs did not take credit losses 

during the financial crisis, many AAA-rated CLO tranches saw price declines of around 

30 percent.20 Banks also provide credit, in the form of warehouse lines of credit, to firms 

that arrange CLOs. CLO arrangers use warehouse lines of credit to purchase leveraged 

loans. However, this exposure appears to be fairly limited. The International Monetary Fund 

recently estimated total global CLO warehouse lines of credit to be only $20 billion, down 

from $200 billion in 2008.21

Bank Exposure to Syndicated Loans, Which Include Leveraged Loans, Is Signicant 

and Increasing

Source: Federal Reserve Board Enhanced Financial Accounts data (Haver Analytics).

Note: Data are through second quarter 2019.

Bank Syndicated Loans

$ Billions Undrawn Revolving Credits Drawn Revolving Credits Term Loans

0

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Chart 6
2019 • Volume 1 3 • Number 4

48 FDIC QUARTERLY

22 FDIC. This figure is for “other domestic debt securities,” which could include securities other than corporate bonds and does 

not include U.S. bank holdings of foreign corporate bonds. Total foreign bond holdings (including all foreign bonds, not only 

corporate) for U.S. commercial banks and savings institutions totaled about $218 billion in second quarter 2019. Total outstanding 

bonds are from the Federal Reserve Board, “Financial Accounts of the United States.”

23 This includes holdings of foreign bonds for all holders except non-U.S. individuals and entities, which cannot be separately 

determined from bonds issued by U.S. corporations. Total holdings of foreign bond issues by U.S. residents equaled $3.2 trillion in 

second quarter 2019.

24 ICE Data Services. Bond rating data are through August 2018.

25 Bank for International Settlements, BIS Quarterly Review, March 2019, https://www.bis.org/publ/qtrpdf/r_qt1903.htm.

Direct Bank Exposure to 

Increasing Risk in 

Corporate Bonds 

Is Limited

Depository institutions participate in corporate bond markets, but they provide only a small 

portion of the total funding. The vast majority of financing in corporate bond markets 

comes from nonbank institutional investors and investment funds. In second quarter 2019, 

U.S. commercial banks and savings institutions held only around $67 billion in corporate 

bonds compared with $11.5 trillion in total outstanding financial and nonfinancial U.S. 

corporate bonds.22 Life insurance companies, mutual funds, pension funds, and non-U.S. 

individuals and entities, combined, hold more than $10.5 trillion in U.S. corporate bonds.23

Banks increased their corporate bond holdings during the financial crisis, but their holdings 

as a share of total bonds has since fallen significantly, while the corporate bond market has 

grown (Chart 7).

An increase in risk in some areas has accompanied the growth in corporate bonds over the 

past decade. Most of the growth in corporate bonds since the financial crisis has been in 

lower-rated investment-grade borrowers and the highest-rated of the “high-yield” borrowers. The amount of BBB-rated bonds, the lowest investment-grade rating, almost quadrupled 

from the end of 2007 to late 2018, but the highest-rated AA and AAA bonds grew by only 

12 percent in that period (Chart 8).24 As of late 2018, the dollar volume of BBB-rated bonds 

made up 49 percent of the investment-grade bond market and was 2.5 times as large as that 

of the entire high-yield bond market. This presents risks to bond market borrowers and 

investors. If the rating agencies downgrade a significant portion of BBB-rated debt because 

of an economic slowdown or other factors affecting borrower creditworthiness, this would 

increase borrowing costs not only for the downgraded firms but potentially for other highyield borrowers as well, as the much-smaller high-yield bond market struggles to absorb the 

additional supply of debt. Mutual funds and some other investors that are required to hold 

investment-grade bonds would be forced to sell downgraded bonds. This could exacerbate 

the effects of the downgrades. In 2018, about 45 percent of bonds held by U.S. investmentgrade bond mutual funds were rated BBB.25

Bank Holdings of U.S. Corporate Bonds Have Fallen Substantially Since the Financial Crisis

Sources: Federal Reserve Board (Haver Analytics) and Federal Deposit Insurance Corporation.

Notes: Bank share is based on “other domestic debt securities” and may overestimate bank bond holdings. Data are through second quarter 2019. 

Bank Share of Corporate Bond Holdings

Percent

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Chart 7
FDIC QUARTERLY 49

LEVERAGED LENDING AND CORPORATE BORROWING:

INCREASED RELIANCE ON CAPITAL MARKETS, WITH IMPORTANT BANK LINKS

26 Federal Reserve Board.

27 U.S. Department of the Treasury, “The Treasury High Quality Market Corporate Bond Yield Curve,” treasury.gov/resourcecenter/economic-policy/corp-bond-yield/Pages/Corp-Yield-Bond-Curve-Papers.aspx.

BBB-Rated Bonds Have Grown Faster an Other Bonds

Source: ICE Data Services.

Note: Data are through August 2018.

$ Trillions

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

AAA AA A BBB BB B C

Chart 8

Macroeconomic Effects of 

Corporate Debt Distress 

Could Affect Other Types of 

Bank Loans

A potentially significant exposure of banks to corporate debt risks is through macroeconomic effects. In the event of corporate debt distress, firms may reduce investment and cut 

payrolls to continue servicing their debt. This would likely slow economic activity more 

broadly, potentially affecting noncorporate businesses such as small sole proprietorships and 

partnerships, as well as households.

Bank exposure to household and noncorporate business debt is more extensive than bank 

direct exposure to corporate debt. Bank lending to households and small noncorporate businesses include home mortgages, consumer loans, commercial mortgages, and business loans. 

In second quarter 2019, noncorporate U.S. businesses owed more than $1.4 trillion in loans 

from depository institutions, which exceeds the total of corporate bank loans. In addition, 

noncorporate businesses owed over $4.1 trillion in commercial mortgages, more than seven 

times the amount of corporate mortgages.26 Were an economic slowdown to affect these 

noncorporate business borrowers’ ability to pay their debts, banks could incur losses on 

those loans. A macroeconomic slowdown would potentially affect the ability of households 

and other non-business borrowers to service their debt, as distress in the business sector 

would likely have adverse effects on employment and household income, further increasing 

potential bank exposure.

High Corporate Profits 

and Low Interest Rates 

Should Aid Corporate 

Debt Servicing

While corporate debt levels are at an all-time high, the ability of corporations to service 

that debt is stronger than in the past. The extended period of historically low interest rates 

since the 2008 financial crisis has meant that from 2010 through at least early 2019, the rates 

corporations paid on their debt remained well below any other point between 1980 and the 

financial crisis.27 These lower interest rates reduce corporate debt servicing costs. Additionally, the profits corporations have available to service their debt loads have increased 

substantially over the past two decades. Since the 1990–1991 recession, U.S. corporate aftertax profits as a share of GDP have reached a higher peak during each economic cycle than 

they reached in the previous one.
2019 • Volume 1 3 • Number 4

50 FDIC QUARTERLY

28 A lower debt-to-profit ratio means corporations have more profits available to service their debt.

29 Federal Reserve Board and Bureau of Economic Analysis.

Corporate debt relative to profits has reached new lows during each expansion since 1990 

(Chart 9).28 In the 1990s, the corporate debt-to-profit ratio reached a low of 5.2. In the 2002–

2007 economic expansion the corporate debt-to-profit ratio fell to 4.4. So far in the current 

economic cycle, which began after the 2008 financial crisis, the corporate debt-to-profit ratio 

has reached a new low of 3.8 and has averaged well below the average level from previous 

economic expansions, although it increased to 5.4 in second quarter 2019.29 These higher 

profits can potentially support the higher debt loads corporations have accumulated since 

the financial crisis.

0

5

10

15

20

25

30

35

40

45

50

1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011 2017

0

1

2

3

4

5

6

7

8

9

10

Corporate Prots Are Near All-Time Highs, Which Should Improve Debt-Servicing Capabilities

Sources: Federal Reserve Board and Bureau of Economic Analysis (Haver Analytics).

Notes: Recessions shaded. Data are through second quarter 2019.

Debt-to-GDP Ratio

Percent Nonnancial Corporate Debt-to-GDP Total Debt to Aer-Tax Prot Corporate Debt-to-Prot Ratio

Chart 9

Conclusion Corporations have increased their debt significantly since the end of the financial crisis. 

Most of this lending has come not from banks but from capital markets in the form of 

corporate bonds and syndicated leveraged loans. This pattern of corporations receiving 

debt funding primarily through nonbank capital markets continues a long-term trend in 

corporate borrowing. Corporate debt has become riskier as lower-rated bonds have grown 

substantially and lender protections in leveraged loan markets have been reduced. Despite 

the concentration of corporate debt in nonbank credit markets, banks still face both direct 

and indirect exposure to corporate debt risks. Direct bank holdings of leveraged loans, 

pipeline risks in bond and leveraged loan issuance, and lending to nonbank financial firms 

expose banks to risks from corporate debt. Macroeconomic effects of corporate debt distress 

create indirect risks. As this distress affects the broader economy it can reduce the ability of 

noncorporate businesses and consumers to service their debt, a higher proportion of which 

is held by banks.

Author:

Frank Martin-Buck, PhD

Senior Financial Economist

Division of Insurance and Research
FDIC QUARTERLY 51

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: 

Nonbanks in the Post-Crisis Period

1 For this article, the financial crisis period is defined throughout as 2008 through 2009, corresponding roughly to the most acute 

phase of the financial crisis. The FDIC has referred to the broader banking crisis as extending through 2013. See FDIC, Crisis and 

Response: An FDIC History, 2008–2013 (2017), https://www.fdic.gov/bank/historical/crisis/. 2 Home equity loans and home equity lines of credit are included in 1–4 family mortgages outstanding.

3 Board of Governors of the Federal Reserve System, “Z.1 Financial Accounts of the United States, Second Quarter 2019,” 

https://www.federalreserve.gov/releases/z1/20190920/z1.pdf, L.218. 4 Private-label issuance is 5.2 percent of all residential mortgage-backed securitization issuance, down from more than 50 percent 

in 2005 and 2006, and the 1995 to 2003 share of near 20 percent, according to the Urban Institute, “Housing Finance at a Glance,” 

August 2019:12, https://www.urban.org/sites/default/files/publication/100866/august_chartbook_2019_0.pdf. 5 According to the Urban Institute’s July 2019 edition of “Housing Finance at a Glance,” of all first-lien originations in first 

quarter 2019, 39.6 percent were GSE securitizations, 37.3 percent were portfolio originations, 20.2 percent were Federal Housing 

Administration (FHA) or Department of Veterans Affairs (VA) securitizations, and 2.9 percent were private-label securitizations. 

The percentage of private-label securitizations was the highest since 2007, but a small fraction of the private-label share in the 

years leading up to the crisis. https://www.urban.org/sites/default/files/publication/100723/july_chartbook_2019_1.pdf. 6 Ben S. Bernanke, “Housing, Housing Finance, and Monetary Policy,” speech at the Federal Reserve Bank of Kansas City 

Economic Symposium, Jackson Hole, Wyoming, August 31, 2007, https://www.federalreserve.gov/newsevents/speech/

bernanke20070831a.htm; and Marshall Lux and Robert Greene, “What’s Behind the Non-Bank Mortgage Boom?” Harvard 

Kennedy School, June 2015:5, https://www.hks.harvard.edu/sites/default/files/centers/mrcbg/working.papers/42_Nonbank_

Boom_Lux_Greene.pdf. 

Introduction The mortgage market changed notably after the collapse of the U.S. housing market in 

2007 and the financial crisis that followed. A substantive share of mortgage origination and 

servicing, and some of the risk associated with these activities, migrated outside of the banking system. Some risk remains with banks or could be transmitted to banks through other 

channels, including bank lending to nonbank mortgage lenders and servicers.1 Changing 

mortgage market dynamics and new risks and uncertainties warrant investigation of potential implications for systemic risk.

This article covers trends in the volume of 1–4 family mortgages outstanding, migration 

of mortgages between market participants, and the drivers of these shifts. Next, the article 

discusses trends in residential mortgage origination and servicing from 2000 to early 2019 

and discusses the landscape of the mortgage industry, key characteristics of nonbank originators and servicers, and the potential risks posed by nonbanks. Last, the article contemplates the implications that the migration of mortgage activities to nonbanks may have for 

banks and the financial system.

Trends in the Volume of and 

Competition for 1–4 Family 

Home Mortgage Loans

Mortgage originators and servicers have long competed for market share through innovations in capital markets, customer service, and funding and business structures, and in 

applying technology to make processes more efficient and cost-effective. The composition 

and the concentration of the dominant market participants have varied with developments 

in regulation, government intervention and guarantees, primary and secondary mortgage 

markets, securitization, technological innovation, dynamics in housing markets, financial 

markets, and the broader economy.

The share of 1–4 family mortgages outstanding held by banks has declined since the late 

1970s as mortgages held by the government-sponsored enterprises (GSEs) and mortgages in 

agency- and GSE-backed mortgage pools became an increasingly dominant part of the U.S. 

mortgage market (Chart 1).2 The share of mortgages outstanding held by banks declined 

from the 1970s through the 1990s and then leveled off near 24 percent in the past decade.3

The bank share of mortgages held by non-GSE entities declined through 2007 to 46 percent, 

then rebounded to nearly 64 percent in 2019. This decline and recovery was largely driven 

by the rise and fall of private-label mortgage-backed securitization.4 These historical shifts 

in outstanding mortgage volumes were largely driven by securitization trends and a robust 

secondary market for mortgages.5

Insolvency in thrifts in the early 1980s and the savings and loan crisis of the late 1980s 

contributed significantly to the decline in bank market share. These events in the 1980s 

ended the dominance of deposit-taking portfolio lenders in the mortgage markets, leaving 

mortgage lending largely to growing regional banks and a growing number of nonbanks.6
2019 • Volume 1 3 • Number 4

52 FDIC QUARTERLY

e Bank Share of 1–4 Family Mortgages Outstanding Declined rough the 1980s and 

Flattened in 2009 

Source: Federal Reserve Flow of Funds (Haver Analytics).

Notes: Data as of June 2019. Dollar values are adjusted for ination, expressed as trillions of chained 2012 dollars.

GSEs (government-sponsored enterprises) includes mortgages held by GSEs and mortgages held by agency- and GSE-backed mortgage pools.

Mortgages Outstanding

$ Trillion 2012 Banks Credit Unions

GSEs Issuers of ABS

Other Financial Nonnancial

Bank Share of Mortgages

Percent

2

4

6

8

10

12

14

1952 1961 1970 1979 1988 1997 2006 2015

0

Bank Share of Mortgages (Right Axis)

Bank Share of Non-GSE Mortgages (Right Axis)

0

10

20

30

40

50

60

70

80

90

Chart 1

Two types of entities originate and service mortgages: 1) banks and their affiliates and 

2) nonbanks that are not part of or affiliated with depository institutions.7 Banks have access 

to deposits and other borrowings for funding while nonbanks are financed through means 

other than deposits. Banks and nonbanks originate loans and either hold the loans on their 

balance sheets until maturity or securitize and sell the loans on the secondary market. The 

latter describes the originate-to-distribute model, which is the form of financing particularly prevalent among nonbank mortgage lenders.8

 Because they rely on the originate-todistribute model, nonbank mortgage lenders are largely absent in measures of the holdings 

of mortgages outstanding in Chart 1, though they have been originating mortgages dating 

back to at least World War II.9 The post-crisis shift in residential mortgage lending activity 

from banks to nonbanks has mostly involved originations and servicing rather than holdings 

of loans. In 2016, the volume of 1–4 family mortgages originated by nonbanks surpassed the 

volume originated by banks (Chart 2).

7 Throughout this article, mortgage originators are generally classified as “bank” or “nonbank” using Home Mortgage Disclosure 

Act (HMDA) data. “Nonbanks” include all U.S. Department of Housing and Urban Development (HUD) reporters. “Banks” 

include banks, credit unions, and their affiliates. Any references to HMDA origination data includes single-family residential 

originations, defined as first-lien purchase or refinance loans secured by an owner-occupied, 1–4 family unit, site-built 

property. Mortgage servicers were categorized for this article using organization hierarchies published by the Federal Financial 

Institutions Examination Council National Information Center. For a given year, each entity identified in the Inside Mortgage 

Finance servicing rankings was located by name on the National Information Center website (https://www.ffiec.gov/npw) 

and an organization hierarchy for that year for that entity or that entity’s parent holding company was searched. If the entity’s 

organization hierarchy or the hierarchy of its parent holding company included a bank (depository institution), savings and 

loan association, or a credit union, the entity was categorized as a bank for that year. All other entities in that ranking year were 

categorized as nonbanks. Any references to Inside Mortgage Finance mortgage servicing data generally refer to the rankings of 

the top 25 mortgage servicing participants by total residential mortgages serviced. The Inside Mortgage Finance ranking includes 

entities that own mortgage servicing rights, but do not service loans directly, and some institutions that are subservicers only 

(firms that service mortgages on a contract basis).

8 FDIC analysis of 2017 HMDA data indicates that through the first three quarters of 2017, banks sold nearly half of their 

1–4 family originations in aggregate, while nonbanks sold more than 97 percent. In aggregate, nonbanks sold 34.1 percent to the 

GSEs, 20.8 percent into securitizations guaranteed by Ginnie Mae, and 42.7 percent to other entities. In aggregate, banks sold 

27.2 percent to the GSEs, 7.2 percent into securitizations guaranteed by Ginnie Mae, and 19.0 percent to other entities. Disposition 

shares are based on originations from the first three quarters of 2017, to correct for censoring. “Other” dispositions include sales 

to commercial banks, mortgage banks, life insurance companies, affiliated institutions, and into private-label securities.

9 According to Bernanke’s “Housing, Housing Finance, and Monetary Policy,” following World War II, the mortgage market took 

on the form that would last several decades. The market consisted of two main sectors. The first sector consisted of savings and 

loan associations, mutual savings banks, and, to a lesser extent, commercial banks, primarily financed by short-term deposits. 

These institutions made conventional fixed-rate long-term loans to homebuyers. Notably, federal and state regulations limited 

geographical diversification for these lenders. Largely the product of New Deal programs established in the 1930s, the second 

sector included private mortgage brokers and other lenders that largely originated standardized loans backed by the FHA and the 

VA. These guaranteed loans could be held in portfolio or sold to institutional investors through a nationwide secondary market.
FDIC QUARTERLY 53

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

Strong Post-Crisis Growth in Nonbank Mortgage Originations Enabled Nonbanks to

Surpass the Bank Share of Originations Since 2016

Source: FDIC analysis of Home Mortgage Disclosure Act data.

Notes: Nonbanks include all Department of Housing and Urban Development reporters. Banks also include credit unions and their aliates. 

Data are limited to single-family residential mortgage originations, dened as rst-lien purchase or renance loans secured by an owner-occupied, 

1–4 family unit, site-built property.

Market Share

Percent

Origination Volume

$ Billions

52.5

0

20

40

60

80

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0

200

400

600

800

1,000

1,200

1,400

1,600

Bank Volume (Right Axis) Nonbank Volume (Right Axis)

Bank Share (Le Axis) Nonbank Share (Le Axis)

47.5

Chart 2

Mortgage Origination and 

Servicing Trends in Banks 

and Nonbanks During the 

Pre- and Post-Crisis Period

The period from 2000 to 2008 was characterized by a rapid expansion followed by a sudden 

contraction in mortgage origination with large shifts in the participants in and composition 

of the mortgage market. In the pre-crisis period, home prices rose rapidly and the volume of 

1–4 family mortgage originations grew to nearly $2.3 trillion in 2005, for which nonbanks 

originated just more than one-third (Chart 2).10 Fueled by investor demand, the share of 

originations sold into private-label securitizations grew rapidly. Lenders that reached aggressively for growth used less stringent lending practices and underwriting standards, causing 

a rapid rise in risk.11 These lenders increasingly offered loans with limited or no documentation of the consumer’s income or assets, negative amortization, interest-only payments, and 

adjustable rates with low initial monthly payments and subsequent payment reset.12

Nonbanks and banks, particularly the largest banks and their affiliates, grew their mortgage originations at an unprecedented rate through 2005 before home prices peaked and 

mortgage delinquencies accelerated. With the onset of the housing crisis, nonbank originators faced funding strains. Dependence on credit to finance both mortgage origination and 

the costs of mortgages in default made nonbanks particularly vulnerable as banks either 

cancelled existing lines of credit or became unwilling or less willing to extend new lines. The 

slowdown in securitization markets made it difficult for nonbanks to move loan originations off the warehouse lines and to obtain financing.13 Nonbanks yielded 12.4 percent of 

their market share of originations to banks between 2006 and 2007 and nonbank failures 

accelerated.14

10 The pre-crisis period is defined throughout this article as 2000 through the start of the recession in December 2007, though the 

onset of the housing crisis preceded the onset of the recession.

11 Urban Institute, “Housing Finance at a Glance,” July 2019:8, https://www.urban.org/sites/default/files/publication/100723/

july_chartbook_2019_1.pdf. 12 Consumer Financial Protection Bureau, “Ability-to-Repay and Qualified Mortgage Rule Assessment Report,” January 2019:9, 

https://files.consumerfinance.gov/f/documents/cfpb_ability-to-repay-qualified-mortgage_assessment-report.pdf. 13 You Suk Kim, Richard Stanton, Steven M. Laufer, Nancy Wallace, and Karen Pence, “Liquidity Crises in the Mortgage 

Market,” Brookings Papers on Economic Activity, March 8, 2018:348–349, 366, https://www.brookings.edu/wp-content/

uploads/2018/03/5_kimetal.pdf. 14 A number of nonbanks failed in 2007 and did not report HMDA data for 2007. Consequently, the volume of nonbank 

originations for 2007 may be understated.
2019 • Volume 1 3 • Number 4

54 FDIC QUARTERLY

Through 2009, as mortgage delinquencies and defaults accelerated and securitization markets 

were strained, many banks and nonbanks with mortgage businesses could not offload originations to third parties and were instead left with large quantities of relatively inferior quality mortgage loans on their books.15 During this period, many bank and nonbank lenders 

failed, faced bankruptcy, or merged with other lenders. Between 2005 and 2009, the number 

of banks reporting HMDA data declined by 3.7 percent while the number of nonbank reporters declined by 32.6 percent. The volume of 1–4 family mortgage originations declined from 

$1.6 trillion in 2007 to $1.1 trillion in 2008, but rose to $1.6 trillion in 2009.

After the financial crisis, demand has generally outpaced supply in the housing market and 

home price appreciation has exceeded income growth. An extended period of low interest 

rates boosted refinancing activity, while a decline in the inventory of existing homes for sale 

and moderate levels of new home construction restricted supply and increased home prices, 

which tempered growth in home sales.16 After a prolonged period of low interest rates, mortgage rates climbed in 2013 and again in 2016, further reducing affordability of purchase 

loans and the appeal of refinancing.17 The resulting decline in refinancing activity served 

as a major impediment to the refinancing-focused business models of some lenders. Nearly 

40 percent of the origination activity of both banks and nonbanks is refinancing, and some 

of the largest nonbanks depend particularly on revenue from refinancings.18 Overall, origination volume post-crisis has been low compared with pre-crisis.

Nonbank originators and servicers gained significant market share post-crisis. Nonbanks 

accounted for 52.5 percent of the volume of 1–4 family mortgages originated in 2017, up 

significantly from the financial crisis-era low of 23.5 percent in 2007 (Chart 2). Nonbank 

mortgage servicers also continue to gain significant market share (Chart 3). Among the top 

25 servicers in 2018, nonbanks serviced 42.3 percent of mortgages, up from 4.0 percent in 

2008. Overall servicing volume reached $10.9 trillion in 2018, down slightly from the peak of 

$11.2 trillion in 2007 but more than double the $5.1 trillion reported in 2000.19

Nonbanks Continue to Gain Market Share of Mortgage Servicing in the Post-Crisis Period

Source: FDIC analysis of Inside Mortgage Finance data.

Notes: Includes top 25 servicers by volume. Ranking includes entities that own mortgage servicing rights but do not service loans directly and some

institutions that subservice only. Bank and nonbank classications were performed using National Information Center organization hierarchies.

Nonbanks include entities that are not insured depository institutions (IDIs) and that are not aliated with IDIs (not a subsidiary or parent of an IDI 

and not a subsidiary or parent of a holding company that is parent to one or more IDI subsidiaries).

Market Share

Percent

Volume of Top 25 Mortgage Servicers

$ Billions

0

20

40

60

80

100

Bank Volume (Right Axis) Nonbank Volume (Right Axis)

Bank Share (Le Axis) Nonbank Share (Le Axis)

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

57.7

42.3

Chart 3

15 Amiyatosh Purnanandam, “Originate-to-Distribute Model and the Subprime Mortgage Crisis,” FDIC, August 9, 2010:2, 

https://www.fdic.gov/bank/analytical/cfr/2010/wp2010/2010-08.pdf. 16 Joint Center for Housing Studies of Harvard University, “The State of the Nation’s Housing 2018,” Harvard Kennedy 

School:3–12, https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_State_of_the_Nations_Housing_2018.pdf. 17 Freddie Mac, Primary Mortgage Market Survey, http://www.freddiemac.com/pmms/. 18 According to 2017 HMDA aggregate data, both banks and nonbanks reported nearly 36 percent of origination volume in 

refinance. However, the top seven nonbank lenders reported 51 percent of volume in refinance loans. The top two nonbank 

lenders specialize in refinance.

19 Inside Mortgage Finance data compiled by the FDIC and servicing rankings are based on total residential mortgages serviced. 

The Inside Mortgage Finance ranking includes entities that own mortgage servicing rights, but do not service loans directly, and 

some institutions that subservice only. See footnote 7 for details.
FDIC QUARTERLY 55

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

The Shift in Mortgage 

Origination and Servicing 

to Nonbanks

In the financial crisis, many nonbanks, especially the largest, experienced significant funding strains and scaled back origination and servicing or left the business. Nearly all of the 

largest nonbank mortgage originators and servicers today were new to the market or quickly 

accumulated market share post-crisis, while many banks among the largest mortgage originators and servicers today also ranked among the largest before the financial crisis.

A sizeable share of the banks most active in mortgage origination and servicing before the 

financial crisis remained active in these markets after the crisis. The market share of many 

of these banks has diminished marginally, yet not enough for these banks to fall from the 

top rankings. Conversely, many of the nonbanks most active in the market today were inactive before and during the financial crisis, or had smaller operations that they built upon 

post-crisis.

The strong resurgence of nonbanks in mortgage origination and servicing post-crisis has 

largely been attributed to:

• litigation on crisis-era legacy portfolios at the largest bank originators

• more aggressive expansion by nonbanks

• mortgage-focused business models and technological innovation of nonbanks

• large bank sales of crisis-era legacy servicing portfolios because of servicing deficiencies 

and difficulties revealed in the financial crisis

• changes to the capital treatment of mortgage servicing assets (MSAs) applicable to banks.

Explanations for the shift in mortgage origination activity to nonbanks. Many of the 

largest banks that engaged in mortgage origination pre-crisis and survived the crisis faced 

post-crisis litigation for crisis-era legacy portfolios, particularly for Federal Housing Administration (FHA)-insured originations. This litigation and the associated fines and legal fees 

reduced the profitability of these large banks and may have served as deterrents to post-crisis 

mortgage origination, particularly of FHA-insured loans. Of particular concern to a mortgage 

originator is “put-back risk”—the risk that the originator will be asked to repurchase loans.20

As indicated by the shifts in the rankings of top originators, post-crisis nonbank mortgage 

originators generally did not have the same legacy exposure as these large banks, as many of 

these nonbanks were established in the post-crisis period or had limited operations leading 

up to the crisis. Nonbanks have increased their market share in origination of loans with 

mortgage insurance or other guarantees from federal government agencies (government 

loans), and often sell these loans into mortgage-backed securities (MBS) guaranteed by 

Ginnie Mae.21

Many nonbanks expanded operations more aggressively than did banks after the crisis, 

partially in response to the thriving refinancing market that resulted from low interest 

rates.22 Some of the largest nonbanks that emerged in this period focused their business 

models on refinancing, which is particularly rate-sensitive, though in aggregate both banks 

and nonbanks report a similar share of refinance activity.

20 Lux and Greene:17.

21 Government loans include loans with mortgage insurance or other guarantees from federal government agencies, including the 

FHA, VA, and the U.S. Department of Agriculture (USDA) Farm Service Agency and Rural Housing Service.

22 “Recent Trends in the Enterprises’ Purchases of Mortgages From Smaller Lenders and Nonbank Mortgage Companies,” Office 

of the Inspector General of the Federal Housing Finance Agency (FHFA), July 2014:17, https://www.fhfaoig.gov/Content/Files/

EVL-2014-010_0.pdf. 
2019 • Volume 1 3 • Number 4

56 FDIC QUARTERLY

Nonbank mortgage originators have generally focused on mortgage lending, while banks 

generally have multiple business lines and can shift resources in response to changes in profitability and in the housing market. Most nonbanks focus on mortgage lending and generally 

have fewer business lines. When faced with outsized losses, going out of business is a more 

viable option for nonbanks, as demonstrated through the financial crisis.23

Nonbank specialization in mortgage lending may also place banks at a disadvantage in the 

development and application of technology to streamline, automate, and reduce the expense 

of the origination process, allowing some nonbanks to reach more aggressively for market 

share.24

Explanations for the shift in mortgage servicing activity to nonbanks. The post-crisis 

increase in nonbank market share of servicing has largely been attributed to large bank sales 

of crisis-era legacy servicing portfolios and the increase in mortgage origination activity 

among nonbanks. Nonbanks boosted their mortgage servicing market share largely through 

bulk purchases of the rights to service portfolios of nonperforming loans originally held by 

banks. In 2013 alone, nonbank servicers purchased from banks in bulk sales the servicing 

rights to more than $500 billion in mortgages.25

The difficulties banks faced managing portfolios of nonperforming loans during the financial crisis seem to have played a key role in the growth of the post-crisis nonbank servicer 

sector. Fines, legal fees, and other heightened expenses associated with litigation and with 

the nonperformance of loans in crisis-era servicing portfolios negatively affected profitability at some banks and may have deterred growth in servicing portfolios after the crisis.26

Nonbanks have increased their servicing business, in part because many were not as active 

in pre-crisis servicing and did not have large crisis-era legacy portfolios of their own to 

deal with. While the cost to service performing and nonperforming loans has significantly 

increased post-crisis (Chart 4), nonbanks may have cost advantages over banks in servicing 

nonperforming loans, thanks to specialization and the use of technology.27 These specialty 

servicers also received support from Fannie Mae’s High-Touch Servicing Program, which 

facilitated the transfer of nonperforming loans from banks to specialty servicers.28

In 2013, the federal banking agencies issued a revised capital rule for banking institutions 

that, among other things, established standards to improve the quality and increase the 

quantity of regulatory capital. The revised capital rule tightened the limits on the amount of 

MSAs that could be included in regulatory capital and assigned higher-risk weights to MSAs 

included in regulatory capital.29 A 2016 study by the federal banking agencies concluded that 

23 Kim et al.:356.

24 Andreas Fuster, Matthew Plosser, Philipp Schnabl, and James Vickery, “The Role of Technology in Mortgage Lending,” Federal 

Reserve Bank of New York Staff Report No. 836, February 2018:1, 49, https://www.newyorkfed.org/medialibrary/media/research/

staff_reports/sr836.pdf; Tom Finnegan, “The Large Bank Mortgage Banking Profitability Conundrum,” Stratmor Group, June 

2019, https://www.stratmorgroup.com/insights_article/the-large-bank-mortgage-banking-profitability-conundrum/. 25 FDIC, the Federal Reserve Board (FRB), Office of the Comptroller of the Currency (OCC), National Credit Union 

Administration (NCUA), “Report to the Congress on the Effect of Capital Rules on Mortgage Servicing Assets,” June 2016:23–25, 

https://www.federalreserve.gov/publications/other-reports/files/effect-capital-rules-mortgage-servicing-assets-201606.pdf. 26 FDIC, FRB, OCC, NCUA:23–25.

27 Servicing costs can vary from servicer to servicer depending on the share of delinquent loans in portfolio, the share of these 

loans in judicial versus non-judicial foreclosure states, the share of conventional loans versus government loans, and overall 

servicer efficiency. Lux and Greene:26.

28 “Evaluation of FHFA’s Oversight of Fannie Mae’s Transfer of Mortgage Servicing Rights From Bank of America to High-Touch 

Servicers,” EVL-2012-008, FHFA Office of Inspector General, 2012, https://www.fhfaoig.gov/Content/Files/EVL-2012-008.pdf. 29 While servicing is inherent in all mortgage loans, a mortgage servicing right (MSR) is created only when the act of servicing is 

contractually separated from the underlying loan. MSR represents the right to service mortgage loans and receive servicing fees. 

It is the present value of the net fee that servicers earn for servicing mortgages and advancing payments to investors. A firm, for 

example, that originates a mortgage, sells it to a third party, and retains the servicing would report an MSA on its balance sheet, if 

certain conditions are met. That MSA therefore would be subject to a capital requirement. Conversely, a firm would not report an 

MSA if the firm originates a mortgage, holds the mortgage on its balance sheet, and performs the servicing.
FDIC QUARTERLY 57

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

for larger banks, economic incentives to avoid the regulatory capital deduction is likely one 

factor influencing the size and distribution of MSAs. The report said that large aggregator 

banks reduced their purchases of loans and servicing rights from smaller banks after the 

financial crisis, likely in part a result of the revised capital treatment of MSAs.30 The report 

also noted that most small banks either do not have MSAs or have them in small enough 

amounts that they would not be subject to capital deductions.31

Since 2008, the Cost of Servicing a Nonperforming Loan Increased More an Fivefold, 

While the Cost of Servicing a Performing Loan Nearly Tripled

Source: Mortgage Bankers Association Servicing Operations Study and Forum. 

Notes: 2018 data are through the rst half of the year. Figures include servicing costs associated with single-family residential mortgages.

Nonperforming loans are either delinquent or in default. Performing loans are loans for which the borrower is not behind on payments.

Average Servicing Cost per Loan Performing Nonperforming

$482

$704

$911

$1,369

$2,304 $2,414

$2,000

$2,386

$2,113 $2,135

$2,471

$59 $77 $90 $96 $114 $156 $156 $181 $163 $158 $160

$0

$500

$1,000

$1,500

$2,000

$2,500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018

Chart 4

Characteristics of the 

Post-Crisis Generation of 

Nonbank Mortgage Lenders 

and Servicers

The nonbanks that top the rankings of mortgage originators and servicers post-crisis share 

certain similarities with pre-crisis nonbanks, many of which faltered in the crisis. Nonbank 

business models can vary significantly. Some nonbanks originate mortgages and retain the 

servicing. Others originate mortgages but do not retain the servicing. The nonbanks that 

originate mortgages typically obtain funding from warehouse lines of credit extended by 

banks. These nonbanks typically apply the originate-to-distribute model, selling originations 

into securitizations most often guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. 

Nonbanks are also increasingly funding origination through cash sales to Fannie Mae and 

Freddie Mac. Other nonbanks are mortgage servicing rights (MSR) investors that purchase 

MSRs and outsource the servicing to another firm, called a subservicer. Some nonbanks are 

subservicers and provide servicing functions as third-party vendors.32

Nonbank and bank risk characteristics differ markedly. Nonbanks rely on external shortterm credit and narrowly focused lines of business in mortgage origination or servicing, 

which may pose risks to the banking industry and the financial system. Short-term credit 

can become more expensive and less accessible when financial market conditions tighten. 

Nonbank originators rely on warehouse lines of credit, which is short-term funding primarily provided by banks.33 Banks and their affiliates typically fund their mortgage origination 

with deposits or other borrowings.

30 FDIC, FRB, OCC, NCUA:29–31.

31 FDIC, FRB, OCC, NCUA:2.

32 “Reengineering Nonbank Supervision,” The Conference of State Bank Supervisors, 2019, https://www.csbs.org/sites/default/

files/chapter_one_-_introduction_to_the_nonbank_industry_cover_footer_1_v2.pdf. 33 Kim et al.:357–358.
2019 • Volume 1 3 • Number 4

58 FDIC QUARTERLY

The federal government now backs a majority of new mortgages either directly at origination through the FHA, the U.S. Department of Veterans Affairs (VA), or the USDA, or 

indirectly in securitization through Ginnie Mae or through the GSEs, including Fannie 

Mae and Freddie Mac. Nonbanks now originate a majority of these mortgages.

The composition of 1–4 family mortgage originations shifted significantly in the financial 

crisis. Government loans grew from 5.0 percent of originations in 2004 to 26.9 percent in 

2017 (Chart 5). Jumbo loans declined from 29.5 percent in 2004 to 17.4 percent in 2017. 

Conventional, conforming, single-family originations declined from 65.5 percent to 

55.8 percent in the same period, but remain the dominant type of origination.

e Composition of 1–4 Family Mortgage Originations Shied Signicantly rough the Crisis, 

as Government Lending Gained Market Share

Source: FDIC analysis of Home Mortgage Disclosure Act data.

Note: Data are limited to single-family residential mortgage originations, dened as rst-lien purchase or renance loans secured by an owner-occupied, 

1–4 family unit, site-built property.

Origination Market Share by Loan Type

Percent

0

20

40

60

80

100

Government Loans Conventional Conforming Jumbo Loans

26.9

55.8

17.4

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Chart 5

Nonbank market share of government lending rose from 44.9 percent in 2004 to 76.1 percent 

in 2017 (Chart 6). Nonbank market share in the largest segment of single-family mortgage 

lending—originating new conventional, conforming loans—rose from 34.7 percent 2004 

to 52.0 percent in 2017 (Chart 7). Banks have held their ground in jumbo loans, which have 

loan amounts exceeding the size limit for eligibility for purchase by the GSEs. Nonbanks 

originated 17.7 percent of jumbo loans in 2017, down from 27.3 percent in 2004 (Chart 8).

Nonbanks Gained Signicant Market Share of Government Lending

Source: FDIC analysis of Home Mortgage Disclosure Act data.

Notes: Nonbanks include all Department of Housing and Urban Development reporters. Banks include banks, credit unions, and their aliates.

Data are limited to single-family residential mortgage originations, dened as rst-lien purchase or renance loans secured by an owner-occupied, 

1–4 family unit, site-built property. Government loans consist of loans with insurance or other guarantees from the Federal Housing Administration, 

the U.S. Department of Veterans Aairs, and the U.S. Department of Agriculture. 

Market Share of Government Loan Originations

Percent

Government Loan Origination Volume

$ Billions

0

20

40

60

80

100

Bank Volume (Right Axis) Nonbank Volume (Right Axis)

Bank Share (Le Axis) Nonbank Share (Le Axis)

23.9

76.1

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

0

200

400

600

800

1,000

1,200

1,400

1,600

Chart 6
FDIC QUARTERLY 59

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

Nonbanks Gained Market Share of Conventional Conforming Originations

Source: FDIC analysis of Home Mortgage Disclosure Act data.

Notes: Nonbanks include all Department of Housing and Urban Development reporters. Banks include banks, credit unions, and their aliates.

Data are limited to single-family residential mortgage originations, dened as rst-lien purchase or renance loans secured by an owner-occupied, 

1–4 family unit, site-built property. Conventional conforming loans conform to maximum loan amounts set by the government along with other rules 

and limits set by Fannie Mae or Freddie Mac. 

Market Share of Conventional 

Conforming Originations

Percent

Conventional Conforming

 Loan Origination Volume

$ Billions

0

20

40

60

80

100

Bank Volume (Right Axis) Nonbank Volume (Right Axis)

Bank Share (Le Axis) Nonbank Share (Le Axis)

0

200

400

600

800

1,000

1,200

1,400

1,600

48.0

52.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Chart 7

Banks Retained Market Share of Jumbo Loan Originations

Source: FDIC analysis of Home Mortgage Disclosure Act data.

Notes: Nonbanks include all Department of Housing and Urban Development reporters. Banks include banks, credit unions, and their aliates.

Data are limited to single-family residential mortgage originations, dened as rst-lien purchase or renance loans secured by an owner-occupied, 

1–4 family unit, site-built property. Jumbo loans have loan amounts in excess of the single-family conforming loan-size limits for eligibility for purchase

by the government-sponsored enterprises. 

Market Share of Jumbo Loan Originations

Percent

Jumbo Loan Origination Volume

$ Billions

0

20

40

60

80

100

Bank Volume (Right Axis) Nonbank Volume (Right Axis)

Bank Share (Le Axis) Nonbank Share (Le Axis)

0

200

400

600

800

1,000

1,200

1,400

1,600

82.3

17.7

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Chart 8

Government loans consist of originations with mortgage insurance or other guarantees from 

federal government agencies (FHA, VA, and USDA) and are generally eligible to be pooled 

into MBS guaranteed by Ginnie Mae. A conventional mortgage is a loan that is not insured 

by the FHA, VA, or USDA. A conforming mortgage is one that meets GSE funding criteria 

and conforms to maximum loan amounts set by the government and to other rules and 

limits set by Fannie Mae or Freddie Mac, and is therefore eligible for purchase and securitization by either entity. Mortgages that do not conform to the GSE standards, such as jumbo 

loans, are called nonconforming loans. Other financial institutions without explicit or 

implicit government support, including both banks and nonbanks, also issue MBS, known as 

private-label MBS (PLMBS). Nonconforming loans often make up the majority of the pools 

underlying PLMBS.34

34 N. Eric Weiss and Katie Jones, “An Overview of the Housing Finance System in the United States,” Congressional Research 

Service, January 2017:5–8, https://fas.org/sgp/crs/misc/R42995.pdf. 
2019 • Volume 1 3 • Number 4

60 FDIC QUARTERLY

Nearly all securitization now occurs through entities with government support, like the 

GSEs and Ginnie Mae. The private-label market that surged before the financial crisis has 

yet to regain much volume. Of all first-lien originations in first quarter 2019, 37.3 percent 

were portfolio originations (not securitized), 39.6 percent were securitized by the GSEs, 

20.2 percent were sold into securitizations guaranteed by Ginnie Mae, and 2.9 percent were 

PLMBS (the highest since 2007, yet a small fraction of the private-label share in the years 

leading to the crisis).35 In the post-crisis period, most loans that are securitized through the 

GSEs or pooled into securitizations guaranteed by Ginnie Mae are originated by nonbanks. 

As of June 2019, nonbanks originated 85 percent of all loans sold into securitizations guaranteed by Ginnie Mae, 53 percent of loans sold to Freddie Mac, and 60 percent of loans sold to 

Fannie Mae. In 2013, the nonbank share for each was below 40 percent.36

Nonbanks facilitate access to mortgage credit for a broad range of borrowers and have 

played a key role in opening up access to credit. As banks, particularly the largest banks, 

have largely pulled back from government lending, and to a lesser extent, conventional 

conforming lending, nonbanks have stepped up originations in the FHA market, especially 

where the borrowers are disproportionately either first-time borrowers or borrowers with 

lower credit scores and higher debt-to-income (DTI) ratios.

Banks generally have more conservative mortgage underwriting practices than 

nonbanks, as nonbanks gain market share in government and conventional conforming 

lending. As of June 2019, the median credit score was roughly 25 points lower on nonbank 

loans than bank loans in securitizations guaranteed by Ginnie Mae and 4 points lower 

on nonbank loans than bank loans sold to the GSEs. The median loan-to-value (LTV) for 

nonbank and bank originations are comparable, while the median DTI for nonbank loans is 

higher, indicating that nonbanks are more accommodating in DTIs and with credit scores. 

DTIs rose across the board in 2017 given rising interest rates, as borrower payments were 

driven up relative to incomes. The reduction in refinance volumes in the rising rate environment made lenders more competitive for loans to purchase homes and, therefore, apt to work 

hard to secure a loan approval for a wide range of borrowers, another factor that contributed 

to the rise in DTIs. However, with the decline in interest rates in 2019, DTIs have come down 

measurably, more so for banks.37

The Federal Housing Finance Agency (FHFA) and the GSEs have relaxed several underwriting standards for conforming loans since late 2014. Fannie Mae began accepting 

mortgages with LTV ratios of up to 97 percent in 2014 and Freddie Mac followed in 2015. 

Fannie Mae raised its DTI limit from 45 to 50 percent in 2017 and replaced a requirement 

for compensating factors with standards to reduce risk layering.38 The GSEs also eliminated 

first-time homebuyer requirements for certain mortgage programs, removed income and 

geographic limitations, allowed non-borrower income to be included in the DTI calculation, and extended flexibility in evaluating borrowers with student debt.39 This relaxation in 

underwriting standards for conforming loans affects credit risk in mortgage markets. And 

more risk layering has been noted, particularly in government loans and for first-time home 

purchase mortgages.40

35 Urban Institute:8.

36 Urban Institute:11.

37 Urban Institute:17–18.

38 Archana Pradhan, “Underwriting Loosening for Conventional Conforming Loans,” CoreLogic Insights Blog, June 4, 2018, 

https://www.corelogic.com/blog/2018/06/underwriting-loosening-for-conventional-conforming-loans.aspx. 39 Select standards apply to certain lending programs offered by Fannie Mae and Freddie Mac post-crisis, including Home Possible 

Mortgage and HomeOne from Freddie Mac and HomeReady from Fannie Mae.

40 Risk layering refers to loans with some combination of multiple risk characteristics such as low credit scores, high DTIs, and 

high LTVs.
FDIC QUARTERLY 61

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

Some post-crisis nonbanks rely on technological innovation to improve efficiency. Technology plays an increasingly prominent role in facilitating access to mortgage credit, and 

some of the largest nonbank mortgage lenders are at the forefront in applying technology to 

streamline and automate the mortgage origination process. Nonbank mortgage servicers are 

also more technologically advanced than most bank competitors.41

Large banks have a significant disadvantage in mortgage origination expenses. Costs for 

corporate administration are on average three times higher for large banks than for large 

nonbanks because of 1) overhead administrative expenses that generally do not affect 

nonbanks and 2) the difficulty large banks reportedly face in providing efficient technology 

support for the mortgage origination business. Higher expenses and lower revenues meant 

large banks significantly lagged nonbank competitors in profitability on retail residential 

mortgages. According to the review by the Stratmore Group (see note 24), large banks lost 

$4,803 per retail mortgage loan originated in 2018 compared to large nonbank lenders, 

which earned $376 per loan, on average.42

The technical expertise and innovation of many nonbank servicers is said to have helped 

them to be leaders in customer experience and process efficiency. And nonbanks reportedly have lowered delinquency and default rates by using technology to educate borrowers, 

streamline processes, and make loan modification processes efficient and effective.43

Risks Posed by Post-Crisis 

Generation of Nonbank 

Originators and Servicers

While post-crisis nonbank originators and servicers have gained market share over banks 

in mortgage origination and servicing, competitive pressures have increased a number of 

risks. The sections that follow summarize the key risks posed by nonbank originators and 

servicers.

The nonbank structure is vulnerable to liquidity and funding risks. The new postcrisis generation of nonbanks seem vulnerable to liquidity pressures similar to those that 

nonbanks were subjected to during the financial crisis. Nonbanks depend on short-term 

credit, particularly warehouse lines of credit provided by banks.44 This funding can become 

more expensive and less accessible when financial market conditions tighten, and this tightening alone can cause the nonbank to go out of business. In times of stress, warehouse lenders face strong incentives to cancel lines of credit and seize collateral as quickly as possible.45

When a nonbank draws on a line of credit to fund a mortgage, the nonbank transfers the 

mortgage to the bank warehouse lender to collateralize this draw on the line. The nonbank 

then finds investors for the mortgage, typically either the GSEs or Ginnie Mae investors, 

though investors in PLMBS made up a large part of the market pre-crisis. Once the mortgage 

is sold, the proceeds are paid to the bank, the bank releases the mortgage to the securitization vehicle, and the warehouse lender then pays down the dollar value of the draw to the 

nonbank’s line of credit.46

41 Lux and Greene:27–28.

42 Finnegan, June 2019. The review also found that large bank revenue per loan was on average $1,712 lower than at large 

nonbanks, reflecting the lack of a robust secondary market and a competitive pricing environment for jumbo loans. The review 

noted that the servicing function, which produced modest profits for most of the large banks in 2018, offset origination losses to 

some extent. The report was based on a review of more than 100 lenders.

43 Lux and Greene:28, and Fuster et al.:2, 15–16.

44 According to Kim et al., (2018), while banks may allow nonbanks to finance servicing advances as part of the warehouse lines 

of credit primarily used for funding loan originations, nonbank mortgage servicers have other options for funding servicing 

advances, including securitization, cash from operations, unsecured loans, or credit lines collateralized by other assets, such 

as MSRs. Ginnie Mae recently released a “Report on Issuer Liquidity Meeting Series,” https://www.ginniemae.gov/newsroom/

publications/Documents/issuer_liquidity_meeting_series_report.pdf, which indicated that much of the shift in mortgage 

origination and servicing activity to the largest nonbanks was financed by private equity or other types of investment funds, 

which infused billions of dollars of capital either through direct ownership in the operating companies of nonbanks or the 

financing and ownership of mortgage servicing rights. The report also confirms that as the nonbank share of mortgage 

origination and servicing has risen, so has the sum of warehouse lines and servicing advance facilities largely provided by banks.

45 Kim et al.:347-350.

46 Kim et al.:361–362.
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62 FDIC QUARTERLY

Kim et al. (2018) cite “vulnerabilities associated with the warehouse funding of nonbanks: 

(i) margin calls due to aging risk (that is, the time it takes the nonbank to sell the loans 

to a mortgage investor and repurchase the collateral), (ii) mark-to-market devaluations, 

(iii) rollover risk, (iv) cancellation of a line for covenant violations, and (v) changes in warehouse lender risk appetite.” 

47 In addition, the put-back risk for mortgages funded with 

warehouse lines remains with the nonbank originator, since the originator underwrote and 

funded the loan in its own name.48

Nonbank mortgage servicers face both liquidity and capital concerns because servicers of 

mortgages in securitized pools must make payments to investors, tax authorities, and insurers when mortgage borrowers skip their payments. While many servicers are eventually 

reimbursed for most of these advances, they need to finance them in the interim and obtaining such financing can be difficult in times of strain. Servicers can incur large costs servicing 

delinquent loans, especially those that end in foreclosure.49

Nonbank originations are 85 percent of all loans sold into securitizations guaranteed 

by Ginnie Mae and more than half of all loans sold to the GSEs, so there is a risk that if 

nonbanks have liquidity or solvency issues, nonbank servicers may not have cash on hand 

to fulfill advances to Ginnie Mae and GSE bondholders, particularly if delinquencies rise.50

Credit risk and liquidity concerns can be more pronounced for Ginnie Mae servicers, which 

may need to advance more types of payments for much longer than GSE servicers when 

mortgage borrowers become delinquent, or default. Ginnie Mae-guaranteed pools are not 

limited in the time they must advance principal and interest on delinquent loans, and they 

may be required to absorb losses not covered by the FHA or VA, including property repair 

costs.51 Chart 9 illustrates Ginnie Mae’s relative loss position as guarantor of the servicing 

performance of the issuer. In general, by the time risk is passed on to Ginnie Mae, Ginnie 

Mae has no recourse against an issuer.

Credit Loss Priorities for a Defaulted Mortgage in a Pool Guaranteed by Ginnie Mae

Source: Ginnie Mae, 2016.

First Dollar Loss

Last Dollar Loss LOSSES

Government

Agency Insurance

Corporate

Resources of

Issuer/Servicer

Ginnie Mae

Relative Loss Position

$

Homeowner

Equity

Chart 9

47 Kim et al.:362.

48 David Echeverry, Richard Stanton, and Nancy Wallace, “Funding Fragility in the Residential Mortgage Market,” Berkeley Haas 

School of Business, December 31, 2016:7, https://www.aeaweb.org/conference/2017/preliminary/paper/zKz3shzZ. 49 Kim et al.:376.

50 Urban Institute:11.

51 Kim et al.:376.
FDIC QUARTERLY 63

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

The liquidity issues associated with both nonbank origination and servicing have become 

more pressing because the nonbank sector is a larger part of the market than it was before 

the financial crisis. And because many nonbanks share similar business models, contagion is 

a concern as strains in one nonbank could cause creditors to question the viability of others. 

Given the outsized share of nonbank origination and servicing of government mortgages, 

including FHA-guaranteed loans to borrowers with higher risk of default, the government 

may incur insurance losses on the mortgages and on the securities that fund them. Government guarantees are conditional and somewhat limited, and a rise in defaults could expose 

nonbanks to insolvency.52

The refinancing-focused business models of some lenders, including some of the largest 

nonbanks, are vulnerable to changes in interest rates. Many lenders, including some of 

the largest nonbanks that emerged in the post-crisis period, benefited from the prolonged 

period of low interest rates and focused their business models on refinancing mortgages.53

The demand for refinancing depends highly on interest rates. When rates rise and remain 

elevated, refinancing activity and the associated revenue declines.54 Refinancing activity slowed with the increases in interest rates that started in 2013 and again in 2016, and 

both banks and nonbanks engaged in refinancing have attempted to shift their focus to the 

competitive market for purchase loans. Those that struggle to remain competitive may face 

acquisition by stronger peers, a trend increasingly prevalent among nonbanks in 2018 and 

that some analysts expect to continue in 2019.55

Access to mortgage credit could be more restricted if nonbanks experience difficulties. 

Banks have pulled back on government lending while nonbanks have stepped in to fill this 

void. Nonbanks have become the primary providers of credit in the FHA market in particular, where the borrowers are disproportionately either first-time buyers or borrowers with 

lower credit scores and higher DTIs. A large-scale failure or widespread consolidation of 

nonbanks could lead to significant contraction in mortgage origination capacity, since it is 

unclear to what extent banks would return to the FHA market.

Driven in part by nonbanks, the competitive lending environment is increasing credit 

risk. After a prolonged post-crisis period of tightened underwriting standards bolstered by 

post-crisis reforms aiming to improve mortgage credit quality and consumer protection, and 

the risk-aversion that mortgage lenders exhibited in the aftermath of the crisis, early signs of 

marginal deterioration in underwriting standards have emerged. This marginal loosening is 

largely in response to heightened competition among bank and nonbank mortgage originators as they compete for refinancing and purchase loan activity against the headwinds of 

higher interest rates, low inventory, and elevated home prices.

GSEs purchase a large share of new originations for securitization, and their recent relaxation of requirements for eligibility for purchase put competitive pressures on other entities 

that purchase and securitize mortgage loans. Partly in response to relaxed GSE underwriting standards and to competition, banks and nonbanks are exhibiting incremental easing of 

historically tight underwriting standards as they reach for growth in their lending portfolios, 

as indicated by continued increases in the Mortgage Credit Availability Index (Chart 10). 

Although performance of recent mortgage origination vintages has remained strong, performance may worsen if lenders’ appetite for risk continues to increase, especially if macroeconomic conditions deteriorate.

52 Kim et al.:349.

53 According to 2017 HMDA data, in aggregate, both banks and nonbanks reported nearly 36 percent of origination volume in 

refinance. However, the top seven nonbank lenders reported 51 percent of volume in refinance loans, driven in part by the two 

largest nonbank lenders that specialize in refinance.

54 Kim et al.:387–390.

55 “Mortgage M&As This Year Likely to Top 2018 Tally,” Inside Mortgage Finance, January 3, 2019, 

https://www.insidemortgagefinance.com/articles/213439-mortgage-m-as-this-year-likely-to-top-2018-tally?v=preview.”
2019 • Volume 1 3 • Number 4

64 FDIC QUARTERLY

Mortgage Credit Availability Is Trending Higher, Indicating Loosening Credit

Source: Mortgage Bankers Association (Haver Analytics).

Note: Data as of May 2019. e MCAI is calculated using several factors related to borrower eligibility, such as credit score, loan type, and 

loan-to-value ratio. ese metrics and underwriting criteria for more than 95 lenders and investors are combined by the Mortgage Bankers Association 

(MBA) using data made available via the AllReg Market Clarity product and a proprietary formula derived by MBA to calculate the MCAI.

Mortgage Credit Availability Index (MCAI)

Not seasonally adjusted. March 2012=100

189.5

80

100

120

140

160

180

200

2011 2012 2013 2014 2015 2016 2017 2018 2019

Mortgage Credit Availability Index,

2004–2019

0

250

500

750

1000

2004 2006 2008 2010 2012 2014 2016 2018

Chart 10

Nonbank mortgage lenders predominantly use an originate-to-distribute model, while in 

aggregate, banks keep nearly half of their single-family mortgage originations on balance 

sheet, according to FDIC analysis of HMDA data.56 This practice may provide a stronger 

incentive for banks to underwrite more carefully and to invest in gathering information 

about borrowers and communities.57 However, competition from nonbanks and slowing of 

the housing market could induce banks to ease historically tight underwriting standards. 

The Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices 

reported incremental easing in underwriting standards for residential real estate lending 

from late 2017 through third quarter 2018 and weaker demand for residential mortgages.58

Technological innovation led by nonbanks has resulted in efficiencies but may increase 

business model disruption, heighten risk of consolidation, amplify cybersecurity risks, 

and exacerbate operational risks. The competition for mortgage origination and servicing 

market share has helped to spur technological innovation beneficial to lenders, servicers, 

and consumers. Most nonbanks were new to mortgage origination and servicing and built 

their processes and platforms from the ground up using many technological innovations. 

Banks with long-established origination and servicing businesses must work to change existing processes and platforms to incorporate innovation. According to some observers, it is 

unclear whether traditional lenders or small institutions can adopt technological advances 

that require significant reorganization and investment. A more concentrated mortgage 

market dominated by innovative firms may result.59

While there are benefits to technological innovation, there are also potential risks. While 

replacing legacy systems may reduce cyber risks in some areas, cyber risks could be heightened in others, highlighting the importance of cybersecurity implementation, technological 

literacy, and risk awareness more broadly.60

56 The share of originations that banks keep their on balance sheets varies greatly by type of origination. Most jumbo loans that 

banks originate are kept in portfolio, while a greater share of conforming and government loans are sold into securitizations 

guaranteed by the GSEs or Ginnie Mae.

57 Lux and Greene:6.

58 “Senior Loan Officer Opinion Survey on Bank Lending Practices,” Board of Governors of the Federal Reserve System, 

January 2017 through January 2019, https://www.federalreserve.gov/data/sloos.htm. 59 Fuster et al.:6, 37.

60 “Financial Stability Implications From FinTech: Supervisory and Regulatory Issues That Merit Authorities’ Attention,” 

Financial Stability Board, June 27, 2017:30, http://www.fsb.org/wp-content/uploads/R270617.pdf. 
FDIC QUARTERLY 65

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

Many bank and nonbank originators and servicers increasingly rely on third-party service 

providers, many of which are nonbanks and are subject to some federal and state oversight, 

yet are generally not federally regulated for safety and soundness. Banks and nonbanks that 

rely on third-party service providers are generally subject to operational risk management 

policies, including third-party or vendor management guidance. The subservicing sector 

allows firms to hold mortgage servicing rights without building and maintaining a servicing 

infrastructure. If a subservicer fails, a bank or nonbank relying on that subservicer may have 

difficulty finding another subservicer to pick up the portfolio and may not have the capacity 

to service the loans itself.61

In addition, aggressive growth of nonbank mortgage servicers in the post-crisis period may 

pose operational challenges, particularly in cases where support infrastructure is insufficient, and may result in harm to consumers, expose counterparties to operational and reputational risks, and complicate servicing transfers between institutions.62

Residential mortgage regulation was strengthened post-crisis, and nonbanks are subject 

to some federal and state oversight, but, unlike banks, nonbanks are not federally regulated for safety and soundness. A 2019 report from the U.S. Government Accountability 

Office (GAO) states that the lack of federal safety and soundness oversight of nonbank lenders and servicers may pose risks, particularly for the GSEs and federal housing finance entities.63 The FHFA Office of Inspector General also found in 2014 that nonbank lenders may 

have limited financial capacity, are not subject to federal safety and soundness oversight, and 

are subject to rapid business growth that could place stress on their operational capacity or 

overrun their quality control procedures.64

Several oversight mechanisms in place or under development help to mitigate these risks. 

The Conference of State Bank Supervisors (CSBS) proposed nonbank mortgage servicer 

standards covering capital, liquidity, risk management, data standards, data protection 

(including cyber risk), corporate governance, servicing transfer requirements, and change of 

control.65 Enhanced standards for more complex nonbanks would focus on capital, liquidity, 

stress testing, living wills, and recovery and resolution plans. The CSBS has also undertaken 

a comprehensive data collection effort aimed at enhancing a state regulator’s ability to effectively supervise licensees. All state-licensed and state-registered companies must complete the 

CSBS Nationwide Multistate Licensing System Mortgage Call Report with information on the 

financial condition of licensed mortgage companies, their loan activities, and their mortgage 

loan originators.66 The Consumer Financial Protection Bureau oversees nonbank issuers for 

compliance with consumer financial protection laws, and the GSEs apply FHFA standards 

in financial and operational reviews of counterparties, including nonbanks. The Consumer 

Financial Protection Bureau does not evaluate nonbanks for safety and soundness.67 However, 

safety and soundness evaluations of nonbanks are conducted by state mortgage regulators.

Note: The text on this page has been slightly modified from the version published online on 

November 14, 2019, to clarify the role of state mortgage regulators with regard to nonbank safety 

and soundness examinations.

61 Kim et al.:399.

62 “Nonbank Mortgage Servicers: Existing Regulatory Oversight Could be Strengthened,” U.S. Government Accountability Office, 

March 2016:25, https://www.gao.gov/assets/680/675747.pdf. 63 “Prolonged Conservatorships of Fannie Mae and Freddie Mac Prompt Need for Reform,” U.S. Government Accountability 

Office, January 2019:27, https://www.gao.gov/products/GAO-19-239. 64 “Recent Trends in the Enterprises’ Purchases of Mortgages from Smaller Lenders and Nonbank Mortgage Companies,” Federal 

Housing Finance Agency, Office of Inspector General, July 17, 2014, https://www.fhfaoig.gov/Content/Files/EVL-2014-010_0.pdf. 65 The CSBS represents financial regulators in 50 states, the District of Columbia, Guam, Puerto Rico, American Samoa, and the 

U.S. Virgin Islands.

66 “Proposed Regulatory Prudential Standards for Nonbank Mortgage Servicers,” CSBS, 2015, https://www.csbs.org/sites/default/

files/2017-11/MSR-ProposedRegulatoryPrudentialStandardsforNon-BankMortgageServicers.pdf. The Nationwide Multistate 

Licensing System registers and collects data from nonbank financial service providers: mortgage providers, money services 

businesses, and consumer finance companies.

67 “Prolonged Conservatorships:” 27–28.
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66 FDIC QUARTERLY

Implications of the PostCrisis Migration for the 

Banking Industry and the 

Financial System

While a substantive share of mortgage origination and servicing activity has migrated to 

nonbanks and transferred some of the risk outside of the banking system, a portion of the 

risk remains with banks or could be transmitted back to banks through other channels.

Banks generally have more conservative underwriting practices than do nonbanks, and 

while there are indications that banks have been easing standards and increasing risk, a 

corresponding deterioration in loan performance has not yet occurred; however, the housing 

and mortgage market should continue to be monitored carefully.

Banks retain direct exposure to the mortgage markets through their origination and servicing activities and through the portfolios they keep on their balance sheets, whether they have 

scaled back or increased production. From 2004 to 2017, the market share of the top seven 

bank originators of 1–4 family mortgages declined 13.6 percent, while the market share of all 

other banks declined 5.8 percent.

The composition of new bank single-family mortgage originations has shifted. In 2004, 

63.9 percent were conventional conforming, 32.0 percent were jumbo loans, and 4.1 percent 

were government loans. In 2017, 56.4 percent were conventional conforming, 30.1 percent 

were jumbo loans, and 13.5 percent were government loans. Banks retain many of the 

new jumbo loans originated on their balance sheets, while they sell a larger share of new 

conforming and government loans.

In the post-crisis period, banks are directly exposed to nonbanks and the activities in which 

they engage through their extension of warehouse lines of credit to nonbank mortgage lenders and other types of financing to nonbank servicers to fund servicing advances. Bank lending to nonbanks includes loans to nonbank mortgage lenders yet also includes loans to other 

nonbanks that do not primarily make loans, including open- and closed-end investment 

funds, mutual funds, special purpose vehicles, other vehicles, and real estate investment 

trusts.68 Outside of the loans extended by the four largest banks, supervisory experience 

indicates that some loans to nonbank financial institutions are to nonbank mortgage lenders or MBS warehouse lines. Overall, as illustrated in Chart 11, bank lending to nonbanks 

has expanded seven-fold since 2010 and exceeds $440 billion. While these loans have grown 

steadily since 2010, they account for less than 5 percent of total loans and leases reported by 

banks, and less than 11 percent of all banks are engaged in this type of lending.

During Second Quarter 2019, Loans to Nonbanks Held by FDIC-Insured Institutions 

Totaled $442 Billion

Source: FDIC.

Note: Quarterly data through second quarter 2019.

Loans to Nonbank Financial Institutions

$ Billions

Share of Banks With Loans to Nonbanks

Percent 

0

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0

2

4

6

8

10

12

Community Bank Loans to Nonbanks (Le Axis)

Noncommunity Bank Loans to Nonbanks (Le Axis)

Percent Share of Banks With Loans to Nonbanks (Right Axis)

Chart 11

68 Board of Governors of the Federal Reserve System, “Financial Stability Report,” November 2018:29, https://www.federalreserve.

gov/publications/files/financial-stability-report-201811.pdf. 
FDIC QUARTERLY 67

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

Much of the funding that has supported increased nonbank engagement in mortgage origination and servicing activities is provided by banks through warehouse lines of credit. While 

in times of acute strain these lines of credit can be a source of significant losses to banks, as 

they were during the financial crisis, they generally are considered relatively low risk because 

they are typically overcollateralized and subject to frequent monitoring.

The lines of credit banks extend to nonbanks generally contain multiple protections for 

creditors, including personal guarantees, collateral beside the loan originations, and provisions that allow for the changing of the pricing on, or cancellation of, the warehouse line in 

the event that the nonbank violates any of its covenants.69 And banks that extend warehouse 

lines are not subject to put-back risk for mortgages funded with these lines, as the put-back 

risk remains with the nonbank originator.70

The lines of credit are generally open for only a limited time and are collateralized by the 

loan origination until the nonbank can sell the origination to an investor or into a securitization. When the secondary market is liquid and is functioning normally, nonbanks can 

generally sell loans into securitization vehicles relatively quickly and then reimburse the 

bank for their draw on the line of credit. However, in the crisis, there were slowdowns in 

the securitization of mortgages in both the GSE and PLMBS markets. These slowdowns 

contributed to the cancellation of billions of dollars in lines of credit to nonbank mortgage 

originators, leaving the bank warehouse lender with few options but to seize the mortgage 

as collateral.71 Ultimately, the extension of warehouse lines of credit to nonbank mortgage originators and servicers directly exposes banks to the liquidity and funding risks 

of nonbanks.

The extension of credit has important implications for the health of the economy. Unsustainable growth in credit can lead to risk for originators, servicers, and borrowers that face 

financial distress. If originators fund loans, particularly loans to borrowers with higher risk 

factors and insufficient resources to withstand resulting losses, the financial sector becomes 

more vulnerable to adverse shocks. Nonbanks rely primarily on warehouse lines of credit 

from banks and other financing firms to fund their operations, a source of funding that 

would become more expensive and less accessible in adverse market conditions. To the extent 

servicers fund their operations with short-term funding, if adverse market conditions make 

that credit less accessible and servicers ultimately yield to liquidity and funding concerns, 

borrowers may be at heightened risk of processing errors related to transfer of servicing 

rights or other servicing deficiencies, particularly if delinquencies rise.

As nonbanks continue to grow their market share of mortgage origination and servicing, the 

associated risk is increasingly shifting from banks to nonbanks and ultimately to the entities 

that guarantee payment on securities made up of these loans, namely Ginnie Mae, the GSEs 

and, to some extent, other investors.

69 Kim et al.:357–369, 382, 398.

70 Echeverry at al.:7.

71 Kim et al.:357–369, 375, 398.
2019 • Volume 1 3 • Number 4

68 FDIC QUARTERLY

Conclusion A review of the history of the U.S. mortgage market reveals that mortgage originators and 

servicers have adapted to changes in the regulatory landscape and evolution in the structure 

of the primary and secondary mortgage markets. Over time, competition for mortgage origination and servicing market share has helped to spur innovation that has enabled market 

participants to effectively and efficiently extend credit to borrowers. Risks have been redistributed in the system as a result and have increased in ways described in this article.

After many nonbank mortgage originators and servicers faced liquidity and funding strains 

and the threat of failure during the crisis, nonbanks have gained significant market share 

since the crisis.

The growth of nonbanks in mortgage origination and servicing after the crisis has largely 

been attributed to a handful of factors: litigation on crisis-era legacy portfolios at the largest 

bank originators, more aggressive post-crisis expansion by nonbanks, mortgage-focused business models and technological innovation at nonbanks, large bank sales of crisis-era legacy 

servicing portfolios because of servicing deficiencies and difficulties revealed in the crisis, 

and, possibly, large banks’ responses to the capital treatment of mortgage servicing assets.

The characteristics of nonbanks that have, in part, enabled them to gain a competitive edge 

in mortgage origination and servicing include continued reliance on short-term credit, a 

focus in conventional conforming and government (FHA in particular) loan origination, 

origination of loans exhibiting incrementally eased underwriting standards, application of 

technological innovation to improve efficiency and origination profits, and less comprehensive regulatory oversight relative to banks.

Many nonbank characteristics subject these entities to several risks, and the new competitive 

pressures facilitated by nonbanks have increased several risks in the financial system. These 

risks include:

• liquidity and funding risks of the nonbank structure

• interest rate risk inherent in refinancing-focused lending

• risk of reduced availability of FHA-insured and other government loans in the case of 

widespread nonbank failures

• moderate growth in credit risk caused by heightened competition in the market driving 

incremental easing in historically tight credit standards

• cybersecurity and other risks related to increased reliance on technology

• risks posed by the less stringent and more fragmented regulation of nonbanks relative 

to banks

The funding structure of post-crisis nonbank mortgage originators and servicers appears 

similar to that of pre-crisis nonbanks, a generation of lenders and servicers that largely 

faltered during the crisis because of funding and liquidity strains. Many of the largest 

nonbank originators and servicers today are new to the market or were operating on a 

much smaller scale pre-crisis, and have not weathered a crisis or a stressed economy. Given 

their similar funding structures, in an episode of pronounced housing-market stress, these 

nonbanks could exhibit vulnerabilities similar to those of their predecessors.
FDIC QUARTERLY 69

TRENDS IN MORTGAGE ORIGINATION AND SERVICING: NONBANKS IN THE POST-CRISIS PERIOD

Nonbanks have so far been well-positioned to compete for growth in the post-crisis mortgage market. While the post-crisis recovery in the housing market has been gradual, interest 

rates have been low, which boosted the market for both refinance and purchase loans. The 

securitization market for those loans has so far been functioning well, despite the collapse 

of private-label securitization markets after the crisis. Following several years of more stringent underwriting standards, delinquency rates have been low and nonbank servicers have 

generally not faced the strain of funding servicing advances. With the federal government 

now backing the majority of new mortgages, nonbanks now originating the majority and 

servicing a larger share of those mortgages, and banks providing warehouse lines of credit 

to nonbanks, the new structure of the mortgage market remains untested by considerable 

strain in the housing sector. Along with the positive aspects of the migration of mortgage 

activity to nonbanks, new uncertainties have emerged that warrant additional assessment 

and continued monitoring.

Author:

Kayla Shoemaker

Senior Policy Analyst

Division of Insurance and Research