FDIC Quarterly 

Quarterly Banking Profile: 

Fourth Quarter 2008 

The 2009 Economic Landscape: 

How the Recession Is Unfolding 

across Four U.S. Regions 

Alternative Financial Services: 

A Primer 

2009, Volume 3, Number 1 
 

 

 

 

 

 

 

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 Information Center, 3501 Fairfax Drive, Room E-1002, Arlington, VA 22226. E-mail requests should be 

sent to publicinfo@fdic.gov. Change of address information also should be submitted to the Public 

Information Center. 

The FDIC Quarterly is available on-line by visiting the FDIC Web site at www.fdic.gov. To receive 

e-mail notification of the electronic release of the FDIC Quarterly and the individual feature articles, 

subscribe at www.fdic.gov/about/subscriptions/index.html. 

Chairman Sheila C. Bair 

Director, Division of Insurance Arthur J. Murton 

and Research 

Executive Editor Maureen E. Sweeney 

Managing Editors Richard A. Brown 

Diane L. Ellis 

Paul H. Kupiec 

Christopher J. Newbury 

Editor Kathy Zeidler 

Publication Managers Peggi Gill 

Lynne Montgomery 

Media Inquiries (202) 898-6993 
FDIC Quarterly 

2009, Volume 3, Number 1 

The Federal Deposit Insurance Corporation Celebrates Its 

75th Year See page ii. 

Quarterly Banking Profile: Fourth Quarter 2008 

FDIC-insured institutions reported a net loss of $32.1 billion in the fourth quarter of 2008, a decline of $32.7 billion from 

the $575 million that the industry earned in the fourth quarter of 2007 and the first quarterly loss since 1990. Rising loanloss provisions, large writedowns of goodwill and other assets, and sizable losses in trading accounts all contributed to the 

industry’s net loss. More than two-thirds of all insured institutions were profitable in the fourth quarter, but their earnings 

were outweighed by large losses at a number of big banks. See page 1. 

Insurance Fund Indicators 

Estimated insured deposits (based on the basic FDIC insurance limit of $100,000) increased by 4.6 percent in the fourth 

quarter. The Deposit Insurance Fund reserve ratio fell to 0.40 percent, and 12 FDIC-insured institutions failed during 

the quarter. See page 15. 

Temporary Liquidity Guarantee Program 

The FDIC Board approved the Temporary Liquidity Guarantee Program (TLGP) in response to major disruptions in 

credit markets. The TLGP improves access to liquidity for participating institutions by fully guaranteeing non-interestbearing transaction deposit accounts and by guaranteeing eligible senior unsecured debt. More than 85 percent of FDICinsured institutions have opted in to the Transaction Account Guarantee Program, and more than 8,000 eligible entities 

have elected the option to participate in the Debt Guarantee Program. Over $680 billion in non-interest-bearing transaction accounts was guaranteed as of December 31, 2008, and $224 billion in guaranteed senior unsecured debt, issued 

by 64 entities, was outstanding at year-end. See page 18. 

Feature Articles: 

The 2009 Economic Landscape: 

How the Recession Is Unfolding across Four U.S. Regions 

Events in the U.S. and global financial markets are powerful drivers of the recession that began in 2007. However, this 

economic downturn is unfolding in unique ways across the various regional economies. The following series of articles takes 

a closer look at the distinct way that this recession is playing out in four major regions of the country. 

Recession Adds to Long-Term Manufacturing Challenges in the Industrial Midwest See page 27. 

The Sand States: Anatomy of a Perfect Housing-Market Storm See page 30. 

Financial Sector Woes Pressure the Northeast See page 33. 

How Long Can Energy and Agriculture Boost the Nation’s Midsection? See page 36. 

Alternative Financial Services: A Primer 

Alternative financial services (AFS) is a term often used to describe the array of financial services offered by companies that 

are not federally insured banks and thrifts. It sometimes also refers to financial services that are offered through alternative 

channels, such as the Internet or mobile phones. This article provides an overview of AFS and a description of the key 

products and services in this sector. It is intended as a primer for banks and others who are interested in understanding the 

competitive landscape in the financial services industry and exploring suitable opportunities in the AFS sector. See page 39. 

The views expressed are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance 

Corporation. 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. 
 

 

 

The Federal Deposit Insurance Corporation 

Celebrates Its 75th Year 

Chairman Bair and the Federal Deposit Insurance Corporation 

(FDIC) officially launched the agency’s 75th anniversary on June 

16, 2008. The Corporation is celebrating this milestone with a 

campaign to promote awareness of deposit insurance and coverage 

limits, as well as to reinforce its ongoing commitment to consumers 

through an initiative to enhance financial literacy and improve 

consumer savings. Please visit our 75th anniversary web site for 

more information at www.fdic.gov/anniversary. 

The FDIC is an independent government agency that has been protecting Americans’ 

savings for 75 years. Created in 1933, the FDIC promotes public trust and confidence in 

the U.S. banking system by insuring deposits. 

The FDIC insures more than $4.7 trillion of deposits in over 8,300 U.S. banks and thrifts— 

deposits in virtually every bank and thrift in the country. Throughout our 75-year history, 

no one has ever lost a penny of insured deposits as a result of a bank failure. 

In addition to immediately responding to insured depositors when a bank fails, the FDIC 

monitors and addresses risks to the Deposit Insurance Fund, and directly supervises and 

examines approximately 5,100 institutions that are not members of the Federal Reserve 

System. The FDIC—with a staff of more than 4,900 employees nationwide—is managed by a 

five-person Board of Directors, all of whom are appointed by the President and confirmed 

by the Senate, with no more than three being from the same political party. Sheila C. Bair 

heads this board as the 19th Chairman of the Federal Deposit Insurance Corporation. 

FDIC QUARTERLY II 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Banking Profile Fourth Quarter 2008 

INSURED INSTITUTION PERFORMANCE 

■ Industry Posts $32.1 Billion Quarterly Loss 

■ Loan-Loss Expenses, Goodwill Writedowns, and Trading Losses Outstrip Revenues 

■ Asset Quality Indicators Show Further Deterioration 

■ Domestic Deposits Register Strong Growth 

■ Full-Year Net Income of $10.2 Billion Is Lowest Since 1989 

Note to Readers: Shortly after the original release of the Fourth Quarter 2008 Quarterly Banking Profile, amended financial 

reports were received that significantly changed aggregate fourth quarter and full-year earnings. Accordingly, this issue has been 

updated from the original release to reflect the changes. Updated results include substantially higher charges for goodwill impairment in the fourth quarter, which affected the industry’s aggregate net income and total equity capital. As a result of the amended 

reports, the industry’s fourth quarter net loss widened from $26.2 billion to $32.1 billion, and net income for all of 2008 was 

revised from $16.1 billion to $10.2 billion. 

Industry Reports First Quarterly Loss Since 1990 

Expenses associated with rising loan losses and declining asset values overwhelmed revenues in the fourth 

quarter of 2008, producing a net loss of $32.1 billion at 

insured commercial banks and savings institutions. This 

is the first time since the fourth quarter of 1990 that the 

industry has posted an aggregate net loss for a quarter. 

The −0.94 percent quarterly return on assets (ROA) is 

the worst since the −1.10 percent in the second quarter 

of 1987. A year ago, the industry reported $575 million 

in profits and an ROA of 0.02 percent. High expenses 

for loan-loss provisions, large writedowns of goodwill 

and other assets, and sizable losses in trading accounts 

all contributed to the industry’s net loss. A few very 

large losses were reported during the quarter—four 

institutions accounted for half of the total industry 

loss—but earnings problems were widespread. One out 

of every three institutions reported a net loss in the 

fourth quarter. Only 36 percent of institutions reported 

Chart 1 

year-over-year increases in quarterly earnings, and only 

33 percent reported higher quarterly ROAs. 

Provisions for Loan Losses Are More than Double 

Year-Earlier Total 

Insured banks and thrifts set aside $69.4 billion in provisions for loan and lease losses during the fourth quarter, 

more than twice the $32.1 billion that they set aside in 

the fourth quarter of 2007. Loss provisions represented 

50.4 percent of the industry’s net operating revenue 

(net interest income plus total noninterest income), the 

highest proportion since the second quarter of 1987 

when provisions absorbed 53.2 percent of net operating 

revenue. As in the fourth quarter of 2007, a few institutions reported unusually large trading losses, while 

others took substantial charges for impairment of goodwill. Goodwill impairment charges and other intangible 

asset expenses rose to $21.9 billion, from $11.5 billion 

in the fourth quarter of 2007. Trading activities 

Chart 2 

The Industry Has Its First Quarterly Loss in 18 Years Loss Provisions Were More Than 

$ Billions Twice the Level of a Year Ago 50 Securities and Other Gains/Losses, Net 4th Quarter 2008 vs. 4th Quarter 2007 

Net Operating Income ($ Billions) 40 36.9 38.0 38.1 35.3 35.6 36.8 34.0 33.2 34.7 40 37.3 32.6 28.7 31.8 31.2 32.5 31.0 35 

30 

30 

19.3 20 Positive Negative 

Factor 

25 

Factors 20 10 4.8 1.0 15 0.6 

0 10 6.8 4.5 5 

-10 0 

-5 -20 -4.5 -6.1 -10 

Increase in Increase in Decrease in Increase in Increase in 

-32.1 Net Interest Loan-Loss Noninterest Realized Noninterest 

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Income Provisions Income Losses on Expense 

2004 2005 2006 2007 2008 Securities 

-30 

FDIC QUARTERLY 1 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

produced a $9.2 billion net loss in the quarter, 

compared to a loss of $11.2 billion a year earlier. These 

are the only two quarters in the past 25 years in which 

trading revenues have been negative. Other negative 

earnings factors included a $6.1 billion (13 percent) 

year-over-year decline in noninterest income, and $8.1 

billion in realized losses on securities and other assets in 

the quarter, more than twice the $3.7 billion in losses 

realized a year earlier. The reduction in noninterest 

income was driven by declines in servicing income 

(down $3.1 billion from a year earlier) and securitization income (down $2.6 billion, or 52.3 percent). 

Average Net Interest Margin at Community Banks

Falls to 20-Year Low 

Net interest income totaled $97.0 billion in the fourth 

quarter, an increase of $4.5 billion (4.9 percent) from 

the fourth quarter of 2007. The average net interest 

margin (NIM) was 3.34 percent in the quarter, up 

slightly from 3.32 percent a year earlier but lower than 

the 3.37 percent average in the third quarter. The yearover-year margin improvement was confined mostly to 

larger institutions. More than half of all institutions (56 

percent) reported lower NIMs. At institutions with less 

than $1 billion in assets, the average margin was 3.66 

percent, compared to 3.85 percent a year earlier and 

3.78 percent in the third quarter. This is the lowest 

quarterly NIM for this size group of institutions since 

the second quarter of 1988. At larger institutions, the 

average NIM improved from 3.24 percent a year earlier 

to 3.30 percent, slightly below the 3.32 percent average 

of the third quarter. When short-term interest rates are 

low and declining, it is more difficult for banks to 

reduce the rates they pay for deposits without causing 

deposit outflows. The cost of short-term nondeposit 

liabilities, in contrast, tends to follow movements in 

short-term interest rates more closely. Community 

banks fund more than two-thirds of their assets with 

domestic interest-bearing deposits, whereas larger institutions fund less than half of their assets with these 

deposits. As rates fell in the fourth quarter, average 

funding costs declined at larger institutions but 

remained unchanged at community banks. 

Full-Year Earnings Fall to Lowest Level in 19 Years 

Net income for all of 2008 was $10.2 billion, a decline 

of $89.8 billion (89.8 percent) from the $100 billion 

the industry earned in 2007. This is the lowest annual 

earnings total since 1989, when the industry earned 

$10.0 billion. The ROA for the year was 0.08 percent, 

the lowest since 1987, when the industry reported a net 

loss. Almost one in four institutions (23.6 percent) was 

unprofitable in 2008, and almost two out of every three 

institutions (62.8 percent) reported lower full-year earnings than in 2007. Loss provisions totaled $174.4 billion 

in 2008, an increase of $105.2 billion (152 percent) 

compared to 2007. Total noninterest income was $25.6 

billion (11 percent) lower as a result of the industry’s 

first-ever full-year trading loss ($1.8 billion), a 

$5.8-billion (27.4-percent) decline in securitization 

income, and a $6.6-billion negative swing in proceeds 

from sales of loans, foreclosed properties, and other 

assets. As low as the full-year reported earnings total 

was, it could easily have been worse. If the effect of failures and purchase accounting for mergers that occurred 

during the year is excluded from reported results, the 

industry would have posted a net loss in 2008.1 The 

magnitude of many year-over-year income and expense 

comparisons is muted by the impact of these structural 

changes and their accounting treatments. 

Quarterly Net Charge-Off Rate Matches Previous High 

Net loan and lease charge-offs totaled $38.0 billion in 

the fourth quarter, an increase of $21.7 billion (132.7 

percent) from the fourth quarter of 2007. The annual1 Under purchase accounting rules that apply to bank mergers, income and 

expenses that have been booked by an acquired institution are reset to zero 

as of the date when a change in ownership occurs. Income and expenses 

that have been accrued prior to that date are reflected in adjustments to the 

assets, equity capital, and reserves of the acquired institution and are not 

reflected in subsequent reporting of year-to-date income and expense. 

Chart 3 Chart 4 

Troubled Loans Continue to Rise 

0.0 

0.5 

1.0 

1.5 

2.0 

2.5 

3.0 

3.5 

4.0 

Noncurrent Loan Rate 

Quarterly Net Charge-off Rate 

1991 1993 1995 1997 1999 2001 2003 2005 2007 

Percent 

Full-Year Profitability Was the Lowest Since 1987

-0.2 

0.0 

0.2 

0.4 

0.6 

0.8 

1.0 

1.2 

1.4 

1.6 

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 -2 

0 

2 

4 

6 

8 

10 

12 

14 

16 

Annual ROE

 (Percent) 

ROE 

ROA 

Annual ROA 

(Percent) 

FDIC QUARTERLY 2 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Banking Profile 

ized quarterly net charge-off rate was 1.92 percent, the 

highest level in the 25 years that institutions have 

reported quarterly net charge-offs. The year-over-year 

increase in quarterly net charge-offs was led by real 

estate construction and development loans (up $6.1 

billion, or 450.9 percent), closed-end 1–4 family residential mortgage loans (up $4.6 billion, or 206.7 

percent), commercial and industrial (C&I) loans (up 

$3.1 billion, or 98.2 percent), and credit cards (up $2.5 

billion, or 60.1 percent). Charge-offs in all major loan 

categories increased from a year ago. Real estate loans 

accounted for almost two-thirds of the total increase in 

charge-offs (64.7 percent). 

Noncurrent Loans Register Sizable Increase in the

Fourth Quarter 

The amount of loans and leases that were noncurrent 

rose sharply in the fourth quarter, increasing by $44.2 

billion (23.7 percent). Noncurrent loans totaled $230.8 

billion at year-end, up from $186.6 billion at the end of 

the third quarter. More than two-thirds of the increase 

during the quarter (69.4 percent) came from loans 

secured by real estate. Noncurrent closed-end 1–4 family 

residential mortgages increased by $18.4 billion (24.1 

percent) during the quarter, while noncurrent C&I loans 

rose by $7.6 billion (42.8 percent). Noncurrent home 

equity loans increased by $3.0 billion (39.0 percent), and 

noncurrent loans secured by nonfarm nonresidential real 

estate increased by $3.0 billion (20.9 percent). In the 12 

months ended December 31, total noncurrent loans at 

insured institutions increased by $120.1 billion (108.5 

percent). At the end of the year, the percentage of loans 

and leases that were noncurrent stood at 2.93 percent, 

the highest level since the end of 1992. Real estate 

construction loans had the highest noncurrent rate of 

any major loan category at year-end, at 8.55 percent, up 

from 7.30 percent at the end of the third quarter. 

Chart 5 

Reserve Coverage Ratio Slips to 16-Year Low 

Total reserves increased by $16.6 billion (10.6 percent) 

in the fourth quarter. Insured institutions added $31.4 

billion more in loss provisions to reserves than they 

took out in charge-offs, but the impact of purchase 

accounting from a few large mergers in the quarter 

limited the overall growth in industry reserves.2 The 

growth in reserves, coupled with a decline in industry 

loan balances, caused the industry’s ratio of reserves to 

total loans to increase during the quarter from 1.96 

percent to 2.20 percent, a 14-year high. However, the 

increase in reserves did not keep pace with the sharp 

rise in noncurrent loans, and the industry’s ratio of 

reserves to noncurrent loans fell from 83.9 percent to 

75.0 percent. This is the lowest level for the “coverage 

ratio” since the third quarter of 1992. 

Goodwill Writedowns Produce Drop in

Total Equity Capital 

Total equity capital declined for a third consecutive 

quarter, falling by $10.1 billion (0.8 percent) in the 

fourth quarter. A $45.5-billion (12.8-percent) decline in 

goodwill and a $16.5-billion reduction in other comprehensive income were the main reasons for the decline. 

In contrast, regulatory capital, which does not include 

goodwill and is not affected by unrealized losses on securities (which are included in other comprehensive 

income), increased during the quarter. Tier 1 leverage 

capital increased by $22.8 billion (2.3 percent), to $1 

trillion at year-end. Total regulatory capital increased by 

$28.0 billion (2.2 percent) during the quarter, to $1.28 

trillion. For the full year, equity capital fell by $51.2 

billion. Other comprehensive income, which includes 

unrealized gains and losses on securities held for sale, 

declined by $61.2 billion, and goodwill fell by $41.1 

billion. Even though the industry’s dividends fell by 

more than half in 2008 compared to 2007, the $51.0 

billion paid out in 2008 exceeded the year’s net income 

2 See footnote 1. 

Chart 6 

The Coverage Ratio Is Still Declining 

0 

50 

100 

150 

200 

250 

1 2 3 4 1 2 3 4 1 2 3 41234 

$ Billions 

0 

20 

40 

60 

80 

100 

120 

140 

160 

180 

200 

Coverage Ratio (Percent) 

Loan-Loss Reserves ($ Billions) 

Noncurrent Loans ($ Billions) 

2005 2006 2007 2008

Percent 

Total Loans Declined in the Fourth Quarter 

-100 

-50 

0 

50 

100 

150 

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1234 

Quarterly Change in Commercial Loans 

Quarterly Change in Consumer Loans 

Quarterly Change 

($ Billions) 

2004 2005 2006 2007 2008 

FDIC QUARTERLY 3 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

by almost $41 billion. Of the 5,631 insured institutions 

that paid dividends in 2007, more than half (55 

percent) reduced their dividends in 2008, including 502 

institutions (9 percent) that eliminated their dividends. 

At the end of 2008, 97.5 percent of all insured institutions, representing 98.7 percent of industry assets, met 

or exceeded the highest regulatory capital standards. 

Balances at Federal Reserve Banks Increased by

$342 Billion in the Quarter 

Total assets of insured institutions increased by $274.2 

billion (2.0 percent) in the fourth quarter. The growth 

was driven by a $341.7-billion (194.3-percent) increase 

in balances with Federal Reserve banks. While 1,069 

banks reported increases in reserve balances during the 

quarter, five banks accounted for more than half of the 

entire industry increase. Net loans and leases fell by 

$131.4 billion (1.7 percent), as several large institutions 

restructured their loan portfolios. Three large banks 

accounted for all of the decline in the industry’s loans 

during the fourth quarter; most institutions grew their 

loan balances in the quarter. Almost two-thirds of all 

institutions (64.7 percent) reported increases in their 

loans and leases, while only about half as many institutions (2,865 institutions, or 34.5 percent of all reporters) had declines in their loan portfolios. 

Deposit Share of Asset Funding Rises 

Total deposits increased by $307.9 billion (3.5 percent) in 

the fourth quarter, the largest percentage increase in a 

quarter in ten years. Deposits in domestic offices grew by 

$274.1 billion (3.8 percent), with interest-bearing domestic 

deposits rising by $242.8 billion (4.2 percent). Brokered 

deposits increased by $101.8 billion (15.3 percent). Deposits in foreign offices increased by $33.8 billion (2.2 percent) 

during the quarter. Deposit growth outpaced growth in 

total assets, and at the end of 2008, deposits funded 65.3 

percent of industry assets, the highest proportion since midyear 2007. Nondeposit liabilities fell by $23.6 billion (0.7 

percent), as Federal Home Loan Bank advances declined 

Chart 7 

Deposit Growth Was Particularly Strong 

in the Fourth Quarter 

Quarterly Change 

($ Billions) 

by $124.0 billion (13.6 percent), and Federal funds 

purchased and securities sold under repurchase agreements 

declined by $54.7 billion (5.8 percent). 

Trust Activities Receded in 2008 

In a difficult year for financial markets, it was not surprising that trust activities at insured institutions diminished. Total managed fiduciary assets declined in 2008 

by $1.1 trillion (25.1 percent), while non-managed 

assets fell by $3.4 trillion (19.6 percent), and assets in 

custodial and safekeeping accounts fell by $7.7 trillion 

(13.2 percent). Net fiduciary income was $1.1 billion 

(8.3 percent) less in 2008 than in 2007. 

Failures and Assistance Transactions Rose to 

15-Year High in 2008 

The number of FDIC-insured commercial banks and 

savings institutions reporting financial results fell to 

8,305 at the end of 2008, down from 8,384 at the end 

of the third quarter. The net decline of 79 institutions 

was the largest since the first quarter of 2002. Fifteen 

new institutions were chartered in the fourth quarter, 

the smallest number in any quarter since the third quarter of 1994. Seventy-eight insured institutions were 

absorbed into other institutions through mergers, and 

12 institutions failed during the quarter (five other 

institutions received FDIC assistance in the quarter). 

For all of 2008, there were 98 new charters, 292 mergers, 25 failures, and 5 assistance transactions. This is the 

largest number of failed and assisted institutions in a 

year since 1993, when there were 50. At year-end, 252 

insured institutions with combined assets of $159 

billion were on the FDIC’s “Problem List.” These totals 

are up from 171 institutions with $116 billion in assets 

at the end of the third quarter, and 76 institutions with 

$22 billion in assets at the end of 2007. 

Author: Ross Waldrop, Sr. Banking Analyst 

Division of Insurance and Research 

(202) 898-3951 

Chart 8 

247 

70 

140 145 150 

7 

155 

-164 

252 

72 

172 

-66 

162 

235 

308 

-24 

31 

127 

-200 

-100 

0 

100 

200 

300 

400 

4 1 2 3 4 1 2 3 4 

Total Deposits 

Nondeposit Liabilities 

Merger and Chartering Activity Slowed in 2008 

0 

100 

200 

300 

400 

500 

600 

700 

800 

1992 1994 1996 1998 2000 2002 2004 2006 2008 

Number of Institutions 

Mergers 

New Charters 

Failures 

2006 2007 2008 

FDIC QUARTERLY 4 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

Quarterly Banking Profile 

TABLE I-A. Selected Indicators, All FDIC-Insured Institutions* 2008 2007 2006 2005 2004 2003 2002 

Return on assets (%) ...................................................................................................... 0.08 0.81 1.28 1.28 1.28 1.38 1.30 

Return on equity (%)....................................................................................................... 0.79 7.75 12.30 12.43 13.20 15.05 14.08 

Core capital (leverage) ratio (%) .................................................................................... 7.49 7.97 8.22 8.25 8.11 7.88 7.86 

Noncurrent assets plus other real estate owned to assets (%) .................................... 1.88 0.94 0.54 0.50 0.53 0.75 0.90 

Net charge-offs to loans (%) .......................................................................................... 1.28 0.59 0.39 0.49 0.56 0.78 0.97 

Asset growth rate (%) ..................................................................................................... 6.24 9.89 9.04 7.63 11.37 7.58 7.20 

Net interest margin (%)................................................................................................... 3.18 3.29 3.31 3.47 3.52 3.73 3.96 

Net operating income growth (%)................................................................................... -85.70 -27.58 8.52 11.43 3.99 16.38 17.58 

Number of institutions reporting..................................................................................... 8,305 8,534 8,680 8,833 8,976 9,181 9,354 

Commercial banks................................................................................................... 7,085 7,283 7,401 7,526 7,631 7,770 7,888 

Savings institutions ................................................................................................. 1,220 1,251 1,279 1,307 1,345 1,411 1,466 

Percentage of unprofitable institutions (%).................................................................... 23.59 12.07 7.94 6.22 5.97 5.99 6.67 

Number of problem institutions...................................................................................... 252 76 50 52 80 116 136 

Assets of problem institutions (in billions) ..................................................................... $159 $22 $8 $7 $28 $30 $39 

Number of failed institutions........................................................................................... 25 3 0 0 4 3 11 

Number of assisted institutions...................................................................................... 5 0 0 0 0 0 0 

* Excludes insured branches of foreign banks (IBAs). 

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

(dollar figures in millions) 4th Quarter 

2008 

3rd Quarter 

2008 

4th Quarter 

2007 

%Change 

07Q4-08Q4 

Number of institutions reporting..................................................................................... 8,305 8,384 8,534 -2.7 

Total employees (full-time equivalent) ........................................................................... 2,153,247 2,170,931 2,215,029 -2.8 

CONDITION DATA 

Total assets .................................................................................................................... $13,847,284 $13,573,065 $13,034,074 6.2 

Loans secured by real estate.................................................................................. 4,704,149 4,749,500 4,781,832 -1.6 

1-4 Family residential mortgages .................................................................... 2,044,840 2,102,109 2,241,455 -8.8 

Nonfarm nonresidential.................................................................................... 1,068,203 1,043,174 968,765 10.3 

Construction and development........................................................................ 590,177 615,891 629,452 -6.2 

Home equity lines............................................................................................. 667,505 652,127 611,389 9.2 

Commercial & industrial loans ................................................................................ 1,496,321 1,503,734 1,439,122 4.0 

Loans to individuals................................................................................................. 1,088,780 1,082,719 1,058,462 2.9 

Credit cards ...................................................................................................... 444,685 411,627 421,818 5.4 

Farm loans............................................................................................................... 59,908 59,504 56,786 5.5 

Other loans & leases............................................................................................... 531,278 597,344 572,625 -7.2 

Less: Unearned income .......................................................................................... 5,204 2,790 2,309 125.4 

Total loans & leases ................................................................................................ 7,875,231 7,990,011 7,906,518 -0.4 

Less: Reserve for losses......................................................................................... 173,163 156,530 102,552 68.9 

Net loans and leases............................................................................................... 7,702,069 7,833,481 7,803,966 -1.3 

Securities................................................................................................................. 2,035,605 2,025,444 1,954,146 4.2 

Other real estate owned.......................................................................................... 26,618 22,960 12,127 119.5 

Goodwill and other intangibles ............................................................................... 423,198 484,149 461,744 -8.3 

All other assets........................................................................................................ 3,659,794 3,207,031 2,802,091 30.6 

Total liabilities and capital .............................................................................................. 13,847,284 13,573,065 13,034,074 6.2 

Deposits................................................................................................................... 9,035,676 8,727,757 8,415,375 7.4 

Domestic office deposits.................................................................................. 7,496,369 7,222,236 6,912,800 8.4 

Foreign office deposits..................................................................................... 1,539,307 1,505,522 1,502,575 2.4 

Other borrowed funds ............................................................................................. 2,575,254 2,732,527 2,516,753 2.3 

Subordinated debt................................................................................................... 185,467 176,833 185,393 0.0 

All other liabilities .................................................................................................... 754,565 629,552 569,065 32.6 

Equity capital ........................................................................................................... 1,296,322 1,306,396 1,347,488 -3.8 

Loans and leases 30-89 days past due......................................................................... 158,186 121,380 107,999 46.5 

Noncurrent loans and leases ......................................................................................... 230,809 186,560 110,708 108.5 

Restructured loans and leases ...................................................................................... 23,968 18,942 6,926 246.1 

Direct and indirect investments in real estate ............................................................... 948 910 1,097 -13.6 

Mortgage-backed securities .......................................................................................... 1,299,829 1,261,316 1,236,004 5.2 

Earning assets................................................................................................................ 11,768,835 11,492,995 11,304,844 4.1 

FHLB advances .............................................................................................................. 787,512 911,469 808,944 -2.6 

Unused loan commitments............................................................................................. 7,147,590 7,860,482 8,315,951 -14.0 

Trust assets..................................................................................................................... 17,328,176 19,948,345 21,862,322 -20.7 

Assets securitized and sold**......................................................................................... 1,910,884 1,906,803 1,698,002 12.5 

Notional amount of derivatives**.................................................................................... 201,096,104 177,103,500 166,118,444 21.1 

INCOME DATA 

Total interest income ................................................................... 

Total interest expense ................................................................. 

Net interest income .............................................................. 

Provision for loan and lease losses ............................................ 

Total noninterest income ............................................................. 

Total noninterest expense ........................................................... 

Securities gains (losses) ............................................................. 

Applicable income taxes ............................................................. 

Extraordinary gains, net.............................................................. 

Net income............................................................................ 

Net charge-offs............................................................................ 

Cash dividends ............................................................................ 

Retained earnings ....................................................................... 

Net operating income ........................................................... 

Full Year Full Year 4th Quarter 4th Quarter %Change 

2008 2007 %Change 2008 2007 07Q4-08Q4 

$603,357 $724,859 -16.8 $151,227 $189,631 -20.3 

245,612 372,144 -34.0 54,203 97,127 -44.2 

357,746 352,714 1.4 97,024 92,504 4.9 

174,362 69,193 152.0 69,431 32,144 116.0 

207,493 233,098 -11.0 40,885 47,000 -13.0 

364,860 367,043 -0.6 111,309 104,473 6.5 

-14,994 -1,371 N/M -8,137 -3,665 N/M 

6,219 46,480 -86.6 -14,149 -1,112 N/M 

5,367 -1,735 N/M 4,710 241 N/M 

10,170 99,991 -89.8 -32,109 575 N/M 

99,461 44,118 125.4 37,983 16,319 132.8 

51,017 110,348 -53.8 8,463 20,746 -59.2 

-40,846 -10,356 N/M -40,572 -20,172 N/M 

14,641 102,409 -85.7 -31,782 2,553 N/M 

** Call Report filers only. N/M - Not Meaningful. 

FDIC QUARTERLY 5 2009, VOLUME 3, NO. 1 
TABLE III-A. Full Year 2008, All FDIC-Insured Institutions 

FULL YEAR 

(The way it is...) 

Number of institutions reporting....................... 

All Insured 

Institutions 

Asset Concentration Groups* 

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 

8,305 26 5 1,558 4,752 838 91 281 710 44 

Commercial banks..................................... 7,085 22 5 1,554 4,248 230 71 259 662 34 

Savings institutions ................................... 1,220 4 0 4 504 608 20 22 48 10 

Total assets (in billions).................................... $13,847.3 $513.0 $3,410.1 $168.8 $5,465.6 $997.5 $122.2 $34.7 $94.9 $3,040.5 

Commercial banks..................................... 12,312.9 487.1 3,410.1 168.3 4,943.6 183.3 66.1 30.5 84.2 2,939.8 

Savings institutions ................................... 1,534.4 26.0 0.0 0.4 522.0 814.3 56.1 4.2 10.7 100.7 

Total deposits (in billions)................................. 9,035.7 200.0 2,139.2 135.6 3,872.2 548.6 87.2 25.8 77.6 1,949.6 

Commercial banks..................................... 8,082.1 183.0 2,139.2 135.2 3,528.8 68.8 43.1 22.9 68.9 1,892.1 

Savings institutions ................................... 953.6 17.0 0.0 0.4 343.4 479.8 44.1 2.9 8.6 57.5 

Net income (in millions) .................................... 10,170 7,915 8,061 1,642 -1,963 -4,153 -7 493 798 -2,617 

Commercial banks..................................... 18,726 7,592 8,061 1,638 -1,209 2,292 7 290 817 -762 

Savings institutions ................................... 

Performance Ratios (%) 

-8,556 323 0 3 -753 -6,445 -15 204 -19 -1,854 

Yield on earning assets.................................... 5.36 12.21 5.13 6.38 5.88 4.91 6.64 4.52 6.10 3.61 

Cost of funding earning assets ........................ 2.18 2.81 2.26 2.48 2.28 2.47 2.90 1.67 2.28 1.66 

Net interest margin.................................... 3.18 9.41 2.86 3.90 3.60 2.43 3.74 2.85 3.82 1.94 

Noninterest income to assets........................... 1.58 8.00 1.75 0.65 1.45 0.44 1.79 11.45 0.86 0.92 

Noninterest expense to assets......................... 2.77 6.65 2.87 2.65 3.17 1.56 2.95 11.18 2.98 1.62 

Loan and lease loss provision to assets.......... 1.32 6.69 1.19 0.35 1.29 1.42 2.43 0.13 0.27 0.70 

Net operating income to assets ....................... 0.11 1.41 0.11 1.04 0.02 -0.38 -0.06 1.64 0.94 0.14 

Pretax return on assets .................................... 0.12 2.60 0.15 1.18 0.06 -0.34 -0.04 2.40 1.01 -0.13 

Return on assets............................................... 0.08 1.70 0.25 1.01 -0.04 -0.43 -0.01 1.45 0.86 -0.09 

Return on equity ............................................... 0.79 7.87 3.44 9.11 -0.35 -5.59 -0.06 7.43 7.58 -0.93 

Net charge-offs to loans and leases................ 1.28 5.94 1.43 0.41 1.12 0.85 1.74 0.33 0.35 0.74 

Loan and lease loss provision to 

net charge-offs .......................................... 175.31 151.89 204.34 129.34 163.15 244.16 172.14 152.43 138.83 183.95 

Efficiency ratio .................................................. 59.04 39.56 65.41 62.31 61.02 57.05 55.87 76.38 67.94 59.57 

% of unprofitable institutions............................ 23.59 15.38 20.00 6.68 31.57 23.75 18.68 16.37 9.72 43.18 

% of institutions with earnings gains................ 

Condition Ratios (%) 

36.82 26.92 40.00 51.93 27.74 48.45 43.96 40.93 49.01 29.55 

Earning assets to total assets .......................... 

Loss allowance to: ............................................ 

84.99 81.27 81.54 91.19 87.45 90.91 92.95 87.80 91.57 82.22 

Loans and leases ...................................... 2.20 7.09 2.79 1.32 1.86 1.34 2.44 1.38 1.25 1.75 

Noncurrent loans and leases.................... 75.02 255.14 72.75 92.09 65.44 39.85 164.59 133.07 87.44 70.66 

Noncurrent assets plus 

other real estate owned to assets............. 1.88 2.08 1.62 1.18 2.31 2.53 1.31 0.35 1.07 1.27 

Equity capital ratio............................................ 9.36 20.44 7.01 11.01 10.11 7.49 9.85 18.56 11.31 9.11 

Core capital (leverage) ratio............................. 7.49 14.55 5.95 9.99 8.17 7.20 9.86 16.30 10.91 6.60 

Tier 1 risk-based capital ratio........................... 9.99 13.72 9.60 13.33 9.70 12.86 12.23 38.03 17.73 8.74 

Total risk-based capital ratio ............................ 12.81 16.11 13.73 14.39 12.02 13.84 13.93 38.86 18.83 12.06 

Net loans and leases to deposits..................... 85.24 179.11 58.53 81.63 96.96 119.66 108.67 30.08 68.39 72.57 

Net loans to total assets................................... 55.62 69.82 36.72 65.57 68.69 65.80 77.53 22.35 55.91 46.53 

Domestic deposits to total assets .................... 

Structural Changes 

54.14 34.36 31.51 80.33 67.75 54.93 70.21 72.04 81.66 54.95 

New Charters............................................. 98 0 0 2 28 2 0 66 0 0 

Institutions absorbed by mergers ............. 292 0 2 32 217 18 1 1 12 9 

Failed Institutions ...................................... 

PRIOR FULL YEARS 

(The way it was...) 

25 0 0 1 21 3 0 0 0 0 

Number of institutions ............................. 2007 8,534 27 5 1,592 4,773 784 109 373 815 56 

..................................... 2005 8,833 33 4 1,685 4,617 887 125 425 995 62 

..................................... 2003 9,181 36 6 1,767 4,254 1,033 157 529 1,308 91 

Total assets (in billions)........................... 2007 $13,034.1 $479.2 $2,784.4 $157.5 $4,619.2 $1,328.1 $94.9 $37.8 $110.4 $3,422.7 

..................................... 2005 10,878.3 359.1 1,851.2 142.3 4,257.3 1,655.1 117.3 47.7 128.7 2,319.6 

..................................... 2003 9,075.7 348.4 1,448.0 129.5 2,923.8 1,657.9 146.6 61.1 171.1 2,189.3 

Return on assets (%) ............................... 2007 0.81 3.35 0.58 1.20 0.83 0.03 1.26 2.56 1.03 0.88 

..................................... 2005 1.28 2.90 0.86 1.27 1.36 1.07 1.55 2.18 1.09 1.35 

..................................... 2003 1.38 4.08 1.10 1.20 1.28 1.38 1.31 1.85 1.06 1.34 

Net charge-offs to loans & leases (%) .... 2007 0.59 3.95 0.76 0.22 0.35 0.40 0.87 0.29 0.22 0.39 

..................................... 2005 0.49 4.64 0.87 0.18 0.23 0.12 1.44 0.26 0.23 0.24 

..................................... 2003 0.78 5.22 1.40 0.28 0.46 0.18 2.09 1.22 0.38 0.62 

Noncurrent assets plus OREO to 

assets (%) .................... 2007 0.94 1.54 0.68 0.83 1.07 1.52 1.64 0.23 0.65 0.68 

..................................... 2005 0.50 1.32 0.46 0.61 0.48 0.56 0.51 0.24 0.54 0.39 

..................................... 2003 0.75 1.63 0.93 0.81 0.68 0.73 0.99 0.33 0.71 0.59 

Equity capital ratio (%)............................. 2007 10.34 21.26 8.01 11.17 11.00 8.38 12.62 19.98 11.46 10.32 

..................................... 2005 10.28 21.51 8.30 10.55 10.83 9.39 10.11 19.47 10.83 9.53 

..................................... 2003 9.15 16.04 7.39 10.64 9.24 9.10 7.30 16.74 10.45 8.87 

* See Table IV-A (page 8) for explanations. 

FDIC QUARTERLY 6 2009, VOLUME 3, NO. 1 
Quarterly Banking Profile 

TABLE III-A. Full Year 2008, All FDIC-Insured Institutions 

Full Year 

(The way it is...) 

Number of institutions reporting............................. 

All Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less than 

$100 

Million 

$100 

Million to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than 

$10 Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

8,305 3,131 4,499 561 114 1,014 1,180 1,705 1,935 1,700 771 

Commercial banks........................................... 7,085 2,784 3,790 425 86 530 1,041 1,407 1,829 1,575 703 

Savings institutions ......................................... 1,220 347 709 136 28 484 139 298 106 125 68 

Total assets (in billions).......................................... $13,847.3 $170.8 $1,355.7 $1,491.6 $10,829.2 $2,433.1 $3,749.2 $3,264.8 $1,057.4 $781.0 $2,561.8 

Commercial banks........................................... 12,312.9 152.5 1,105.7 1,142.5 9,912.2 1,725.5 3,483.0 3,117.5 1,008.1 653.4 2,325.2 

Savings institutions ......................................... 1,534.4 18.3 250.0 349.1 917.0 707.6 266.2 147.2 49.3 127.6 236.5 

Total deposits (in billions)....................................... 9,035.7 139.2 1,071.9 1,080.0 6,744.6 1,534.4 2,513.5 2,155.6 718.8 571.1 1,542.2 

Commercial banks........................................... 8,082.1 125.2 887.4 830.5 6,239.0 1,058.4 2,363.4 2,050.6 683.3 492.0 1,434.3 

Savings institutions ......................................... 953.6 14.0 184.5 249.5 505.6 476.0 150.1 104.9 35.5 79.1 107.9 

Net income (in millions).......................................... 10,170 493 4,204 -2,638 8,112 8,850 -3,349 9,121 5,854 3,998 -14,303 

Commercial banks........................................... 18,726 528 3,992 -1,113 15,319 11,079 -2,039 10,137 5,887 3,763 -10,101 

Savings institutions ......................................... 

Performance Ratios (%) 

-8,556 -36 212 -1,525 -7,207 -2,229 -1,310 -1,017 -33 234 -4,202 

Yield on earning assets.......................................... 5.36 6.25 6.32 5.99 5.11 6.12 4.39 4.87 6.42 5.88 6.08 

Cost of funding earning assets .............................. 2.18 2.39 2.61 2.47 2.07 2.42 1.94 2.14 2.07 2.18 2.40 

Net interest margin .......................................... 3.18 3.87 3.71 3.51 3.04 3.70 2.44 2.72 4.35 3.70 3.68 

Noninterest income to assets................................. 1.58 1.11 1.05 1.12 1.72 2.17 1.15 1.84 2.64 1.40 0.95 

Noninterest expense to assets............................... 2.77 3.78 3.23 3.05 2.66 3.07 2.21 2.58 3.85 3.22 2.99 

Loan and lease loss provision to assets................ 1.32 0.45 0.68 1.16 1.44 1.44 1.02 1.23 1.83 0.79 1.75 

Net operating income to assets ............................. 0.11 0.32 0.41 -0.05 0.09 0.51 -0.08 0.23 0.52 0.54 -0.44 

Pretax return on assets .......................................... 0.12 0.40 0.42 -0.11 0.12 0.63 -0.04 0.43 0.82 0.71 -0.97 

Return on assets..................................................... 0.08 0.30 0.32 -0.18 0.08 0.38 -0.09 0.31 0.59 0.53 -0.60 

Return on equity ..................................................... 0.79 2.24 3.11 -1.64 0.83 3.14 -0.89 3.60 6.02 5.38 -6.76 

Net charge-offs to loans and leases...................... 1.28 0.45 0.63 1.05 1.44 1.43 1.00 1.22 1.59 0.68 1.72 

Loan and lease loss provision to net charge-offs.. 175.31 159.07 153.07 160.54 178.84 177.73 169.83 189.25 169.66 174.31 170.01 

Efficiency ratio ........................................................ 59.04 80.69 70.24 63.11 56.60 53.35 59.34 58.39 58.46 64.60 65.17 

% of unprofitable institutions.................................. 23.59 24.43 21.94 28.70 40.35 30.18 41.78 19.65 13.33 14.35 41.89 

% of institutions with earnings gains...................... 

Condition Ratios (%) 

36.82 40.72 35.85 25.31 24.56 37.77 19.58 40.18 44.08 42.53 23.74 

Earning assets to total assets................................ 

Loss Allowance to: 

84.99 91.44 91.55 89.99 83.38 85.56 84.03 85.12 86.45 90.18 83.50 

Loans and leases ............................................ 2.20 1.38 1.38 1.76 2.43 2.39 1.90 2.22 2.39 1.54 2.61 

Noncurrent loans and leases .......................... 75.02 70.27 58.89 61.32 79.46 114.41 64.73 68.41 80.01 68.08 72.34 

Noncurrent assets plus 

other real estate owned to assets................... 1.88 1.66 2.14 2.37 1.79 1.26 1.95 1.94 2.28 1.80 2.16 

Equity capital ratio.................................................. 9.36 12.89 10.07 10.75 9.03 11.40 9.60 8.08 9.50 9.96 8.46 

Core capital (leverage) ratio................................... 7.49 12.57 9.60 9.26 6.90 8.61 6.64 6.84 8.21 9.01 7.81 

Tier 1 risk-based capital ratio................................. 9.99 18.24 12.83 11.83 9.23 12.34 8.69 9.11 9.79 11.57 10.61 

Total risk-based capital ratio .................................. 12.81 19.30 13.97 13.24 12.50 14.21 11.73 12.29 12.59 13.34 13.84 

Net loans and leases to deposits........................... 85.24 77.64 88.43 94.46 83.41 87.86 85.48 77.18 96.08 89.21 86.98 

Net loans to total assets......................................... 55.62 63.27 69.91 68.39 51.95 55.41 57.31 50.96 65.32 65.24 52.36 

Domestic deposits to total assets .......................... 

Structural Changes 

54.14 81.49 78.97 71.58 48.19 54.60 58.94 52.16 64.35 72.28 39.43 

New Charters................................................... 98 92 4 1 1 20 34 3 5 14 22 

Institutions absorbed by mergers ................... 292 111 146 28 7 41 72 60 56 54 9 

Failed Institutions ............................................ 

PRIOR FULL YEARS 

(The way it was...) 

25 6 10 6 3 0 8 2 4 3 8 

Number of institutions ....................................2007 8,534 3,440 4,424 551 119 1,043 1,221 1,763 1,986 1,742 779 

............................................2005 8,833 3,864 4,339 512 118 1,110 1,227 1,874 2,070 1,791 761 

............................................2003 9,181 4,390 4,210 471 110 1,173 1,227 2,011 2,133 1,866 771 

Total assets (in billions)..................................2007 $13,034.1 $181.9 $1,308.8 $1,422.1 $10,121.3 $2,441.1 $3,329.6 $2,842.5 $976.3 $738.3 $2,706.3 

............................................2005 10,878.3 200.8 1,247.6 1,393.2 8,036.7 2,768.2 2,683.9 2,505.8 803.7 607.7 1,508.9 

............................................2003 9,075.7 225.7 1,160.5 1,313.0 6,376.5 3,085.2 1,882.6 1,693.8 456.3 563.3 1,394.3 

Return on assets (%) ......................................2007 0.81 0.74 0.97 0.96 0.77 0.77 0.81 0.86 1.46 1.00 0.52 

............................................2005 1.28 0.99 1.24 1.28 1.29 1.21 1.36 0.99 1.62 1.19 1.60 

............................................2003 1.38 0.95 1.18 1.41 1.43 1.28 1.38 1.31 1.63 1.37 1.62 

Net charge-offs to loans & leases (%) ...........2007 0.59 0.24 0.25 0.42 0.68 0.90 0.33 0.47 0.78 0.30 0.76 

............................................2005 0.49 0.20 0.19 0.24 0.60 0.80 0.23 0.33 0.56 0.24 0.70 

............................................2003 

Noncurrent assets plus 

0.78 0.31 0.36 0.54 0.94 1.16 0.54 0.72 1.09 0.40 0.58 

OREO to assets (%)........................................2007 0.94 0.96 1.07 1.09 0.91 0.76 0.81 0.94 1.37 1.00 1.12 

............................................2005 0.50 0.69 0.52 0.44 0.50 0.44 0.30 0.54 0.86 0.73 0.59 

............................................2003 0.75 0.83 0.69 0.62 0.78 0.78 0.56 0.86 0.84 0.76 0.76 

Equity capital ratio (%)....................................2007 10.34 13.73 10.49 11.34 10.12 12.06 10.30 9.23 9.74 10.22 10.24 

............................................2005 10.28 12.16 10.20 10.68 10.18 10.54 9.80 9.23 10.45 10.17 12.40 

............................................2003 9.15 11.49 10.05 10.34 8.66 9.05 8.78 8.49 10.59 9.60 10.05 

* See Table IV-A (page 9) for explanations. 

FDIC QUARTERLY 7 2009, VOLUME 3, NO. 1 
 

TABLE IV-A. Fourth Quarter 2008, All FDIC-Insured Institutions 

FOURTH QUARTER 

(The way it is...) 

Number of institutions reporting......................................... 

All Insured 

Institutions 

Asset Concentration Groups* 

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 

8,305 26 5 1,558 4,752 838 91 281 710 44 

Commercial banks....................................................... 7,085 22 5 1,554 4,248 230 71 259 662 34 

Savings institutions ..................................................... 1,220 4 0 4 504 608 20 22 48 10 

Total assets (in billions)...................................................... $13,847.3 $513.0 $3,410.1 $168.8 $5,465.6 $997.5 $122.2 $34.7 $94.9 $3,040.5 

Commercial banks....................................................... 12,312.9 487.1 3,410.1 168.3 4,943.6 183.3 66.1 30.5 84.2 2,939.8 

Savings institutions ..................................................... 1,534.4 26.0 0.0 0.4 522.0 814.3 56.1 4.2 10.7 100.7 

Total deposits (in billions)................................................... 9,035.7 200.0 2,139.2 135.6 3,872.2 548.6 87.2 25.8 77.6 1,949.6 

Commercial banks....................................................... 8,082.1 183.0 2,139.2 135.2 3,528.8 68.8 43.1 22.9 68.9 1,892.1 

Savings institutions ..................................................... 953.6 17.0 0.0 0.4 343.4 479.8 44.1 2.9 8.6 57.5 

Net income (in millions) ...................................................... -32,109 -273 -320 290 -19,771 -3,972 -492 60 171 -7,803 

Commercial banks....................................................... -26,047 -195 -320 289 -19,393 548 -348 6 178 -6,813 

Savings institutions ..................................................... 

Performance Ratios (annualized, %) 

-6,062 -78 0 1 -378 -4,520 -144 54 -7 -990 

Yield on earning assets...................................................... 5.21 13.35 4.91 6.13 5.61 5.32 6.56 4.23 5.91 3.28 

Cost of funding earning assets .......................................... 1.87 2.24 1.79 2.20 2.02 2.47 2.83 1.41 2.03 1.32 

Net interest margin ...................................................... 3.34 11.10 3.12 3.94 3.60 2.84 3.73 2.82 3.88 1.96 

Noninterest income to assets............................................. 1.19 6.29 1.36 0.62 1.15 0.34 1.35 10.69 0.84 0.44 

Noninterest expense to assets........................................... 3.25 6.51 3.29 2.80 3.91 1.84 3.15 11.20 3.10 1.87 

Loan and lease loss provision to assets............................ 2.03 9.36 1.48 0.62 2.16 2.88 4.24 0.21 0.43 0.99 

Net operating income to assets ......................................... -0.93 -0.40 -0.47 0.73 -1.45 -1.51 -1.65 0.87 0.79 -0.55 

Pretax return on assets ...................................................... -1.35 -0.39 -0.53 0.77 -1.82 -1.94 -2.58 1.51 0.76 -1.59 

Return on assets................................................................. -0.94 -0.22 -0.04 0.70 -1.47 -1.61 -1.65 0.70 0.73 -1.06 

Return on equity ................................................................. -9.88 -1.08 -0.53 6.32 -14.18 -20.99 -16.92 3.72 6.46 -11.26 

Net charge-offs to loans and leases.................................. 1.92 6.96 1.85 0.74 1.83 1.78 2.14 0.48 0.54 1.16 

Loan and lease loss provision to net charge-offs.............. 182.79 180.90 204.76 124.42 167.49 239.16 247.80 191.22 138.15 172.01 

Efficiency ratio .................................................................... 64.86 39.39 69.98 65.87 66.49 61.74 64.97 77.29 70.19 78.69 

% of unprofitable institutions.............................................. 32.56 46.15 20.00 17.46 41.41 26.37 27.47 27.05 15.35 45.45 

% of institutions with earnings gains.................................. 

Structural Changes 

35.65 23.08 60.00 43.07 28.77 51.55 41.76 39.15 45.63 22.73 

New Charters............................................................... 15 0 0 0 6 0 0 9 0 0 

Institutions absorbed by mergers ............................... 79 0 0 8 59 5 0 0 4 3 

Failed Institutions ........................................................ 

PRIOR FOURTH QUARTERS 

(The way it was...) 

12 0 0 0 11 1 0 0 0 0 

Return on assets (%) ..................................................2007 0.02 2.01 -0.20 1.07 0.24 -1.97 0.62 2.09 0.92 0.32 

........................................................2005 1.21 2.16 0.79 1.12 1.32 1.02 1.35 3.75 0.96 1.30 

........................................................2003 1.38 4.66 1.22 1.05 1.21 1.26 1.07 3.40 0.93 1.34 

Net charge-offs to loans & leases (%) .......................2007 0.84 4.24 1.05 0.32 0.62 0.67 1.03 0.26 0.38 0.55 

........................................................2005 0.60 6.16 0.86 0.26 0.29 0.19 1.67 0.36 0.32 0.30 

........................................................2003 0.80 5.30 1.36 0.44 0.49 0.13 2.81 0.56 0.44 0.56 

*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. 

FDIC QUARTERLY 8 2009, VOLUME 3, NO. 1 
 

 

 

 

 

Quarterly Banking Profile 

TABLE IV-A. Fourth Quarter 2008, All FDIC-Insured Institutions 

FOURTH QUARTER 

(The way it is...) 

Number of institutions reporting..................... 

All Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less than 

$100 Million 

$100 Million 

to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than 

$10 Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

8,305 3,131 4,499 561 114 1,014 1,180 1,705 1,935 1,700 771 

Commercial banks................................... 7,085 2,784 3,790 425 86 530 1,041 1,407 1,829 1,575 703 

Savings institutions ................................. 1,220 347 709 136 28 484 139 298 106 125 68 

Total assets (in billions).................................. $13,847.3 $170.8 $1,355.7 $1,491.6 $10,829.2 $2,433.1 $3,749.2 $3,264.8 $1,057.4 $781.0 $2,561.8 

Commercial banks................................... 12,312.9 152.5 1,105.7 1,142.5 9,912.2 1,725.5 3,483.0 3,117.5 1,008.1 653.4 2,325.2 

Savings institutions ................................. 1,534.4 18.3 250.0 349.1 917.0 707.6 266.2 147.2 49.3 127.6 236.5 

Total deposits (in billions)............................... 9,035.7 139.2 1,071.9 1,080.0 6,744.6 1,534.4 2,513.5 2,155.6 718.8 571.1 1,542.2 

Commercial banks................................... 8,082.1 125.2 887.4 830.5 6,239.0 1,058.4 2,363.4 2,050.6 683.3 492.0 1,434.3 

Savings institutions ................................. 953.6 14.0 184.5 249.5 505.6 476.0 150.1 104.9 35.5 79.1 107.9 

Net income (in millions) .................................. -32,109 -120 -346 -4,849 -26,795 -2,810 -13,495 -1,644 -982 133 -13,310 

Commercial banks................................... -26,047 -91 -345 -3,747 -21,864 -848 -12,894 -1,022 -975 206 -10,514 

Savings institutions ................................. 

Performance Ratios (annualized, %) 

-6,062 -29 -1 -1,102 -4,930 -1,962 -601 -623 -7 -73 -2,796 

Yield on earning assets.................................. 5.21 6.03 6.01 5.81 4.99 6.07 4.20 4.76 6.21 5.54 5.92 

Cost of funding earning assets ...................... 1.87 2.17 2.37 2.28 1.73 2.09 1.68 1.77 1.67 1.90 2.13 

Net interest margin .................................. 3.34 3.86 3.64 3.53 3.26 3.99 2.52 2.99 4.53 3.65 3.79 

Noninterest income to assets......................... 1.19 1.01 0.96 0.88 1.27 1.93 0.73 1.59 2.08 1.32 0.22 

Noninterest expense to assets....................... 3.25 4.05 3.27 3.44 3.21 3.30 3.02 2.82 3.95 3.35 3.80 

Loan and lease loss provision to assets........ 2.03 0.76 1.13 1.93 2.17 2.24 1.59 1.74 3.08 1.15 2.70 

Net operating income to assets ..................... -0.93 -0.26 -0.05 -1.16 -1.02 -0.20 -1.45 -0.39 -0.59 0.07 -2.05 

Pretax return on assets .................................. -1.35 -0.29 -0.22 -1.57 -1.48 -0.65 -1.80 -0.24 -0.74 0.09 -3.57 

Return on assets............................................. -0.94 -0.28 -0.10 -1.32 -1.00 -0.46 -1.45 -0.20 -0.38 0.07 -2.18 

Return on equity ............................................. -9.88 -2.18 -1.02 -12.21 -10.89 -4.03 -14.58 -2.49 -3.96 0.69 -25.24 

Net charge-offs to loans and leases.............. 1.92 0.82 1.07 1.71 2.11 1.85 1.60 1.86 2.26 0.96 2.73 

Loan and lease loss provision to net 

charge-offs .............................................. 182.79 144.39 147.61 160.58 189.17 218.10 167.32 176.33 201.58 179.86 171.77 

Efficiency ratio ................................................ 64.86 87.36 72.47 69.81 62.74 53.91 71.29 58.79 64.02 65.46 83.99 

% of unprofitable institutions.......................... 32.56 33.41 30.70 38.86 51.75 33.43 51.19 27.68 26.41 23.12 49.94 

% of institutions with earnings gains.............. 

Structural Changes 

35.65 39.96 34.16 25.67 25.44 41.72 23.05 37.42 39.38 39.76 24.64 

New Charters........................................... 15 15 0 0 0 2 6 2 1 0 4 

Institutions absorbed by mergers ........... 79 34 37 6 2 13 19 16 13 17 1 

Failed Institutions .................................... 

PRIOR FOURTH QUARTERS 

(The way it was...) 

12 3 6 2 1 0 5 2 0 2 3 

Return on assets (%) ............................. 2007 0.02 0.44 0.68 0.60 -0.16 0.13 0.10 0.60 0.98 0.55 -1.26 

........................................................ 2005 1.21 0.80 1.25 1.19 1.22 1.10 1.30 0.96 1.49 1.11 1.58 

........................................................ 2003 1.38 0.85 1.15 1.41 1.44 1.34 1.36 1.30 1.62 1.26 1.58 

Net charge-offs to loans & leases (%) .. 2007 0.84 0.37 0.46 0.63 0.94 1.00 0.56 0.75 1.11 0.51 1.10 

........................................................ 2005 0.60 0.31 0.26 0.28 0.73 0.89 0.26 0.44 0.61 0.33 0.95 

........................................................ 2003 0.80 0.43 0.48 0.60 0.92 1.06 0.49 0.90 1.40 0.47 0.54 

* 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 

FDIC QUARTERLY 9 2009, VOLUME 3, NO. 1 
TABLE V-A. Loan Performance, All FDIC-Insured Institutions 

December 31, 2008 All Insured 

Institutions 

Asset Concentration Groups* 

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 ....................................... 2.37 3.81 3.41 1.36 1.85 2.67 1.70 1.46 2.08 3.12 

Construction and development................................. 2.92 0.00 2.72 2.70 2.94 4.84 1.94 1.67 1.94 2.47 

Nonfarm nonresidential............................................. 1.08 0.00 0.82 1.08 1.09 1.24 0.70 0.99 1.56 1.01 

Multifamily residential real estate ............................. 1.18 0.00 1.05 0.92 1.19 1.14 0.06 0.43 1.37 1.43 

Home equity loans..................................................... 1.78 3.87 2.15 0.75 1.23 2.16 1.36 0.21 1.03 2.38 

Other 1-4 family residential....................................... 3.27 4.11 4.75 1.99 2.45 2.77 2.07 1.80 2.54 4.34 

Commercial and industrial loans ..................................... 0.96 4.61 0.68 1.68 1.01 0.95 1.38 0.93 1.62 0.69 

Loans to individuals.......................................................... 2.61 3.11 2.48 2.30 2.53 1.90 1.91 1.63 2.65 2.23 

Credit card loans ....................................................... 2.88 2.98 2.80 2.02 2.63 3.24 1.67 1.83 1.81 2.85 

Other loans to individuals ......................................... 2.43 4.07 2.33 2.32 2.51 1.46 1.98 1.60 2.66 2.12 

All other loans and leases (including farm) ..................... 0.64 0.20 0.47 0.98 0.80 0.16 0.26 0.63 1.14 0.60 

Total loans and leases...................................................... 

Percent of Loans Noncurrent** 

2.01 3.11 2.25 1.37 1.68 2.61 1.75 1.35 2.03 2.17 

All real estate loans .......................................................... 3.80 2.73 5.09 1.78 3.67 3.49 2.15 1.08 1.57 3.82 

Construction and development................................. 8.55 0.00 4.59 7.05 8.77 13.90 3.25 3.59 3.71 6.93 

Nonfarm nonresidential............................................. 1.61 0.00 0.82 2.07 1.65 1.80 0.45 0.92 1.65 1.44 

Multifamily residential real estate ............................. 1.74 0.00 1.11 1.65 1.99 1.70 0.21 2.33 2.17 1.33 

Home equity loans..................................................... 1.61 2.92 1.64 0.57 1.08 1.09 0.80 0.65 0.44 2.82 

Other 1-4 family residential....................................... 4.64 1.25 7.93 1.25 4.14 3.52 3.18 0.85 1.42 4.62 

Commercial and industrial loans ..................................... 1.69 3.74 3.21 1.84 1.35 1.10 0.40 1.49 1.91 1.03 

Loans to individuals.......................................................... 1.77 2.82 2.12 0.82 1.13 1.31 1.00 0.52 0.76 0.84 

Credit card loans ....................................................... 2.73 2.74 3.01 2.28 2.54 3.75 1.57 1.10 0.82 2.68 

Other loans to individuals ......................................... 1.11 3.45 1.69 0.74 0.88 0.50 0.82 0.46 0.76 0.53 

All other loans and leases (including farm) ..................... 1.27 0.08 2.34 0.48 0.99 0.41 0.08 1.00 0.64 0.67 

Total loans and leases...................................................... 

Percent of Loans Charged-off (net, YTD) 

2.93 2.78 3.83 1.43 2.84 3.37 1.48 1.03 1.43 2.47 

All real estate loans .......................................................... 0.99 3.53 1.62 0.31 1.00 0.82 1.10 0.18 0.19 0.79 

Construction and development................................. 2.63 0.00 1.01 1.82 2.73 5.58 0.12 0.48 0.54 1.58 

Nonfarm nonresidential............................................. 0.25 0.00 0.04 0.30 0.27 0.22 0.03 0.09 0.15 0.13 

Multifamily residential real estate ............................. 0.40 0.00 0.07 0.47 0.51 0.30 0.03 0.03 0.11 0.16 

Home equity loans..................................................... 1.58 3.78 1.74 0.21 1.29 2.14 1.59 0.08 0.31 1.81 

Other 1-4 family residential....................................... 0.81 1.55 2.09 0.17 0.61 0.56 1.00 0.20 0.17 0.57 

Commercial and industrial loans ..................................... 1.01 8.43 0.60 1.01 1.08 0.49 3.39 0.11 0.60 0.48 

Loans to individuals.......................................................... 3.40 6.07 3.23 0.84 2.44 2.23 2.27 0.64 0.90 1.40 

Credit card loans ....................................................... 5.44 5.79 4.29 4.95 5.64 6.97 3.89 2.88 2.17 5.22 

Other loans to individuals ......................................... 2.13 7.99 2.74 0.57 1.88 0.87 1.75 0.42 0.88 0.77 

All other loans and leases (including farm) ..................... 0.46 0.01 0.29 0.00 0.78 0.42 1.03 1.10 0.49 0.35 

Total loans and leases...................................................... 

Loans Outstanding (in billions) 

1.28 5.94 1.43 0.41 1.12 0.85 1.74 0.33 0.35 0.74 

All real estate loans .......................................................... $4,704.1 $1.8 $624.1 $64.1 $2,522.0 $631.0 $44.4 $4.6 $37.4 $774.6 

Construction and development................................. 590.2 0.0 13.8 5.4 480.8 17.1 0.7 0.3 2.7 69.4 

Nonfarm nonresidential............................................. 1,068.2 0.0 34.5 17.9 847.3 27.2 3.6 1.4 9.1 127.1 

Multifamily residential real estate ............................. 205.5 0.0 40.6 1.3 132.7 11.9 0.4 0.1 0.6 17.9 

Home equity loans..................................................... 667.5 1.6 143.8 1.3 293.9 51.4 14.5 0.1 1.3 159.5 

Other 1-4 family residential....................................... 2,044.8 0.1 343.7 16.8 720.9 522.5 25.1 2.4 20.9 392.4 

Commercial and industrial loans ..................................... 1,496.3 34.0 288.3 15.4 781.0 14.2 4.4 1.2 5.5 352.3 

Loans to individuals.......................................................... 1,088.8 332.2 199.3 6.4 307.0 17.2 46.3 1.5 6.6 172.3 

Credit card loans ....................................................... 444.7 292.5 65.1 0.4 46.3 4.3 11.0 0.1 0.1 24.9 

Other loans to individuals ......................................... 644.1 39.7 134.2 6.1 260.7 12.9 35.3 1.3 6.5 147.4 

All other loans and leases (including farm) ..................... 591.2 17.5 180.0 26.2 216.6 3.0 2.2 0.6 4.2 140.9 

Total loans and leases...................................................... 

Memo: Other Real Estate Owned (in millions) 

7,880.4 385.5 1,291.6 112.1 3,826.6 665.4 97.4 7.9 53.7 1,440.1 

All other real estate owned............................................... 26,618.4 -32.7 3,078.2 377.8 17,205.4 2,784.4 156.7 28.8 232.0 2,787.8 

Construction and development................................. 8,738.1 0.0 13.0 154.4 7,680.1 559.5 3.1 6.0 45.2 276.7 

Nonfarm nonresidential............................................. 3,371.5 0.2 92.0 103.0 2,275.3 63.8 3.9 8.5 60.3 764.5 

Multifamily residential real estate ............................. 1,202.4 0.0 20.0 16.5 928.3 62.5 0.0 0.1 23.3 151.8 

1-4 family residential ................................................. 11,479.8 2.0 2,343.2 77.0 5,150.2 2,050.7 149.7 12.9 99.4 1,594.7 

Farmland.................................................................... 103.2 0.0 0.0 26.5 68.9 2.6 0.0 1.3 3.9 0.0 

GNMA properties....................................................... 1,632.1 0.0 464.0 0.4 1,099.2 68.4 0.0 0.0 0.0 0.1 

* See Table IV-A (page 8) for explanations. 

** 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. 

FDIC QUARTERLY 10 2009, VOLUME 3, NO. 1 
Quarterly Banking Profile 

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

December 31, 2008 All Insured 

Institutions 

Asset Size Distribution Geographic Regions* 

Less than 

$100 

Million 

$100 

Million to 

$1 Billion 

$1 Billion 

to 

$10 Billion 

Greater 

than 

$10 Billion New York Atlanta Chicago 

Kansas 

City Dallas 

San 

Francisco 

Percent of Loans 30–89 Days Past Due 

All loans secured by real estate .............................. 2.37 1.86 1.66 1.61 2.74 1.49 2.87 2.55 1.53 1.78 2.87 

Construction and development........................ 2.92 2.43 2.63 2.78 3.14 2.44 2.77 3.53 2.63 2.16 3.90 

Nonfarm nonresidential.................................... 1.08 1.40 1.23 0.99 1.03 1.17 1.14 1.25 0.79 0.85 0.96 

Multifamily residential real estate .................... 1.18 1.56 1.32 1.16 1.14 0.90 1.51 1.42 1.11 0.65 0.99 

Home equity loans............................................ 1.78 0.94 0.98 0.93 1.91 0.73 2.34 1.87 1.28 0.88 1.63 

Other 1-4 family residential.............................. 3.27 2.40 1.87 1.84 3.74 1.66 4.04 3.48 2.10 2.95 4.06 

Commercial and industrial loans ............................ 0.96 1.76 1.40 0.97 0.90 1.39 0.75 1.09 1.17 0.74 0.79 

Loans to individuals................................................. 2.61 2.78 2.22 2.35 2.65 3.02 2.73 2.22 3.18 1.76 2.19 

Credit card loans .............................................. 2.88 2.40 2.69 2.89 2.88 3.06 2.87 2.56 3.13 1.46 2.64 

Other loans to individuals ................................ 2.43 2.78 2.18 2.09 2.48 2.92 2.70 2.10 3.22 1.83 1.87 

All other loans and leases (including farm) ............ 0.64 0.80 0.77 0.89 0.61 0.52 0.55 0.87 0.60 0.99 0.48 

Total loans and leases............................................. 

Percent of Loans Noncurrent** 

2.01 1.81 1.62 1.54 2.16 1.75 2.28 2.06 1.61 1.53 2.15 

All real estate loans ................................................. 3.80 2.25 2.67 3.49 4.18 2.19 4.07 4.59 4.37 2.91 4.11 

Construction and development........................ 8.55 6.67 7.73 9.60 8.45 8.03 8.01 10.14 7.43 5.54 12.21 

Nonfarm nonresidential.................................... 1.61 2.15 1.65 1.55 1.59 1.96 1.47 2.12 1.49 1.14 1.15 

Multifamily residential real estate .................... 1.74 2.32 2.01 2.77 1.30 0.91 2.52 2.33 1.40 3.06 1.01 

Home equity loans............................................ 1.61 0.88 0.79 0.94 1.73 0.66 2.40 1.55 1.35 0.48 0.82 

Other 1-4 family residential.............................. 4.64 1.59 1.63 2.59 5.51 1.78 4.79 6.26 8.74 3.52 4.89 

Commercial and industrial loans ............................ 1.69 2.09 1.51 1.42 1.74 1.70 1.06 1.28 1.42 1.09 3.49 

Loans to individuals................................................. 1.77 0.98 0.77 1.14 1.88 2.41 1.18 1.25 2.00 0.68 2.04 

Credit card loans .............................................. 2.73 1.54 1.81 2.33 2.77 2.87 2.62 2.33 2.69 1.36 2.85 

Other loans to individuals ................................ 1.11 0.97 0.69 0.57 1.20 1.53 0.79 0.88 1.37 0.50 1.48 

All other loans and leases (including farm) ............ 1.27 0.56 0.57 0.54 1.39 0.76 0.49 1.25 0.39 0.64 3.57 

Total loans and leases............................................. 

Percent of Loans Charged-off (net, YTD) 

2.93 1.96 2.34 2.88 3.06 2.09 2.94 3.24 2.99 2.26 3.59 

All real estate loans ................................................. 0.99 0.32 0.53 0.91 1.14 0.37 0.99 1.36 0.99 0.58 1.39 

Construction and development........................ 2.63 1.15 1.77 2.80 2.97 1.40 2.24 4.25 1.96 1.53 3.93 

Nonfarm nonresidential.................................... 0.25 0.26 0.20 0.22 0.28 0.27 0.20 0.48 0.18 0.16 0.10 

Multifamily residential real estate .................... 0.40 0.39 0.34 0.62 0.33 0.15 0.58 0.76 0.15 0.40 0.23 

Home equity loans............................................ 1.58 0.41 0.42 0.67 1.74 0.61 1.92 1.08 2.15 0.78 2.34 

Other 1-4 family residential.............................. 0.81 0.19 0.27 0.52 0.94 0.25 0.66 1.19 0.67 0.27 1.46 

Commercial and industrial loans ............................ 1.01 1.00 0.94 0.94 1.03 1.80 0.62 0.74 1.67 0.71 1.19 

Loans to individuals................................................. 3.40 0.87 1.47 2.80 3.56 4.67 2.23 2.14 4.41 1.46 3.84 

Credit card loans .............................................. 5.44 2.79 7.73 5.46 5.42 5.54 5.84 4.52 6.44 3.30 5.25 

Other loans to individuals ................................ 2.13 0.84 1.00 1.53 2.30 3.29 1.35 1.30 2.72 1.01 2.97 

All other loans and leases (including farm) ............ 0.46 0.00 0.44 0.67 0.45 0.25 0.43 0.42 0.63 0.48 0.59 

Total loans and leases............................................. 

Loans Outstanding (in billions) 

1.28 0.45 0.63 1.05 1.44 1.43 1.00 1.22 1.59 0.68 1.71 

All real estate loans ................................................. $4,704.1 $75.1 $749.5 $758.7 $3,120.8 $817.2 $1,383.9 $1,014.2 $382.3 $347.9 $758.6 

Construction and development........................ 590.2 8.8 133.4 150.2 297.8 65.2 202.4 109.0 50.9 84.9 77.8 

Nonfarm nonresidential.................................... 1,068.2 22.6 264.8 265.9 515.0 202.1 285.8 205.0 104.8 117.4 153.2 

Multifamily residential real estate .................... 205.5 1.9 30.6 45.7 127.3 53.2 36.0 60.3 11.0 8.5 36.5 

Home equity loans............................................ 667.5 2.7 38.6 50.8 575.4 67.9 227.1 200.1 81.0 24.7 66.7 

Other 1-4 family residential.............................. 2,044.8 30.4 251.3 231.4 1,531.7 424.0 612.8 422.1 113.8 101.2 371.0 

Commercial and industrial loans ............................ 1,496.3 15.4 126.6 161.6 1,192.8 188.7 423.4 348.9 144.2 107.2 283.8 

Loans to individuals................................................. 1,088.8 7.9 46.7 80.8 953.4 298.2 224.1 186.8 105.8 40.7 233.2 

Credit card loans .............................................. 444.7 0.1 3.4 26.5 414.8 194.9 47.9 47.6 50.5 8.3 95.4 

Other loans to individuals ................................ 644.1 7.8 43.3 54.4 538.6 103.3 176.2 139.2 55.3 32.4 137.7 

All other loans and leases (including farm) ............ 591.2 11.2 38.8 38.3 502.9 77.4 159.1 151.5 75.2 21.8 106.1 

Total loans and leases............................................. 

Memo: Other Real Estate Owned (in millions) 

7,880.4 109.6 961.6 1,039.4 5,769.9 1,381.5 2,190.6 1,701.5 707.6 517.7 1,381.6 

All other real estate owned...................................... 26,618.4 663.7 6,512.4 5,247.0 14,195.2 1,749.4 8,634.6 7,076.3 2,943.0 2,366.3 3,848.6 

Construction and development........................ 8,738.1 201.5 3,358.2 2,677.4 2,501.0 551.0 2,953.2 1,524.7 1,003.0 1,073.0 1,633.2 

Nonfarm nonresidential.................................... 3,371.5 177.9 1,162.6 686.8 1,344.3 264.8 1,317.4 652.3 411.2 453.3 272.6 

Multifamily residential real estate .................... 1,202.4 17.2 231.5 567.3 386.4 73.7 273.9 601.1 75.8 70.9 107.0 

1-4 family residential ........................................ 11,479.8 249.0 1,692.6 1,293.3 8,244.9 821.8 4,042.3 3,496.4 772.2 689.8 1,657.4 

Farmland........................................................... 103.2 15.6 66.5 12.5 8.5 10.2 9.3 14.9 13.0 53.4 2.3 

GNMA properties.............................................. 1,632.1 2.7 2.2 16.5 1,610.8 17.2 62.0 793.3 668.9 26.2 64.6 

* See Table IV-A (page 9) for explanations. 

** 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. 

FDIC QUARTERLY 11 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

TABLE VI-A. Derivatives, All FDIC-Insured Commercial Banks and State-Chartered Savings Banks 

(dollar figures in millions; 

notional amounts unless otherwise indicated) 

%Change 

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 07Q4-

2008 2008 2008 2008 2007 08Q4 

Asset Size Distribution 

Less $100 $1 Billion 

Than $100 Million to to $10 Greater Than 

Million $1 Billion Billion $10 Billion 

ALL DERIVATIVE HOLDERS 

Number of institutions reporting derivatives................. 1,099 1,069 1,067 1,101 1,045 5.2 82 663 273 81 

Total assets of institutions reporting derivatives .......... $10,975,184 $10,723,373 $10,104,739 $10,196,770 $9,827,097 11.7 $5,873 $287,824 $860,593 $9,820,894 

Total deposits of institutions reporting derivatives....... 7,090,315 6,801,605 6,450,947 6,473,029 6,324,979 12.1 4,685 224,219 625,155 6,236,256 

Total derivatives............................................................. 

Derivative Contracts by Underlying Risk Exposure 

201,096,104 177,103,500 183,304,204 181,600,749 166,118,444 21.1 246 20,583 77,241 200,998,033 

Interest rate.................................................................... 164,419,801 137,205,564 144,933,736 141,879,384 129,490,988 27.0 233 20,175 70,947 164,328,445 

Foreign exchange*......................................................... 17,522,868 19,729,813 19,418,964 19,738,204 17,174,167 2.0 0 13 4,900 17,517,955 

Equity ............................................................................. 2,206,793 2,786,005 2,345,171 2,411,871 2,523,739 -12.6 13 125 1,025 2,205,630 

Commodity & other (excluding credit derivatives)........ 1,049,941 1,233,751 1,137,524 1,129,869 1,066,704 -1.6 0 96 212 1,049,633 

Credit.............................................................................. 15,896,702 16,148,367 15,468,809 16,441,421 15,862,846 0.2 0 174 157 15,896,371 

Total................................................................................ 

Derivative Contracts by Transaction Type 

201,096,104 177,103,500 183,304,204 181,600,749 166,118,444 21.1 246 20,583 77,241 200,998,033 

Swaps ............................................................................ 131,717,004 108,289,314 114,178,361 112,564,895 103,102,442 27.8 18 10,600 53,189 131,653,197 

Futures & forwards ........................................................ 22,513,737 24,483,791 23,582,776 22,361,907 18,866,619 19.3 114 3,406 10,446 22,499,771 

Purchased options......................................................... 14,781,875 13,485,926 14,501,600 14,286,015 13,771,509 7.3 15 1,863 5,088 14,774,909 

Written options............................................................... 15,487,881 13,450,146 14,415,325 14,705,772 13,955,063 11.0 100 4,533 8,194 15,475,055 

Total................................................................................ 

Fair Value of Derivative Contracts 

184,500,497 159,709,178 166,678,062 163,918,589 149,695,634 23.3 246 20,402 76,917 184,402,932 

Interest rate contracts.................................................... 131,168 27,299 75,946 62,578 20,075 553.4 1 -43 211 130,999 

Foreign exchange contracts.......................................... -16,942 15,054 32,017 9,670 7,980 N/M 0 0 -2 -16,939 

Equity contracts............................................................. 2,871 3,742 -3,742 -2,306 9,460 -69.7 0 1 23 2,847 

Commodity & other (excluding credit derivatives)........ 3,850 3,175 5,063 3,346 1,785 115.7 0 3 1 3,846 

Credit derivatives as guarantor..................................... -959,872 -566,035 -398,893 -474,045 -212,447 N/M 0 0 -37 -959,834 

Credit derivatives as beneficiary................................... 

Derivative Contracts by Maturity** 

1,030,278 603,936 428,844 501,034 222,426 363.2 0 -2 -3 1,030,283 

Interest rate contracts .............................. < 1 year 47,150,754 40,399,816 44,995,182 42,621,767 39,085,340 20.6 93 3,706 15,056 47,131,899 

........................................... 1-5 years 47,296,539 37,760,943 39,521,416 39,752,501 37,222,363 27.1 18 8,007 23,936 47,264,578 

........................................... > 5 years 36,782,401 28,785,014 29,704,389 30,105,752 27,724,625 32.7 6 3,589 20,179 36,758,627 

Foreign exchange contracts .................... < 1 year 10,867,614 12,664,219 12,345,486 12,524,601 11,591,807 -6.2 0 2 3,941 10,863,672 

........................................... 1-5 years 2,171,061 1,787,926 1,929,554 1,924,840 1,604,898 35.3 0 4 10 2,171,048 

........................................... > 5 years 1,086,245 676,656 734,305 714,707 618,960 75.5 0 0 10 1,086,236 

Equity contracts........................................ < 1 year 408,948 508,748 504,258 509,709 473,413 -13.6 2 34 104 408,808 

........................................... 1-5 years 256,093 332,908 207,513 287,805 297,459 -13.9 4 43 453 255,592 

........................................... > 5 years 72,337 81,967 76,283 39,960 70,485 2.6 0 0 9 72,328 

Commodity & other contracts .................. < 1 year 264,916 294,036 315,202 369,747 284,837 -7.0 0 0 153 264,763 

........................................... 1-5 years 261,768 288,860 267,344 277,956 333,631 -21.5 0 58 4 261,706 

........................................... > 5 years 

Risk-Based Capital: Credit Equivalent Amount 

45,021 88,822 28,367 33,492 28,282 59.2 0 0 0 45,021 

Total current exposure to tier 1 capital (%) ................... 107.3 60.3 57.8 67.1 45.4 0.2 0.8 3.0 123.1 

Total potential future exposure to tier 1 capital (%) ...... 

Total exposure (credit equivalent amount) 

103.8 122.3 118.5 122.7 110.1 0.1 0.4 0.6 119.4 

to tier 1 capital (%).................................................. 211.0 182.5 176.3 189.8 155.5 0.3 1.3 3.6 242.5 

Credit losses on derivatives***.................................. 

HELD FOR TRADING 

1,072.0 227.0 135.0 15.0 156.0 587.2 0.0 1.0 0.0 1,071.0 

Number of institutions reporting derivatives................. 178 185 181 170 166 7.2 8 56 60 54 

Total assets of institutions reporting derivatives .......... 9,412,420 9,234,600 8,596,577 8,622,316 8,306,873 13.3 550 25,384 278,395 9,108,092 

Total deposits of institutions reporting derivatives....... 

Derivative Contracts by Underlying Risk Exposure 

6,083,847 5,855,552 5,501,875 5,465,449 5,354,982 13.6 415 19,675 200,263 5,863,494 

Interest rate.................................................................... 161,899,144 134,667,870 142,264,746 139,169,309 127,128,959 27.4 12 1,163 28,115 161,869,854 

Foreign exchange.......................................................... 16,747,849 18,396,293 18,166,799 18,413,342 16,483,116 1.6 0 0 4,418 16,743,431 

Equity ............................................................................. 2,195,068 2,773,712 2,333,980 2,403,326 2,516,501 -12.8 0 0 272 2,194,796 

Commodity & other........................................................ 1,047,507 1,230,649 1,134,781 1,128,387 1,065,818 -1.7 0 0 85 1,047,421 

Total................................................................................ 

Trading Revenues: Cash & Derivative Instruments 

181,889,568 157,068,525 163,900,306 161,114,364 147,194,394 23.6 12 1,164 32,890 181,855,502 

Interest rate.................................................................... -3,424 950 1,503 1,724 -2,531 N/M 0 0 80 -3,503 

Foreign exchange.......................................................... 4,093 3,090 2,096 2,084 1,880 117.7 0 0 20 4,073 

Equity ............................................................................. -1,230 -923 185 -18 217 N/M 0 0 0 -1,230 

Commodity & other (including credit derivatives) ........ -8,618 3,305 -1,944 -2,791 -10,145 N/M 0 0 -1 -8,618 

Total trading revenues................................................... 

Share of Revenue 

-9,180 6,422 1,839 998 -10,579 N/M 0 0 98 -9,278 

Trading revenues to gross revenues (%) ...................... -8.1 4.6 1.3 0.7 -7.7 0.0 0.0 2.7 -8.5 

Trading revenues to net operating revenues (%).......... 

HELD FOR PURPOSES OTHER THAN TRADING 

46.6 66.9 24.8 9.7 -278.0 0.0 -0.4 -8.9 50.0 

Number of institutions reporting derivatives................. 997 970 975 1,013 965 3.3 74 609 240 74 

Total assets of institutions reporting derivatives .......... 10,465,728 10,396,653 9,806,939 9,914,653 9,660,649 8.3 5,322 264,086 745,038 9,451,281 

Total deposits of institutions reporting derivatives....... 

Derivative Contracts by Underlying Risk 

Exposure 

6,820,086 6,589,374 6,256,368 6,288,937 6,210,106 9.8 4,270 205,866 541,052 6,068,897 

Interest rate.................................................................... 2,520,657 2,537,694 2,668,989 2,710,074 2,362,029 6.7 221 19,012 42,833 2,458,591 

Foreign exchange.......................................................... 76,113 87,565 94,832 84,124 131,087 -41.9 0 5 314 75,794 

Equity ............................................................................. 11,725 12,293 11,191 8,545 7,238 62.0 13 124 753 10,834 

Commodity & other........................................................ 2,434 3,101 2,743 1,482 886 174.7 0 96 126 2,211 

Total notional amount .................................................... 2,610,929 2,640,653 2,777,756 2,804,225 2,501,240 4.4 234 19,238 44,027 2,547,429 

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

*Include 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. 

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

*** The reporting of credit losses on derivatives is applicable to all banks filing the FFIEC 031 report form and to those banks filing the FFIEC 041 report form that have $300 million or more 

in total assets. 

FDIC QUARTERLY 12 2009, VOLUME 3, NO. 1 
 

 

 

Quarterly Banking Profile 

TABLE VII-A. Servicing, Securitization, and Asset Sales Activities (All FDIC-Insured Commercial Banks and State-Chartered 

Savings Banks) 

(dollar figures in millions) 

4th 3rd 2nd 1st 4th 

Quarter Quarter Quarter Quarter Quarter %Change 

2008 2008 2008 2008 2007 07Q4-08Q4 

Asset Size Distribution 

Less Than $100 $1 Billion Greater 

$100 Million to to $10 Than $10 

Million $1 Billion Billion Billion 

Assets Securitized and Sold with Servicing Retained or with 

Recourse or Other Seller-Provided Credit Enhancements 

Number of institutions reporting securitization activities ......................................... 

Outstanding Principal Balance by Asset Type 

131 128 130 132 126 4.0 15 55 21 40 

1-4 family residential loans................................................................................ $1,256,021 $1,217,682 $1,087,215 $1,068,631 $1,056,344 18.9 $89 $308 $1,763 $1,253,861 

Home equity loans............................................................................................. 6,692 6,880 7,822 8,341 9,353 -28.5 0 0 50 6,642 

Credit card receivables...................................................................................... 398,261 417,832 409,883 402,171 390,035 2.1 0 3,466 12,133 382,663 

Auto loans .......................................................................................................... 12,040 13,842 6,224 7,495 8,285 45.3 0 0 110 11,930 

Other consumer loans ....................................................................................... 27,427 28,090 28,870 27,787 28,542 -3.9 0 0 0 27,427 

Commercial and industrial loans....................................................................... 9,705 11,080 12,491 12,555 14,469 -32.9 0 4 4,539 5,162 

All other loans, leases, and other assets* ........................................................ 200,737 211,398 194,756 194,061 190,974 5.1 42 45 163 200,487 

Total securitized and sold.......................................................................................... 

Maximum Credit Exposure by Asset Type 

1,910,884 1,906,803 1,747,262 1,721,042 1,698,002 12.5 131 3,822 18,759 1,888,172 

1-4 family residential loans................................................................................ 6,898 7,514 7,121 7,019 6,912 -0.2 3 65 0 6,830 

Home equity loans............................................................................................. 1,247 1,347 1,527 1,752 2,000 -37.7 0 0 0 1,247 

Credit card receivables...................................................................................... 23,228 24,039 23,129 21,412 19,629 18.3 0 430 1,401 21,397 

Auto loans .......................................................................................................... 707 447 352 405 380 86.1 0 0 9 698 

Other consumer loans ....................................................................................... 1,537 1,428 1,417 1,406 1,379 11.5 0 0 0 1,537 

Commercial and industrial loans....................................................................... 137 170 311 276 603 -77.3 1 27 38 71 

All other loans, leases, and other assets.......................................................... 725 954 1,128 2,297 2,847 -74.5 13 253 9 451 

Total credit exposure ................................................................................................. 34,479 35,900 34,984 34,568 33,749 2.2 17 775 1,457 32,230 

Total unused liquidity commitments provided to institution's own securitizations .... 

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

830 1,273 1,902 2,944 4,686 -82.3 0 0 0 830 

1-4 family residential loans................................................................................ 4.4 3.8 2.8 2.5 2.8 1.2 0.0 1.8 4.4 

Home equity loans............................................................................................. 1.4 1.3 0.6 0.7 0.8 0.0 0.0 8.1 1.4 

Credit card receivables...................................................................................... 2.9 2.5 2.1 2.2 2.2 0.0 1.7 1.9 3.0 

Auto loans .......................................................................................................... 2.5 2.1 2.2 1.9 2.4 0.0 0.0 1.0 2.5 

Other consumer loans ....................................................................................... 3.9 3.2 2.7 2.5 3.1 0.0 0.0 0.0 3.9 

Commercial and industrial loans....................................................................... 2.6 1.6 1.3 1.2 1.0 0.0 2.5 5.2 0.2 

All other loans, leases, and other assets.......................................................... 0.6 0.2 0.3 0.1 0.1 0.0 0.0 0.0 0.6 

Total loans, leases, and other assets ....................................................................... 

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

3.7 3.0 2.3 2.2 2.4 0.8 1.6 2.7 3.7 

1-4 family residential loans................................................................................ 4.5 3.2 1.9 1.9 1.6 1.6 0.0 0.8 4.5 

Home equity loans............................................................................................. 1.2 0.7 0.7 0.7 0.5 0.0 0.0 4.2 1.2 

Credit card receivables...................................................................................... 2.5 2.1 2.1 2.1 1.9 0.0 1.4 1.6 2.6 

Auto loans .......................................................................................................... 0.3 0.2 0.3 0.3 0.4 0.0 0.0 0.3 0.3 

Other consumer loans ....................................................................................... 3.7 2.9 2.4 2.3 2.4 0.0 0.0 0.0 3.7 

Commercial and industrial loans....................................................................... 2.1 1.5 1.3 1.1 0.9 0.0 0.0 4.2 0.3 

All other loans, leases, and other assets.......................................................... 0.4 0.2 0.2 0.2 0.1 0.0 0.0 0.0 0.4 

Total loans, leases, and other assets ....................................................................... 

Securitized Loans, Leases, and Other Assets Charged-Off 

(net, YTD, annualized, %) 

3.6 2.6 1.8 1.8 1.5 1.1 1.2 2.2 3.6 

1-4 family residential loans................................................................................ 0.3 0.3 0.1 0.0 0.1 0.0 0.0 0.2 0.3 

Home equity loans............................................................................................. 0.1 0.4 0.2 0.1 0.2 0.0 0.0 6.3 0.1 

Credit card receivables...................................................................................... 6.4 4.4 2.8 1.4 4.4 0.0 4.0 4.1 6.5 

Auto loans .......................................................................................................... 0.8 1.3 0.9 0.4 1.3 0.0 0.0 0.6 0.8 

Other consumer loans ....................................................................................... 0.8 0.6 0.4 0.2 1.3 0.0 0.0 0.0 0.8 

Commercial and industrial loans....................................................................... 5.9 3.6 1.9 0.8 2.0 0.0 0.0 12.1 0.4 

All other loans, leases, and other assets.......................................................... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 

Total loans, leases, and other assets ....................................................................... 

Seller's Interests in Institution's Own Securitizations - Carried as Loans 

1.6 1.2 0.7 0.4 1.1 0.0 3.6 5.6 1.5 

Home equity loans............................................................................................. 124 166 435 282 347 -64.3 0 0 0 124 

Credit card receivables...................................................................................... 113,017 98,826 82,604 73,418 86,748 30.3 0 258 4,457 108,302 

Commercial and industrial loans....................................................................... 

Seller's Interests in Institution's Own Securitizations - Carried as Securities 

436 636 3,506 3,263 7,671 -94.3 0 0 386 50 

Home equity loans............................................................................................. 5 6 7 9 9 -44.4 0 0 0 5 

Credit card receivables...................................................................................... 584 623 403 377 436 33.9 0 8 576 0 

Commercial and industrial loans....................................................................... 

Assets Sold with Recourse and Not Securitized 

16 15 1 1 2 700.0 0 0 0 16 

Number of institutions reporting asset sales .................................................... 

Outstanding Principal Balance by Asset Type 

790 786 776 760 760 3.9 156 478 109 47 

1-4 family residential loans................................................................................ 66,417 68,709 65,959 60,386 57,612 15.3 1,060 8,374 3,423 53,560 

Home equity, credit card receivables, auto, and other consumer loans ......... 1,477 1,611 1,786 1,886 637 131.9 0 30 67 1,379 

Commercial and industrial loans....................................................................... 6,698 7,314 4,794 4,579 4,728 41.7 0 69 0 6,629 

All other loans, leases, and other assets.......................................................... 42,613 41,501 33,191 29,134 26,983 57.9 1 71 431 42,110 

Total sold and not securitized.................................................................................... 

Maximum Credit Exposure by Asset Type 

117,205 119,135 105,730 95,985 89,960 30.3 1,062 8,544 3,921 103,678 

1-4 family residential loans................................................................................ 15,433 15,735 14,678 14,070 14,780 4.4 104 1,391 1,830 12,109 

Home equity, credit card receivables, auto, and other consumer loans ......... 189 203 240 165 604 -68.7 0 12 64 113 

Commercial and industrial loans....................................................................... 5,617 6,180 3,614 3,335 3,393 65.5 0 50 0 5,567 

All other loans, leases, and other assets.......................................................... 9,290 11,517 8,541 8,112 7,854 18.3 1 13 72 9,203 

Total credit exposure ................................................................................................. 

Support for Securitization Facilities Sponsored by Other Institutions 

30,529 33,634 27,072 25,682 26,631 14.6 105 1,466 1,966 26,992 

Number of institutions reporting securitization facilities sponsored by others ....... 53 50 48 49 49 8.2 21 22 5 5 

Total credit exposure ................................................................................................. 3,328 18,464 12,668 6,825 2,843 17.1 9 68 55 3,197 

Total unused liquidity commitments ......................................................................... 

Other 

1,416 3,531 5,492 6,778 10,314 -86.3 0 0 0 1,416 

Assets serviced for others**...................................................................................... 

Asset-backed commercial paper conduits 

5,615,245 5,528,963 3,921,915 3,813,285 3,798,682 47.8 3,916 66,526 81,838 5,462,966 

Credit exposure to conduits sponsored by institutions and others.................. 23,064 20,830 21,083 22,332 22,226 3.8 2 0 399 22,663 

Unused liquidity commitments to conduits sponsored by institutions 

and others .................................................................................................. 297,908 311,683 339,007 354,525 380,709 -21.7 0 27 0 297,881 

Net servicing income (for the quarter) ...................................................................... -339 4,110 7,280 3,532 2,718 -112.5 3 129 41 -512 

Net securitization income (for the quarter) ............................................................... 2,391 3,119 4,205 5,541 5,008 -52.3 0 56 214 2,121 

Total credit exposure to Tier 1 capital (%)***............................................................ 6.8 9.0 7.4 6.6 6.4 0.60 1.80 2.60 8.70 

*Line item titled “All other loans and all leases” for quarters prior to March 31, 2006. 

**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. 

FDIC QUARTERLY 13 2009, VOLUME 3, NO. 1 
 

 

TABLE VIII-A. Trust Services (All FDIC-Insured Institutions) 

(dollar figures in millions) 

All Insured Institutions Asset Size Distribution 

Dec 31 Dec 31 Dec 31 Dec 31 % Change 

 2008 2007 2006 2005 2007-2008 

Less $100 $1 Billion Greater 

Than $100 Million to to Than 

Million $1 Billion $10 Billion $10 Billion 

Number of institutions reporting................................................ 8,305 8,534 8,680 8,833 -2.7 3,131 4,499 561 114 

Number of institutions with fiduciary powers............................ 2,323 2,410 2,463 2,515 -3.6 487 1,418 339 79 

Commercial banks.............................................................. 2,129 2,216 2,268 2,312 -3.9 466 1,316 279 68 

Savings institutions ............................................................ 194 194 195 203 0.0 21 102 60 11 

Number of institutions exercising fiduciary powers.................. 1,723 1,785 1,826 1,866 -3.5 304 1,064 286 69 

Commercial banks.............................................................. 1,571 1,633 1,672 1,708 -3.8 286 989 237 59 

Savings institutions ............................................................ 152 152 154 158 0.0 18 75 49 10 

Number of institutions reporting fiduciary activity.................... 1,634 1,695 1,739 1,791 -3.6 280 1,012 276 66 

Commercial banks.............................................................. 1,488 1,552 1,593 1,642 -4.1 262 941 229 56 

Savings institutions ............................................................ 

Fiduciary and related assets - managed assets 

146 143 146 149 2.1 18 71 47 10 

Personal trust and agency accounts ........................................ 616,855 800,549 764,623 735,821 -22.9 7,162 62,568 68,077 479,048 

Noninterest-bearing deposits ............................................ 16 -53 -4 364 -130.2 60 76 42 -163 

Interest-bearing deposits ................................................... 11,906 11,547 9,369 8,012 3.1 204 2,963 1,809 6,929 

U.S. Treasury and U.S. Government agency obligations . 26,764 31,619 32,873 34,664 -15.4 390 3,243 3,947 19,184 

State, county and municipal obligations............................ 65,303 67,131 70,909 73,332 -2.7 629 5,629 7,420 51,625 

Money market mutual funds............................................... 56,918 51,248 38,134 33,640 11.1 734 4,349 6,507 45,328 

Other short-term obligations.............................................. 9,657 21,935 9,566 8,601 -56.0 36 202 290 9,129 

Other notes and bonds....................................................... 23,343 25,489 26,896 27,268 -8.4 579 2,013 2,385 18,365 

Common and preferred stocks .......................................... 348,415 522,846 514,963 491,075 -33.4 3,665 27,808 37,653 279,289 

Real estate mortgages....................................................... 1,565 1,530 1,604 1,476 2.3 24 240 264 1,037 

Real estate.......................................................................... 36,027 33,930 31,915 29,721 6.2 627 4,237 4,208 26,955 

Miscellaneous assets......................................................... 

Retirement related trust and agency accounts: 

37,111 33,304 27,941 27,520 11.4 402 11,788 3,551 21,370 

Employee benefit - defined contribution............................ 284,219 328,909 307,194 226,768 -13.6 59,279 50,541 9,032 165,367 

Employee benefit - defined benefit.................................... 697,874 1,060,288 1,153,825 1,067,293 -34.2 5,786 46,504 15,353 630,232 

Other retirement accounts ................................................. 330,459 414,725 309,451 249,466 -20.3 5,676 11,034 11,623 302,125 

Corporate trust and agency accounts....................................... 26,504 25,273 31,457 42,634 4.9 22 806 3,740 21,936 

Investment management agency accounts.............................. 1,228,862 1,592,394 1,505,171 1,311,707 -22.8 25,316 108,313 92,950 1,002,283 

Other fiduciary accounts ........................................................... 

Total managed fiduciary accounts: 

153,059 235,544 320,331 266,515 -35.0 285 2,131 4,277 146,365 

Assets ................................................................................. 3,337,833 4,457,682 4,392,051 3,900,205 -25.1 103,526 281,898 205,052 2,747,356 

Number of accounts ........................................................... 

Fiduciary and related assets - non-managed assets 

1,454,562 1,528,303 2,998,641 2,915,478 -4.8 84,655 206,226 244,380 919,301 

Personal trust and agency accounts ........................................ 

Retirement related trust and agency accounts: 

307,037 355,388 309,352 286,571 -13.6 2,396 16,672 13,892 274,077 

Employee benefit - defined contribution............................ 1,481,594 1,822,860 1,779,446 1,525,676 -18.7 323,589 23,245 68,534 1,066,226 

Employee benefit - defined benefit .................................... 3,983,183 5,333,411 4,542,941 3,567,204 -25.3 11,194 26,043 51,808 3,894,138 

Other retirement accounts ................................................. 1,686,296 2,098,451 2,121,766 2,108,630 -19.6 630,225 29,841 12,595 1,013,634 

Corporate trust and agency accounts....................................... 3,935,533 4,427,672 2,961,810 2,567,357 -11.1 4,756 12,282 583,309 3,335,185 

Other fiduciary accounts ........................................................... 

Total non-managed fiduciary accounts: 

2,596,701 3,366,857 3,170,657 2,580,461 -22.9 2,552 14,425 2,001 2,577,723 

Assets ................................................................................. 13,990,344 17,404,640 14,885,973 12,635,898 -19.6 974,712 122,508 732,140 12,160,984 

Number of accounts ........................................................... 

Custody and safekeeping accounts: 

21,367,984 16,446,110 16,049,836 15,713,903 29.9 11,563,773 2,636,363 264,200 6,903,648 

Assets ................................................................................. 50,497,846 58,167,533 48,360,083 36,798,211 -13.2 203,353 704,314 559,830 49,030,349 

Number of accounts ........................................................... 

Fiduciary and related services income 

10,675,799 11,327,738 11,207,747 11,513,998 -5.8 608,939 7,532,693 881,762 1,652,405 

Personal trust and agency accounts ........................................ 

Retirement related trust and agency accounts: 

4,896 5,766 5,147 5,244 -15.1 59 398 529 3,909 

Employee benefit - defined contribution............................ 1,122 1,183 1,305 1,187 -5.2 163 195 130 634 

Employee benefit - defined benefit .................................... 1,999 1,803 1,949 1,789 10.9 40 198 52 1,708 

Other retirement accounts ................................................. 1,005 1,037 871 756 -3.1 66 66 101 771 

Corporate trust and agency accounts....................................... 2,529 2,439 2,054 1,877 3.7 0 31 473 2,025 

Investment management agency accounts.............................. 4,451 4,160 3,683 3,562 7.0 138 573 483 3,257 

Other fiduciary accounts ........................................................... 2,133 2,156 1,440 1,350 -1.1 3 21 29 2,079 

Custody and safekeeping accounts.......................................... 8,337 8,165 8,011 7,167 2.1 163 423 426 7,324 

Other fiduciary and related services income............................ 3,272 2,424 1,855 1,577 35.0 7 174 63 3,028 

Total gross fiduciary and related services income................... 30,020 29,292 26,142 24,784 2.5 711 2,196 2,307 24,805 

Less: Expenses .................................................................. 20,565 20,545 19,096 17,267 0.1 407 1,578 1,528 17,053 

Less: Net losses from fiduciary and related services ....... 956 364 152 190 162.6 0 17 9 930 

Plus: Intracompany income credits for fiduciary and 

related services........................................................... 3,497 4,553 2,897 1,302 -23.2 0 35 235 3,228 

Net fiduciary and related services income ............................... 

Collective investment funds and common trust funds 

(market value) 

11,717 12,772 9,963 8,426 -8.3 234 519 983 9,980 

Domestic equity funds........................................................ 274,285 448,230 449,079 478,087 -38.8 8,813 2,953 5,014 257,505 

International/global equity funds ....................................... 101,311 206,551 171,114 129,572 -51.0 693 2,049 439 98,130 

Stock/bond blend funds ..................................................... 122,423 215,849 217,734 77,526 -43.3 2,082 247 1,576 118,519 

Taxable bond funds............................................................ 160,206 214,159 185,398 248,050 -25.2 730 2,794 1,854 154,828 

Municipal bond funds ......................................................... 6,007 8,328 8,695 60,308 -27.9 26 450 370 5,161 

Short term investments/money market funds.................... 307,007 395,025 352,341 365,759 -22.3 3,002 120 637 303,248 

Specialty/other funds ......................................................... 94,428 121,628 96,902 102,112 -22.4 29,416 5,736 1,369 57,907 

Total collective investment funds.............................................. 1,065,665 1,609,768 1,481,262 1,461,414 -33.8 44,762 14,349 11,258 995,297 

FDIC QUARTERLY 14 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Banking Profile 

INSURANCE FUND INDICATORS 

■ The DIF Balance Declines by $16 Billion, and Insured Deposits Grow by 

4.6 Percent in the Fourth Quarter 

■ DIF Reserve Ratio Declines to 0.40 Percent 

■ Twenty-Five Insured Institutions Fail During the Year; Another Five Insured 

Institutions under the Same Holding Company Receive Assistance 

During the fourth quarter of 2008, total assets of the 

nation’s 8,305 FDIC-insured commercial banks and 

savings institutions increased by $274.2 billion (2.0 

percent). Total deposits increased by $307.9 billion, 

more than the increase in assets. Total domestic deposits grew by 3.8 percent, higher than any quarterly 

growth rate observed since the fourth quarter of 2000. 

Brokered deposits increased by 15.3 percent ($101.4 

billion), the largest quarterly percentage increase since 

the third quarter of 2000 when brokered deposits 

increased by 15.6 percent. Ten institutions accounted 

for more than two-thirds of this growth. Domestic time 

deposits increased by 1.8 percent, while other domestic 

interest-bearing deposits increased by 6.4 percent and 

domestic non-interest-bearing deposits increased by 

2.2 percent. 

For all of 2008, total domestic deposits increased by 

8.4 percent, with domestic interest-bearing deposits 

rising by 6.2 percent and domestic non-interest-bearing 

deposits increasing by 19.4 percent. Foreign office 

deposits increased by 2.4 percent ($36.7 billion), and 

Federal Home Loan Bank (FHLB) advances decreased 

by 2.6 percent ($21.4 billion). The share of assets 

funded by domestic deposits increased from 53.0 

percent to 54.1 percent. By contrast, foreign deposits as 

a percent of total assets declined during the year from 

11.5 percent to 11.1 percent, and the share of asset 

funding attributable to FHLB advances decreased from 

6.2 percent to 5.7 percent. 

Estimated insured deposits (including U.S. branches 

of foreign banks) increased by 4.6 percent during the 

fourth quarter of 2008, up from a 1.8 percent increase 

in the previous quarter. For all of 2008, insured deposits increased by 10.8 percent, up from a 3.3 percent 

increase in 2007. For institutions reporting as of 

December 31, 2008, and September 30, 2008, insured 

deposits increased during the fourth quarter at 5,332 

institutions (64 percent), decreased at 2,922 institutions (35 percent), and remained unchanged at 36 

institutions. 

The Deposit Insurance Fund (DIF) decreased by 

$15.7 billion during the fourth quarter to $18,889 

million (unaudited). Accrued assessment income added 

$996 million to the DIF during the fourth quarter. 

Interest earned, combined with realized and unrealized 

gains (losses) on securities added $1.13 billion to the 

insurance fund. Operating and other expenses, net of 

other revenue, reduced the fund by $275 million. The 

reduction in the DIF during the quarter was primarily 

due to $17.6 billion in loss provisions for actual and 

anticipated insured institution failures. For all of 2008, 

the DIF balance fell by $33.5 billion (64 percent), 

primarily because of $40.2 billion in loss provisions. 

The DIF’s reserve ratio equaled 0.40 percent on 

December 31, 2008, which was 36 basis points lower 

than the previous quarter. During 2008, the reserve 

ratio decreased by 82 basis points, from 1.22 percent at 

year-end 2007. The December figure is the lowest 

reserve ratio for a combined bank and thrift insurance 

fund since June 30, 1993, when the reserve ratio was 

0.28 percent. 

Twelve FDIC-insured institutions with combined assets 

of $24.4 billion failed during the fourth quarter of 2008, 

at an estimated cost to the DIF of $4.5 billion. For all of 

2008, 25 FDIC-insured institutions with assets of $372 

billion failed, the largest number of failures since 1993 

when 41 institutions with combined assets of $3.8 

billion failed (excluding thrifts resolved by the Resolution Trust Corporation). In 2008, five banks owned by 

Citigroup with assets of $1.3 trillion received assistance 

under a systemic risk determination. 

Author: Kevin Brown, Sr. Financial Analyst 

Division of Insurance and Research 

(202) 898-6817 

FDIC QUARTERLY 15 2009, VOLUME 3, NO. 1 
 

 

 

Table I-B. Insurance Fund Balances and Selected Indicators 

(dollar figures in millions) 

Deposit Insurance Fund 

4th 

Quarter 

2008* 

3rd 

Quarter 

2008* 

2nd 

Quarter 

2008* 

1st 

Quarter 

2008* 

4th 

Quarter 

2007 

3rd 

Quarter 

2007 

2nd 

Quarter 

2007 

1st 

Quarter 

2007 

4th 

Quarter 

2006 

3rd 

Quarter 

2006 

2nd 

Quarter 

2006 

Beginning Fund Balance ...................... 

Changes in Fund Balance: 

$34,588 $45,217 $52,843 $52,413 $51,754 $51,227 $50,745 $50,165 $49,992 $49,564 $49,193 

Assessments earned............................... 

Interest earned on investment 

996 881 640 448 239 170 140 94 10 10 7 

securities .......................................... 277 526 651 618 585 640 748 567 476 622 665 

Realized gain on sale of investments ..... 302 473 0 0 0 0 0 0 0 0 0 

Operating expenses ................................ 290 249 256 238 262 243 248 239 248 237 242 

Provision for insurance losses ................ 17,550 11,930 10,221 525 39 132 -3 -73 49 -50 -6 

All other income, net of expenses........... 15 16 1 0 -2 24 1 4 5 1 12 

Unrealized gain/(loss) on 

available-for-sale securities............. 551 -346 1,559 127 138 68 -162 81 -21 -18 -77 

Total fund balance change...................... -15,699 -10,629 -7,626 430 659 527 482 580 173 428 371 

Ending Fund Balance............................ 18,889 34,588 45,217 52,843 52,413 51,754 51,227 50,745 50,165 49,992 49,564 

Percent change from four quarters 

earlier......................................... -63.96 -33.17 -11.73 4.13 4.48 3.52 3.36 3.15 3.23 3.35 3.21 

Reserve Ratio (%) .................................. 0.40 0.76 1.01 1.19 1.22 1.22 1.21 1.20 1.21 1.22 1.23 

Estimated Insured Deposits**.............. 4,756,809 4,547,688 4,467,614 4,437,862 4,292,163 4,242,607 4,235,044 4,245,266 4,153,786 4,100,013 4,040,353 

Percent change from four quarters 

earlier......................................... 10.83 7.19 5.49 4.54 3.33 3.48 4.82 6.08 6.76 7.02 7.52 

Domestic Deposits................................ 7,505,360 7,230,331 7,036,247 7,076,719 6,921,686 6,747,998 6,698,886 6,702,598 6,640,105 6,484,372 6,446,868 

Percent change from four quarters 

earlier......................................... 8.43 7.15 5.04 5.58 4.24 4.07 3.91 5.71 6.59 6.76 8.68 

Number of institutions reporting ........ 8,315 8,393 8,462 8,505 8,545 8,570 8,625 8,661 8,692 8,755 8,790 

DIF Reserve Ratios*** 

Percent of Insured Deposits 

1.28 1.26 1.25 1.23 1.23 1.22 1.21 1.20 1.21 1.22 1.22 1.19 

1.01 

0.76 

0.40 

6/05 12/05 6/06 12/06 6/07 12/07 6/08 12/08 

Table II-B. Problem Institutions and Failed/Assisted Institutions 

Deposit Insurance Fund Balance 

and Insured Deposits*** 

($ Millions) 

DIFDIF Insured 

Balance Deposits 

6/05 48,023 3,757,728 

9/05 48,373 3,830,950 

12/05 48,597 3,890,941 

3/06 49,193 4,001,906 

6/06 49,564 4,040,353 

9/06 49,992 4,100,013 

12/06 50,165 4,153,786 

3/07 50,745 4,245,266 

6/07 51,227 4,235,044 

9/07 51,754 4,242,607 

12/07 52,413 4,292,163 

3/08 52,843 4,437,862 

6/08 45,217 4,467,614 

9/08 34,588 4,547,688 

12/08 18,889 4,756,809 

(dollar figures in millions) 2008 2007 2006 2005 2004 2003 

Problem Institutions 

Number of institutions ........................................................................ 252 76 50 52 80 116 

Total assets......................................................................................... $159,405 $22,189 $8,265 $6,607 $28,250 $29,917 

Failed Institutions 

Number of institutions ........................................................................ 25 3 0 0 4 3 

Total assets......................................................................................... $371,945 $2,615 $0 $0 $170 $947 

Assisted Institutions**** 

Number of institutions ........................................................................ 5 0 0 0 0 0 

Total assets......................................................................................... $1,306,042 0 0 0 0 0 

* For 2008, preliminary unaudited fund data, which are subject to change. 

** The Emergency Economic Stabilization Act of 2008 directs the FDIC not to consider the temporary coverage increase to $250,000 in setting assessments. Therefore, we do not include 

the additional insured deposits in calculating the fund reserve ratio, which guides our assessment planning. If Congress were to decide to leave the $250,000 coverage level in place 

indefinitely, however, it would be necessary to account for the increase in insured deposits to determine the appropriate level of the fund. 

*** Prior to 2006, amounts represent sum of separate BIF and SAIF amounts. 

**** Five institutions under the same holding company received assistance under a systemic risk determination. 

FDIC QUARTERLY 16 2009, VOLUME 3, NO. 1 
 

 

 

 

 

Quarterly Banking Profile 

Table III-B. Estimated FDIC-Insured Deposits by Type of Institution 

(dollar figures in millions) 

December 31, 2008 

Number of 

Institutions 

Total 

Assets 

Domestic 

Deposits* 

Est. Insured 

Deposits 

Commercial Banks and Savings Institutions 

FDIC-Insured Commercial Banks ............................................... 7,085 $12,312,914 $6,543,010 $3,990,084 

FDIC-Supervised ................................................................... 4,688 1,980,201 1,450,755 1,041,039 

OCC-Supervised.................................................................... 1,537 8,478,798 4,100,230 2,373,247 

Federal Reserve-Supervised................................................. 860 1,853,915 992,024 575,799 

FDIC-Insured Savings Institutions .............................................. 1,220 1,534,369 953,359 762,050 

OTS-Supervised Savings Institutions.................................... 810 1,231,858 745,020 596,801 

FDIC-Supervised State Savings Banks................................. 410 302,512 208,339 165,250 

Total Commercial Banks and Savings Institutions ...................... 

Other FDIC-Insured Institutions 

8,305 13,847,284 7,496,369 4,752,135 

U.S. Branches of Foreign Banks ................................................. 10 52,727 8,991 4,674 

Total FDIC-Insured Institutions.................................................... .. 8,315 13,900,011 7,505,360 4,756,809 

* Excludes $1.54 trillion in foreign office deposits, which are uninsured. 

Table IV-B. Distribution of Institutions and Domestic Deposits Among Risk Categories 

Quarter Ending September 30, 2008 

(dollar figures in billions) 

Risk Category 

Annual 

Rate in 

Basis Points 

Number of 

Institutions 

Percent 

of Total 

Institutions 

Domestic 

Deposits 

Percent 

of Total 

Domestic 

Deposits 

I - Minimum.............................................................................. 5 1,799 21.4 2,959 40.9 

I - Middle ................................................................................. 5.01- 6.00 2,357 28.1 2,009 27.8 

I - Middle ................................................................................. 6.01- 6.99 1,589 18.9 699 9.7 

I - Maximum ............................................................................ 7 1,767 21.1 641 8.9 

II............................................................................................... 10 674 8.0 820 11.3 

III.............................................................................................. 28 186 2.2 84 1.2 

IV ............................................................................................. 43 21 0.3 19 0.3 

Note: Institutions are categorized based on supervisory ratings, debt ratings and financial data as of September 30, 2008. 

Rates do not reflect the application of assessment credits. See notes to users for further information on risk categories and rates. 

FDIC QUARTERLY 17 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEMPORARY LIQUIDITY GUARANTEE PROGRAM 

■ Non-Interest-Bearing Transaction Accounts Can Be Fully Guaranteed 

■ FDIC Debt Guarantees Improve Access to Liquidity 

■ The TLGP Is an Industry-Funded Program 

■ More Than 500,000 Additional Transaction Accounts Receive Full Coverage 

■ $224 Billion in Debt Outstanding in Program 

FDIC Responds to Market Disruptions with TLGP 

The FDIC Board approved the Temporary Liquidity 

Guarantee Program (TLGP)1 on October 13, 2008, as 

major disruptions in credit markets blocked access to 

liquidity for financial institutions. The TLGP improves 

access to liquidity by fully guaranteeing non-interestbearing transaction deposit accounts and by guaranteeing eligible senior unsecured debt. The final rule for the 

TLGP was adopted on November 21, 2008. 

Non-Interest-Bearing Transaction Accounts at 

Participating Institutions Are Fully Guaranteed 

The Transaction Account Guarantee Program provides 

a full guarantee of non-interest-bearing transaction 

deposit accounts above $250,000, regardless of dollar 

amount, at depository institutions that elected to participate in the program. The guarantee is in effect until 

December 31, 2009. Accounts covered by the guarantee 

also include NOW accounts where interest rates are 

maintained at 0.5 percent or less and IOLTA2 accounts. 

FDIC Offers Guarantees on Senior Unsecured Debt 

The Debt Guarantee Program provides a full guarantee 

of senior unsecured debt issued by eligible institutions 

between October 14, 2008, and June 30, 2009, with the 

guarantee expiring on or before June 30, 2012. Senior 

unsecured debt must have a stated maturity of more 

than 30 days and may include term Federal funds 

purchased, promissory notes, commercial paper, unsubordinated unsecured notes, and U.S. dollar denominated certificates of deposit owed to an insured 

depository institution. Institutions eligible for participation in the Debt Guarantee Program include insured 

depository institutions, U.S. bank holding companies, 

1 The FDIC invoked the systemic risk exception pursuant to section 

141 of the Federal Deposit Improvement Act of 1991, 12 U.S.C 

1823(c)(4) on October 13, 2008. For further information on the TLGP, 

see http://www.fdic.gov/regulations/resources/TLGP/index.html. 2 NOW accounts are Negotiable Order of Withdrawal Accounts, and 

IOLTA, or Interest on Lawyers Trust Accounts, are interest-bearing 

accounts maintained by an attorney or law firm for its clients. 

certain U.S. savings and loan holding companies, and 

other affiliates of an insured depository institution that 

the FDIC designates as eligible entities. 

Program Funded by Industry Fees and Assessments 

The TLGP does not rely on taxpayer funding or the 

Deposit Insurance Fund. Both components of the 

program will be paid for by direct user fees. Institutions 

participating in the Transaction Account Guarantee 

Program provide customers full coverage on noninterest-bearing transaction accounts for an annual fee 

of 10 basis points. Fees for participation in the Debt 

Guarantee Program depend on the maturity of debt 

issued. The cost of the guarantee to insured depository 

institutions is 50 basis points for maturities of 180 days 

or less, 75 basis points for maturities of 181 days to 364 

days, and 100 basis points for maturities 365 days or 

greater. Bank holding companies and participating affiliates are required to pay an additional 10 basis points if, 

as of September 30, 2008, the combined assets of all 

insured depository institutions affiliated with such entities constitute less than 50 percent of consolidated 

holding company assets. 

A Majority of Eligible Entities Have Chosen to 

Participate in the TLGP 

According to submissions received by the FDIC, more 

than 85 percent of FDIC-insured institutions have opted 

in to the Transaction Account Guarantee Program, and 

more than half of all eligible entities have elected to 

opt in to the Debt Guarantee Program. Lists of institutions that opted out of the guarantee programs are 

posted at http://www.fdic.gov/regulations/resources/ 

TLGP/optout.html. 

Insured Institutions Report Half a Million 

Transaction Accounts over $250,000 

According to fourth quarter Call Reports, insured institutions reported 522,862 non-interest-bearing transaction accounts over $250,000. These accounts totaled 

FDIC QUARTERLY 18 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Banking Profile 

$814 billion, of which $684 billion in deposit accounts 

was guaranteed under the Transaction Account Guarantee Program. Almost 6,000 FDIC-insured institutions 

reported non-interest-bearing transaction accounts over 

$250,000 in value. 

Limits on Debt Issuance Based on Third Quarter 

2008 Balances 

The amount of FDIC-guaranteed debt that can be 

issued by each eligible entity, or its “cap,” is based on 

the amount of senior unsecured debt outstanding as of 

September 30, 2008, that matures on or before June 30, 

2009. Eligible entities may issue debt up to 125 percent 

of that outstanding amount. The cap for FDIC-insured 

institutions that had no outstanding short-term senior 

unsecured debt other than Fed funds is set at 2 percent 

of liabilities as of September 30, 2008. Holding companies with no short-term senior unsecured debt outstanding must apply to the FDIC to raise the limit on their 

issuance of FDIC-guaranteed debt above $0. Initial caps 

for all 8,177 entities that could exercise their option to 

issue guaranteed debt under the TLGP total almost 

$1.0 trillion. 

$224 Billion in FDIC-Guaranteed Debt Was 

Outstanding at Year-End 

Sixty-four financial entities—39 insured depository 

institutions and 25 bank and thrift holding companies 

and nonbank affiliates—had $224 billion in guaranteed 

debt outstanding at year-end. Some banking groups 

issued FDIC-guaranteed debt at both the subsidiary and 

holding company level, but most guaranteed debt was 

issued by holding companies or nonbank affiliates of 

depository institutions. Bank and thrift holding companies and nonbank affiliates issued 86 percent of FDICguaranteed debt outstanding at year-end. Short-term 

commercial paper and medium-term notes represented 

86 percent of outstanding debt instruments, in almost 

equal shares. Almost one-half of guaranteed debt 

outstanding as of December 31, 2008, matures in 180 

days or less, and one-fourth matures between two and 

three years of issuance. 

Author: Katherine Wyatt, Chief, Financial Analysis Section 

Division of Insurance and Research 

(202) 898-6755 

Table I-C. Participation in Temporary Liquidity Guarantee Program 

December 31, 2008 Total Eligible Entities Number Opting In Percent Opting In 

Transaction Account Guarantee Program 

Depository Institutions with Assets <= $10 Billion ................................ 

Depository Institutions with Assets > $10 Billion .................................. 

Total Depository Institutions * ......................................................... 

Debt Guarantee Program 

Depository Institutions with Assets <= $10 Billion ................................ 

Depository Institutions with Assets > $10 Billion .................................. 

Total Depository Institutions * ......................................................... 

Bank and Thrift Holding Companies and 

Non-Insured Affiliates............................................................................ 

All Entities........................................................................................ 

8,203 

112 

8,315 

8,203 

112 

8,315 

6,403 

14,718 

7,101 

106 

7,207 

4,457 

104 

4,561 

3,630 

8,191 

86.6% 

94.6% 

86.7% 

54.3% 

92.9% 

54.9% 

56.7% 

55.7%

 * Depository institutions include insured branches of foreign banks (IBAs) 

Table II-C. Cap on FDIC-Guaranteed Debt for Opt-In Entities 

December 31, 2008 

Opt-In Entities with Senior Unsecured 

Debt Outstanding at 9/30/2008 

Opt-In Depository Institutions 

with no Senior Unsecured 

Debt at 9/30/2008 

(dollar figures in millions) 

Number 

 Debt Amount 

as of 

9/30/2008 Initial Cap Number 

2% Liabilities 

as of 

9/30/2008 

Total 

Entities 

Total Initial 

Cap 

Depository Institutions with Assets 

<= $10 Billion *....................................... 

Depository Institutions with Assets 

> $10 Billion * ......................................... 

Bank and Thrift Holding 

Companies, Non-Insured Affiliates .. ........... 

Total............................................................. 

124 

45 

90 

259 

$2,812 

298,587 

398,092 

699,490 

$3,514 

373,233 

497,616 

874,363 

4,333 

59 

3,540 

7,932 

$34,863 

30,320 

N/A 

65,183 

4,457 

104 

3,630 

8,191 

$38,377 

403,554 

497,616 

939,546 

* Depository institutions include insured branches of foreign banks (IBAs) N/A - Not applicable 

FDIC QUARTERLY 19 2009, VOLUME 3, NO. 1 
 

Table III-C. Transaction Account Guarantee Program 

(dollar figures in millions) 

Number of Non-Interest-Bearing Transaction Accounts over $250,000 ......... 522,862 

Amount in Non-Interest-Bearing Transaction Accounts over $250,000.......... $814,437 

Amount Guaranteed ......................................................................................... $683,722 

Table IV-C. Debt Issuance under Guarantee Program 

December 31, 2008 

(dollar figures in millions) Number Debt Outstanding Cap 

Debt Outstanding 

Share of Cap 

Insured Depository Institutions 

Assets <= $10 Billion ....................................................... 

Assets > $10 Billion ......................................................... 

Bank and Thrift Holding Companies, 

Non-Insured Affiliates ............................................................ 

All Issuers....................................................................... 

18 

21 

25 

64 

$45 

31,276 

192,928 

224,249 

$984 

303,031 

466,398 

770,413 

4.5% 

10.3% 

41.4% 

29.1% 

Table V-C. Fees Assessed under TLGP Debt Program 

4th Quarter 

(dollar figures in millions) 2008 

Total Fees Assessed ............................................. $3,437 

December 31, 

2008 

Table VI-C. Term at Issuance of Debt Instruments Outstanding 

Other 

Interbank Other Senior 

December 31, 2008 Commercial Eurodollar Medium Interbank Unsecured Other Share 

(dollar figures in millions) Paper Deposits Term Notes Deposits Debt Term Note All Debt by Term 

Term at Issuance 

90 days or less...................................... $56,678 $281 $0 $448 $1,330 $3,208 $61,944 27.6% 

91 - 180 days......................................... 36,917 1,209 0 5,441 10 4,912 48,489 21.6% 

181 - 364 days....................................... 1,725 11 1,100 17 0 2,413 5,266 2.3% 

1 - 2 years ............................................. 0 1 19,800 17 0 770 20,588 9.2% 

Over 2 - 3 years .................................... 0 0 47,023 0 3,225 5,665 55,912 24.9% 

Over 3 years.......................................... 0 0 29,606 4 2,350 90 32,050 14.3% 

Total ................................................ 95,320 1,502 97,528 5,927 6,915 17,057 224,249 

Share of Total........................................ 42.5% 0.7% 43.5% 2.6% 3.1% 7.6% 

FDIC QUARTERLY 20 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Banking Profile 

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 V-A of the 

FDIC Quarterly Banking Profile is aggregated for all FDICinsured institutions, both commercial banks and savings institutions. Tables VI-A (Derivatives) and VII-A (Servicing, 

Securitization, and Asset Sales Activities) aggregate information only for insured commercial banks and state-chartered 

savings banks that file quarterly Call Reports. Table VIII-A 

(Trust Services) aggregates Trust asset and income information collected annually from all FDIC-insured 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 IV-B. 

A separate set of tables (Tables I-B through IV-B) provides 

comparative quarterly data related to the Deposit Insurance 

Fund (DIF), problem institutions, failed/assisted institutions, 

estimated FDIC-insured deposits, as well as assessment rate 

information. Depository institutions 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) Call Reports and the OTS 

Thrift Financial Reports submitted by all FDIC-insured 

depository institutions. 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 double-counting. 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. 

All asset and liability figures used in calculating performance 

ratios represent average amounts for the period (beginning-ofperiod amount plus end-of-period amount plus any interim 

periods, divided by the total number of periods). For “poolingof-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. 

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, e.g., institutions 

can move their home offices between regions, and savings 

institutions can convert to commercial banks or commercial 

banks may convert to savings institutions. 

ACCOUNTING CHANGES 

FASB Statement No. 157 Fair Value Measurements issued in 

September 2006 and FASB Statement No. 159 The Fair Value 

Option for Financial Assets and Financial Liabilities issued in 

February 2007—both are effective in 2008 with early adoption 

permitted in 2007. FAS 157 clarifies fair value and establishes 

a framework for developing fair value estimates for the fair 

value measurements that are already required or permitted 

under other standards. Fair value continues to be used for 

derivatives, trading securities, and available-for-sale securities. 

Changes in fair value go through earnings for the derivatives 

and trading securities. Changes in the fair value of availablefor-sale securities are reported in other comprehensive 

income. Available-for-sale securities and held-to-maturity 

debt securities are written down to fair value through earnings 

if impairment is other than temporary and mortgage loans 

held for sale are reported at the lower of cost or fair value. 

Loans held for investment are also subject to impairment but 

are written down based on the present value of discounted 

cash flows. FAS 159 allows banks to elect a fair value option 

when assets are recognized on the balance sheet and to report 

certain financial assets and liabilities at fair value with subsequent changes in fair value included in earnings. Existing eligible items can be fair-valued as early as January 2007 under 

FAS 159, if a bank adopts FAS 157. 

FASB Statement No. 158 Employers’ Accounting for Defined Benefit 

Pension and Other Postretirement Plans—issued in September 

2006 requires a bank to recognize in 2007, and subsequently, 

the funded status of its postretirement plans on its balance 

sheet. An overfunded plan is recognized as an asset and an 

underfunded plan is recognized as a liability. An adjustment is 

made to equity as accumulated other comprehensive income 

(AOCI) upon application of FAS 158, and AOCI is adjusted 

in subsequent periods as net periodic benefit costs are recognized in earnings. 

FASB Statement No. 156 Accounting for Servicing of Financial 

Assets—issued in March 2006 and effective in 2007, requires 

all separately recognized servicing assets and liabilities to be 

initially measured at fair value and allows a bank the option to 

subsequently adjust that value by periodic revaluation and recognition of earnings or by periodic amortization to earnings. 

FDIC QUARTERLY 21 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FASB Statement No. 155 Accounting for Certain Hybrid Financial accordance with the interpretation’s effective date except as 

Instruments—issued in February 2006, requires bifurcation of follows. On December 31, 2008, the FASB decided to defer 

certain derivatives embedded in interests in securitized finan- the effective date of FIN 48 for eligible nonpublic enterprises 

cial assets and permits fair value measurement (i.e., a fair 

value option) for any hybrid financial instrument that contains an embedded derivative that would otherwise require 

bifurcation under FASB Statement No. 133, Accounting for 

Derivative Instruments and Hedging Activities (FAS 133). In 

addition, FAS 155 clarifies which interest-only and principalonly strips are not subject to FAS 133. 

Purchased Impaired Loans and Debt Securities—Statement of 

Position 03-3, Accounting for Certain Loans or Debt Securities 

Acquired in a Transfer. The SOP applies to loans and debt 

securities acquired in fiscal years beginning after December 

15, 2004. In general, this Statement of Position applies to 

“purchased impaired loans and debt securities” (i.e., loans and 

debt securities that a bank has purchased, including those 

acquired in a purchase business combination, when it is probable, at the purchase date, that the bank will be unable to 

collect all contractually required payments receivable). Banks 

must follow Statement of Position 03-3 for Call Report purposes. The SOP does not apply to the loans that a bank has 

originated, prohibits “carrying over” or creation of valuation 

allowances in the initial accounting, and any subsequent valuation allowances reflect only those losses incurred by the 

investor after acquisition. 

GNMA Buy-back Option—If an issuer of GNMA securities has 

the option to buy back the loans that collateralize the 

GNMA securities, when certain delinquency criteria are met, 

FASB Statement No. 140 requires that loans with this buyback option must be brought back on the issuer’s books as 

assets. The rebooking of GNMA loans is required regardless 

of whether the issuer intends to exercise the buy-back option. 

The banking agencies clarified in May 2005 that all GNMA 

loans that are rebooked because of delinquency should be 

reported as past due according to their contractual terms. 

FASB Interpretation No. 46—The FASB issued Interpretation 

No. 46, Consolidation of Variable Interest Entities, in January 

2003 and revised it in December 2003. Generally, banks with 

variable interests in variable interest entities created after 

December 31, 2003, must consolidate them. The timing of 

consolidation varies with certain situations with application 

as late as 2005. The assets and liabilities of a consolidated 

variable interest entity are reported on a line-by-line basis 

according to the asset and liability categories shown on the 

bank’s balance sheet, as well as related income items. Most 

small banks are unlikely to have any “variable interests” in 

variable interest entities. 

FASB Interpretation No. 48 on Uncertain Tax Positions—FASB 

Interpretation No. 48, Accounting for Uncertainty in Income 

Taxes (FIN 48), was issued in June 2006 as an interpretation 

of FASB Statement No. 109, Accounting for Income Taxes. 

Under FIN 48, the term “tax position” refers to “a position in 

a previously filed tax return or a position expected to be taken 

in a future tax return that is reflected in measuring current or 

deferred income tax assets and liabilities.” FIN 48 further 

states that a “tax position can result in a permanent reduction 

of income taxes payable, a deferral of income taxes otherwise 

currently payable to future years, or a change in the expected 

realizability of deferred tax assets.” FIN 48 was originally 

issued effective for fiscal years beginning after December 15, 

2006. Banks must adopt FIN 48 for Call Report purposes in 

and to require those enterprises to adopt FIN 48 for annual 

periods beginning after December 15, 2008. A nonpublic 

enterprise under certain conditions is eligible for deferral, 

even if it opted to issue interim or quarterly financial information in 2007 under earlier guidance that reflected the adoption of FIN 48. 

FASB Statement No. 123 (Revised 2004) and Share-Based 

Payments—requires all entities to recognize compensation 

expense in an amount equal to the fair value of share-based 

payments (e.g., stock options and restricted stock, granted to 

employees). As of January 2006 all banks must adopt FAS 

123(R). The compensation cost is typically recognized over 

the vesting period with a corresponding credit to equity. The 

recording of the compensation cost also gives rise to a 

deferred tax asset. 

FASB Statement No. 133 Accounting for Derivative Instruments 

and Hedging Activities—All banks must recognize derivatives 

as either assets or liabilities on the balance sheet, measured at 

fair value. A derivative may be specifically designated as a 

“fair value hedge,” a “cash flow hedge,” or a hedge of a foreign 

currency exposure. The accounting for changes in the value 

of a derivative (gains and losses) depends on the intended use 

of the derivative, its resulting designation, and the effectiveness of the hedge. Derivatives held for purposes other than 

trading are reported as “other assets” (positive fair values) or 

“other liabilities” (negative fair values). For a fair value hedge, 

the gain or loss is recognized in earnings and “effectively” offsets loss or gain on the hedged item attributable to the risk 

being hedged. Any ineffectiveness of the hedge could result 

in a net gain or loss on the income statement. Accumulated 

net gains (losses) on cash flow hedges are recorded on the 

balance sheet as “accumulated other comprehensive income” 

and the periodic change in the accumulated net gains (losses) 

for cash flow hedges is reflected directly in equity as the 

value of the derivative changes. FASB Statement No. 149, 

Amendment of Statement 133 on Derivative Instruments 

and Hedging Activities provides guidance on the circumstances in which a loan commitment must be accounted for 

as derivative. Under Statement No. 149, loan commitments 

that relate to the origination of mortgage loans that will be 

held for sale, commonly referred to as interest rate lock commitments, must be accounted for as derivatives on the balance sheet by the issuer of the commitment. 

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, 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—assessable deposits consist of DIF deposits 

(deposits insured by the FDIC Deposit Insurance Fund) in 

banks’ domestic offices with certain adjustments. 

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Quarterly Banking Profile 

Assets securitized and sold—total outstanding principal balance 

of assets securitized and sold with servicing retained or other 

seller-provided 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.” 

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. 

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. 

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 some insurance funds in order to continue operating. 

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. 

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 

seller-provided credit enhancements provided by the reporting bank to securitizations. 

Mortgage-backed securities—certificates of participation in 

pools of residential mortgages and collateralized mortgage 

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obligations issued or guaranteed by government-sponsored or Reserves for losses—the allowance for loan and lease losses on 

private enterprises. Also, see “Securities,” below. a consolidated basis. 

Net charge-offs—total loans and leases charged off (removed 

from balance sheet because of uncollectibility), 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. 

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 file 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. 

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. 

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. 

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—net income (including gains or losses on 

securities and extraordinary items) as a percentage of average 

total assets. The basic yardstick of bank profitability. 

Return on equity—net income (including gains or losses on 

securities and extraordinary items) as a percentage of average 

total equity capital. 

Risk-based capital groups—definition: 

Total Tier 1 

Risk-Based Risk-Based Tier 1 Tangible 

(Percent) Capital * Capital * Leverage Equity 

Well-Capitalized ≥10 and ≥6 and ≥5 – 

Adequately 

capitalized ≥8 and ≥4 and ≥4 – 

Undercapitalized ≥6 and ≥3 and ≥3 – 

Significantly 

undercapitalized <6 or <3 or <3 and >2 

Critically 

undercapitalized – – – ≤2 

*As a percentage of risk-weighted assets. 

Risk Categories and Assessment Rate Schedule—The current risk 

categories and assessment rate schedule became effective 

January 1, 2007. Capital ratios and supervisory ratings distinguish one risk category from another. The following table 

shows the relationship of risk categories (I, II, III, IV) to capital and supervisory groups as well as the assessment rates (in 

basis points) for each risk category. Supervisory Group A generally includes institutions with CAMELS composite ratings 

of 1 or 2; Supervisory Group B generally includes institutions 

with a CAMELS composite rating of 3; and Supervisory 

Group C generally includes institutions with CAMELS composite ratings of 4 or 5. For purposes of risk-based assessment 

capital groups, undercapitalized includes institutions that are 

significantly or critically undercapitalized. 

Supervisory Group 

Capital Group A B C 

I 

1. Well Capitalized 5–7 bps III II 

28 bps 10 bps 2. Adequately Capitalized 

III IV 3. Undercapitalized 28 bps 43 bps 

Assessment rates are 3 basis points above the base rate schedule. The FDIC may adjust rates up or down by 3 basis points 

from the base rate schedule without notice and comment, 

provided that any single adjustment from one quarter to the 

next cannot move rates more than 3 basis points. 

FDIC QUARTERLY 24 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Banking Profile 

For most institutions in Risk Category I, the assessment rate 

assigned will be based on a combination of financial ratios 

and CAMELS component ratings. 

For large institutions in Risk Category I (generally those with 

at least $10 billion in assets) that have long-term debt issuer 

ratings, assessment rates will be determined by weighting 

CAMELS component ratings 50 percent and long-term debt 

issuer ratings 50 percent. For all large Risk Category I institutions, additional risk factors will be considered to determine 

whether assessment rates should be adjusted. This additional 

information includes market data, financial performance measures, considerations of the ability of an institution to withstand financial stress, and loss severity indicators. Any 

adjustment will be limited to no more than 1⁄2 basis point. 

Beginning in 2007, each institution is assigned a risk-based 

rate for a quarterly assessment period near the end of the 

quarter following the assessment period. Payment will generally be due on the 30th day of the last month of the quarter 

following the assessment period. Supervisory rating changes 

will be effective for assessment purposes as of the examination 

transmittal date. For institutions with long-term debt issuer 

ratings, changes in ratings will be effective for assessment purposes as of the date the change was announced. 

Risk-weighted assets—assets adjusted for risk-based capital definitions which include on-balance-sheet as well as off-balancesheet 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 “heldto-maturity,” which are reported at amortized cost (book 

value), and securities designated as “available-for-sale,” 

reported at fair (market) value. 

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. 

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. 

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. 

Temporary Liquidity Guarantee Program (TLGP) was approved by 

the FDIC Board on October 13, 2008. The TLGP was 

designed to help relieve the crisis in the credit markets by 

giving banks access to liquidity during a time of global financial distress. Participation in the TLGP is voluntary. The 

TLGP has two components: 

Transaction Account Guarantee Program provides a full guarantee of non-interest-bearing deposit transaction accounts 

above $250,000, at depository institutions that elected to 

participate in the program. The guarantee is in effect until 

December 31, 2009. 

Debt Guarantee Program provides a full guarantee of senior 

unsecured debt1 issued by eligible institutions between 

October 14, 2008, and June 30, 2009, and maturing on or 

before June 30, 2012. Institutions eligible for participation 

in the debt guarantee program include insured depository 

institutions, U.S. bank holding companies, certain U.S. savings and loan holding companies, and other affiliates of an 

insured depository institution that the FDIC designates as 

eligible entities. 

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 & 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.) 

Volatile liabilities—the sum of large-denomination time deposits, foreign-office deposits, federal funds purchased, securities 

sold under agreements to repurchase, and other borrowings. 

Yield on earning assets—total interest, dividend, and fee 

income earned on loans and investments as a percentage of 

average earning assets. 

1 Senior unsecured debt generally includes term Federal funds 

purchased, promissory notes, commercial paper, unsubordinated 

unsecured notes, certificates of deposit (CDs) standing to the credit of 

a bank, and U.S. dollar denominated bank deposits owed to an insured 

depository institution. 

FDIC QUARTERLY 25 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Feature Article: 

The 2009 Economic Landscape: 

How the Recession Is Unfolding across 

Four U.S. Regions 

Foreword 

With the intensification of financial market turmoil in 

the fourth quarter of 2008 came a new round of distress 

to the U.S. economy, making this not only one of the 

longest but one of the most severe U.S. recessions since 

World War II. Real gross domestic product (GDP) 

declined at an annualized rate of 6.3 percent in the 

fourth quarter, the most in any quarter since 1982. As 

of March 2009, the downturn marked its 16th month, 

making it equal to the longest period of uninterrupted 

contraction in the U.S. economy since the 1930s. 

While events in the U.S. and global financial markets 

are powerful drivers of the recession that began in 2007, 

this economic downturn is unfolding in unique ways 

across the various regional economies. For example, 

most areas of the country are experiencing housing 

market distress, but some are seeing more severe deterioration in local housing markets than indicated by 

national averages. One analysis shows that more than 

half of all residential foreclosure filings in 2008 took 

place in 35 U.S. counties where 20 percent of the U.S. 

population lives.1 Similarly, while some 41 states saw 

payroll jobs decline in 2008, the remaining 9 states 

(and the District of Columbia) continued to report 

employment growth. 

The following series of articles takes a closer look at the 

distinct way that this recession is playing out in four 

major regions of the country. The first article describes 

how the latest downturn is exacerbating long-term 

problems in the manufacturing sector of the Industrial 

Midwest. In the second article, we explore how 

formerly booming housing markets in Arizona, California, Florida, and Nevada have given way to a housing 

bust that has sharply reversed the momentum of the 

regional economy. The third article focuses on the 

impact of financial market turmoil on New York City 

and other financial centers along the East Coast, while 

the fourth article outlines why a number of states in the 

nation’s midsection have fared better than most thus far 

because of their high dependence on energy and agricultural production. 

Richard A. Brown, Chief Economist 

1 “Most foreclosures pack into a few counties,” USAToday, March 6, 

2009. 

FDIC QUARTERLY 26 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

The 2009 Economic Landscape 

Recession Adds to Long-Term Manufacturing 

Challenges in the Industrial Midwest 

The manufacturing sector has long been a primary 

economic driver of the Industrial Midwest.1 This region, 

which comprises eight states in the north-central 

United States, is known for its durable goods manufacturing, a sector that includes the production of automobiles and other types of heavy machinery. The emphasis 

on manufacturing has posed challenges for the region as 

the sector has contracted. This article discusses manufacturing trends in the Industrial Midwest, particularly 

with respect to the troubled auto sector, and the 

economic outlook for the region. 

The Industrial Midwest Has Not Recovered 

from the Last Recession 

The U.S. manufacturing sector has struggled throughout 

this decade. Historically, nationwide manufacturingrelated employment has tended to decline a few quarters 

before the U.S. economy contracts and then recover in 

tandem with the broader economy. However, job 

growth in the U.S. manufacturing sector did not 

1 In this article, the Industrial Midwest is defined as the region encompassing Indiana, Wisconsin, Michigan, Ohio, Iowa, Kentucky, Minnesota, and Illinois. 

Chart 1 

rebound after the 2001 recession, even while overall 

U.S. economic growth was strong (see Chart 1).2 

These manufacturing weaknesses have had a disproportionate effect on the Industrial Midwest economy. In 

each state in the region, manufacturing employment as 

a percentage of total employment is higher than the 

nation’s. Moreover, Indiana, Wisconsin, Michigan, and 

Ohio have the highest concentrations of manufacturing 

employment in the country.3 Because of its reliance on 

manufacturing during a period of weakness in this 

sector, total employment in the region has yet to return 

to pre-2001 levels (see Chart 2). 

Two long-term issues are adversely affecting manufacturing in the Industrial Midwest. First, over the past two 

decades, much of the region’s manufacturing base has 

2 The trend of outsourcing may contribute to overcounting of manufacturing job losses. As manufacturers “purchase” a growing number 

of services, the value of which is ultimately embedded in product 

value, manufacturing employment levels may have simply shifted to 

service industry sectors. See “Is Manufacturing at a Crossroads?” 

Chicago Fed Letter, Number 204a, July 2004. 3 Bureau of Labor Statistics, December 31, 2008. Manufacturing 

concentrations are defined as durable goods manufacturing and 

wholesale trade jobs as a percentage of total nonfarm payrolls. 

-10 

-5 

0 

5 

10 

Q1-79 Q1-83 Q1-87 Q1-91 Q1-95 Q1-99 Q1-03 Q1-07 

-10 

-5 

0 

5 

10 

Sources: Bureau of Economic Analysis; Bureau of Labor Statistics (Haver Analytics). 

Note: Data are seasonally adjusted. Shaded areas denote U.S. recessions. 

Manufacturing Employment 

Year-to-Year Percent Change 

U.S. Manufacturing Employment Did Not Rebound Following the 2001 Recession 

Real GDP 

Quarterly Percent Change at an Annual Rate 

FDIC QUARTERLY 27 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chart 2 Chart 3 

States in the Industrial Midwest Began Contracting 

before the Current National Recession 

90 

95 

100 

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 

Recent Cyclical Job Losses in the Industrial Midwest 

Have Proven to Be Long-Lived 

Indexed Total Employment, Seasonally Adjusted 

Prior Peak=100 

Source: Bureau of Labor Statistics (Haver Analytics). 

Quarters since Peak 

2007-08 1990-92 

2000-07 

1979-86 

been lost to competition, both foreign and domestic. 

Second, technological improvements in U.S. factories 

have led to much higher productivity levels.4 These 

productivity advances have been brought about by capital investments that require fewer low-skilled workers. 

More recently, the erosion of market share and structural cost problems at General Motors (GM), Chrysler, 

and Ford have led to large-scale restructurings and job 

losses. These challenges at U.S. automakers have 

contributed to the loss of more than 140,000 manufacturing jobs since 2005.5 Hundreds of thousands of additional workers at auto assembly plants and auto parts 

suppliers could potentially lose their jobs during the 

current downturn.6 

Auto sector layoffs have disproportionately affected 

Michigan, Ohio, and Indiana, the states most exposed 

to the troubled auto sector. These states were essentially 

in recession before the nation as a whole, with Michigan preceding the national downturn by more than 

three years (see Chart 3). Michigan is the state most 

heavily concentrated in auto manufacturing, with the 

most motor vehicle manufacturing jobs and the highest 

4 Bureau of Labor Statistics. From 2002 to 2006, U.S. manufacturing 

multifactor productivity growth—the increase in the ratio of goods 

output to labor, capital, and other inputs—averaged 2.2 percent, well 

above the 30-year average of 1.4 percent. 

5 The figure cited refers to job losses in the transportation manufacturing sector of the Industrial Midwest through 2008. These job losses 

have occurred mostly at auto parts suppliers and automakers. 

6 See CAR Research Memorandum: The Impact on the U.S. Economy 

of a Major Contraction of the Detroit Three Automakers, Center for 

Automotive Research, November 4, 2008. 

Minnesota, 

+4 months 

Illinois,

+1 month 

Iowa, 

+1 month 

Kentucky, -1 month 

Indiana, -3 months 

Wisconsin, -6 months 

Ohio, -6 months Michigan, -37 months 

-40 -30 -20 -10 0 10 

Number of Months Selected States Entered Recession 

before (-) or after (+) the Nation 

Source: Moody’s Economy.com. 

number and proportion of direct and indirect jobs 

connected to motor vehicle parts production.7 

Employment Weakness Has Also Spilled into the 

Region’s Housing Markets 

Although the Industrial Midwest did not experience 

the significant home price appreciation of the post2001 housing boom to the same degree as other regions, 

its residential real estate markets have still suffered. 

Existing home sales in the Industrial Midwest declined 

33 percent from their second quarter 2005 peak, 

roughly in line with the nationwide decline.8 In 2008, 

home prices fell in all of the region’s states, led by 

Michigan, where prices declined by more than 

10 percent.9 Further, in half of the Industrial Midwest 

states, foreclosure rates are at or slightly higher than the 

national rate.10 

Weak housing markets have, in turn, adversely affected 

the region’s construction industry. Construction 

employment was virtually unchanged across the Industrial Midwest from 2003 through 2006, while it grew 

more than 10 percent nationwide. Since 2006, the 

construction sector in the Industrial Midwest has 

declined by 7.7 percent, or 96,000 jobs. 

7 Contribution of the Motor Vehicle Supplier Sector to the Economies 

of the United States and Its 50 States, Center for Automotive 

Research, January 2007. 

8 National Association of Realtors, data available as of fourth quarter 

2008. 

9 Based on the Federal Housing Finance Agency Purchase-Only House 

Price Index. 

10 Mortgage Bankers Association, fourth quarter 2008. 

FDIC QUARTERLY 28 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2009 Economic Landscape 

The Industrial Midwest Faces a Potentially 

Long Road to Recovery 

Employment in the Industrial Midwest has declined 

substantially during the current downturn, and the 

near-term outlook for Detroit’s auto industry remains 

unclear. Automakers have been shrinking their businesses to match reduced market share. In addition, 

financial press reports and analytical studies indicate 

that hundreds of thousands of jobs are potentially at 

stake as Chrysler and GM continue to negotiate 

restructuring plans with the Obama administration’s 

auto task force. Though foreign-based automakers with 

production facilities in the region might increase output 

to partially offset this gap, their new hiring likely would 

not fully absorb jobs shed by Detroit automakers. 

Two other economic indicators also point to a 

prolonged path to recovery. First, the outlook for the 

metal fabrication and machinery manufacturing industries has diminished. These industries, which include 

companies involved in the transformation of metal into 

intermediate or final products and the production of 

machines used in industrial applications, provided some 

economic stability to the Industrial Midwest following 

the last recession. However, the weakening national 

economy has softened demand for their products. 

Nationally, investment in machinery and other fixed 

assets has slowed consistently since mid-2007, and fell 

21 percent during fourth quarter 2008.11 As a result, 

employment in fabrication and machinery manufacturing in the region declined 1.4 percent, or about 13,000 

jobs, in 2008. 

Second, contraction or slowing growth in the economies of U.S. trading partners will likely limit future 

export opportunities that had provided a counterbalance to the weakened auto sector over the past few 

years. Exports rose 13 percent and 11 percent, respectively, in 2006 and 2007, benefiting from strong foreign 

demand and a decline in the value of the dollar. 

However, the economies of foreign trading partners are 

now slowing or contracting and the decline in the 

dollar has reversed direction, returning to tradeweighted levels not seen since 2006.12 

A more positive outlook for the region hinges in no 

small part on the success of federal government initiatives directed at stimulating the economy in general and 

the auto sector in particular. Spending on infrastructure 

projects should generate new jobs, while other provisions of the $787 billion American Recovery and Reinvestment Act are intended to maintain existing jobs. 

However, most of the affected jobs will be outside of the 

manufacturing sector. While employment will likely 

continue to decline in the automotive sector, it is likely 

that fewer jobs would be lost under a governmentassisted restructuring than would occur otherwise. Over 

the long term, job growth is likely to become more 

dependent on emerging and expanding industries, such 

as those found in the energy, education, and health care 

sectors. 

Authors: Patrick M. Dervin, Regional Economist 

John M. Anderlik, Assistant Director 

12 The Blue Chip Economic Indicators consensus forecast as of 

December 2008 calls for a 0.1 percent decline in Canada’s GDP in 

2009 and only a 0.2 percent increase in Mexico’s GDP. Growth in 

China, one of the fastest growing export markets, is expected to slow 

from 9.5 percent in 2008 to 7.6 percent in 2009, well below trend. 

11 Bureau of Economic Analysis; seasonally adjusted, annualized 

growth in real private nonresidential fixed investment. 

FDIC QUARTERLY 29 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The 2009 Economic Landscape 

The Sand States: Anatomy of a Perfect HousingMarket Storm 

The historic boom and subsequent decline in the nation’s 

housing market has been a defining feature of the current 

recession. The housing downturn has been most acute in 

four states—Arizona, California, Florida, and Nevada— 

that had experienced some of the highest rates of home 

price appreciation in the first half of the decade. While 

these states are not all contiguously located, their similar 

housing cycles and abundance of either beaches or deserts 

have led some analysts to label them “Sand States.” This 

article discusses the factors that led to an expanding 

housing sector in these states and the market imbalances 

that culminated in a sharp correction in home prices. 

The article also explores the ripple effects that the housing downturn has had on the local economies. 

Rapid Population Growth in the Sand States 

Propelled Housing Markets 

For many years, rapid population growth in the Sand 

States spurred higher than average rates of home 

construction. Favorable weather and relatively affordable housing are two factors that attracted retirees as 

well as younger families to these states. In the 1980s 

and 1990s, population growth rates in Arizona, Florida, 

and Nevada were between two and four times the 

national rate. Certain parts of California, such as the 

Riverside–San Bernardino metropolitan area, experienced similarly high rates of population growth. Rapid 

population growth continued into the early years of this 

decade. From 2004 to 2007, Arizona and Nevada 

ranked as the two fastest growing states in the nation, 

followed closely by Florida, which ranked ninth.1 

The influx of new residents into Arizona, Florida, and 

Nevada also contributed to strong employment growth. 

Job creation in these states frequently outpaced the rest of 

the nation during the past few decades. From 2000 to 

2006, these states repeatedly ranked among the top ten 

for job growth, far exceeding the national average. 

California generally reported job growth similar to the 

national average during this period, although the state was 

hit hard by the dot-com recession from mid-2001 to 2003. 

1 U.S. Census Bureau. 

Affordability Mortgages Contributed to 

Housing Imbalances 

During this decade, strong demand for housing, 

supported by a growing population and an expanding 

economy, contributed to growing housing market 

imbalances across the Sand States. Perhaps the best 

measure of the imbalances that accumulated in booming housing markets during this decade was the relationship between home prices and incomes. In the years 

leading up to the housing downturn, escalating home 

prices far outpaced income growth. For example, in 

2003, housing in Nevada was considered relatively 

affordable, both in absolute terms and as compared to 

other states. According to one analysis, a family earning 

the median income in Nevada in 2003 could afford a 

home that was priced approximately 20 percent above 

the median house price in the state using traditional 

mortgage financing.2 However, by late 2005, home 

prices had risen so much that a family earning the 

median income could only afford a home priced at 

24 percent below the state’s median price. 

A combination of factors drove the housing sector 

imbalances in the Sand States to unprecedented levels. 

Under normal market conditions, strained affordability 

tends to limit housing demand because fewer households can purchase a home using traditional mortgage 

financing. However, in this cycle, new mortgage “affordability” products were commonly used to finance home 

purchases. Besides traditional adjustable-rate mortgages 

(ARMs), affordability products included hybrid ARMs, 

which have a low, fixed interest rate for several years 

followed by a market rate that is frequently much 

higher. Affordability products also comprised the 

so-called nontraditional mortgage products, which 

included interest-only loans, where amortization of principal was not required during the first few years of the 

2 Moody’s Economy.com Affordability Index. The calculation assumes 

a 30-year maturity and a down payment of 20 percent. It also assumes 

that the monthly principal and interest payments do not exceed 25 

percent of the median family income. To interpret the indices, a value 

of 100 means that the family earning the median income can afford 

only 100 percent of the traditional mortgage payment of the medianpriced home, taking into consideration the 20 percent down payment. 

FDIC QUARTERLY 30 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2009 Economic Landscape 

loan; negative-amortization loans that offered initial 

payments well below the amount required to cover 

interest and amortize principal; and balloon payment 

loans, which typically required a large lump-sum 

payment at the end of the loan. Unlike subprime mortgage products that were designed for home buyers with 

limited or weaker credit histories, these nontraditional 

mortgages were marketed broadly and often used by 

first-time home buyers and investors who did not 

provide a down payment. In addition, originators of 

these products frequently did not require buyers to verify 

that their income could support the mortgage payments. 

By 2006, nearly half of total U.S. originations of privately 

securitized affordability mortgages were made in the four 

Sand States alone. Moreover, the proportion of these 

mortgages originated in these states, including nontraditional mortgages, rose as home prices escalated. During 

2002, these products accounted for roughly half of the 

privately securitized mortgage originations in each of the 

Sand States, comparable to the rest of the nation. By 2006, 

however, the proportion of these products had increased to 

80 percent of privately securitized mortgage originations. 

Nationwide, the percentage was about 70 percent.3 

The increased presence of speculators or investors in the 

Sand States also contributed to growing imbalances in 

the housing sector. Data from mortgage servicers indicate 

that nonowner, investor, and second-home mortgage 

originations increased noticeably in Arizona, Florida, and 

Nevada between 2000 and 2005.4 Investor and secondhome purchases tended to be more heavily concentrated 

in major metropolitan areas in these states, such as 

Las Vegas, West Palm Beach, Miami, and Phoenix. 

Strong housing demand coupled with escalating home 

prices served as a dual incentive for builders to increase 

the supply of homes, arguably at a rate that exceeded 

short-term demand. New home construction started to 

accelerate in 2002, and, over the next three years, 

housing starts in these four states increased an average 

of 11 percent annually, or about twice the rate of 

increase elsewhere in the nation. Housing construction 

in the Sand States far outpaced annual growth in the 

number of households, which peaked at 1.6 percent in 

2004 and 2005. 

3 Data are from Loan Performance. Affordability mortgage products 

include ARM loans, interest-only loans, negative amortization mortgages, 

balloon loans, and hybrid ARMs. Affordability originations are measured 

as a percentage of privately securitized origination, first liens only. 

4 In contrast, California had less investor activity during the period, 

likely because the median home price in the state was relatively high, 

resulting in a less attractive rate of return for potential investors. 

Labor market imbalances also arose as job growth became 

skewed toward the housing sector. During the height of 

the boom, construction employment grew 10 percent per 

year in these states, far outpacing growth in other industry sectors. During this time, construction jobs accounted 

for a disproportionate 25 percent share of new jobs, while 

representing less than 10 percent of total employment. 

Tipping Point: Imbalances Lead to Housing Collapse 

Ultimately, the housing boom in the Sand States 

proved to be mostly a mirage. The first signs of trouble 

came in the form of sharply decelerating rates of home 

price appreciation. Between 2003 and 2006, annual 

home price appreciation rates in these states had consistently exceeded the national average. Year-over-year 

house price appreciation in Nevada peaked in 2004 at 

37 percent. In Arizona and Florida, appreciation peaked 

in 2005 at rates more than twice the national average. 

Since then, average home prices in the four states have 

declined between 27 and 38 percent from their peak.5 

Price declines have been most severe in metropolitan 

markets such as Phoenix and Las Vegas, which registered the largest percentage declines in the nation at 

34 percent and 33 percent, respectively, during 2008.6 

As home prices slumped, foreclosure activity rose at a 

startling pace. While this phenomenon was occurring 

across the nation, it was most pronounced in the Sand 

States. According to the Mortgage Bankers Association, the Sand States accounted for more than 40 

percent of all mortgage foreclosures started in 2008, 

which is nearly double the share of mortgages held by 

borrowers in these four states (see Table 1). This 

disproportionate share of troubled mortgages in the 

Sand States was most acute among ARMs. In 2008, 

these states held 46 percent of the prime ARMs 

outstanding nationwide and 64 percent of foreclosures 

started within this mortgage category. 

In fourth quarter 2008, foreclosure resales accounted for 

more than 55 percent of all California resale activity, 

almost three times the level of a year ago. Foreclosure 

resales were also prevalent in Las Vegas and Phoenix, 

where this type of transaction accounted for about 71 

and 65 percent, respectively, of house and condominium 

resales.7 

5 Federal Housing Finance Agency, purchase-only index data through 

fourth quarter 2008. 

6 S&P/Case-Shiller Home Price Index, data as of December 2008. 

7 Data Quick Information Systems through http://www.dqnews.com. 

Las Vegas and Phoenix data are for February 2009. 

FDIC QUARTERLY 31 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 1 Chart 1 

The Sand States Account for a 

Disproportionately High Share of 

Foreclosure Activity 

National Share of 

Foreclosures 

Started 

National Share of 

Mortgages 

Serviced 

California 

Florida 

Arizona 

Nevada 

19.2% 

16.2% 

4.4% 

2.7% 

12.9% 

7.8% 

2.7% 

1.2% 

Sand States Total: 42.5% 24.6% 

Source: Mortgage Bankers Association. 

Note: Data from first quarter 2008 through fourth quarter 2008. “Sand States” is the 

aggregate of California, Florida, Arizona, and Nevada. 

-20 

-15 

-10 

-5 

0 

5 

10 

15 

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 

Year-over-Year Change in Sand State Nonfarm Employment 

Percent 

The Construction Sector in the Sand States 

Has Been an Important Driver of Job Growth 

Source: Bureau of Labor Statistics (Haver Analytics). 

Note: “Sand States” is the aggregate of California, Florida, Arizona, and Nevada. “All Other 

Sectors” is the state aggregate nonfarm employment minus the construction sector. 

All Other Sectors 

Job Growth 

Construction Sector 

Job Growth 

Economic Conditions Remain Fragile as the Effects 

of the Housing Collapse Spread 

Compounding the housing-sector problems in the Sand 

States, and elsewhere, has been the virtual shutdown of 

private mortgage-backed securities (MBS) issuance 

since 2007. MBS issuance had largely financed the 

subprime and nontraditional lending that fueled the 

boom. Total issuance of private MBS, which had 

topped $1 trillion annually in both 2005 and 2006, fell 

precipitously thereafter, totaling just over $50 billion in 

2008. Meanwhile, the difficulties that market participants have had in valuing complex mortgage securities 

and the derivatives based on them have contributed to 

wider risk aversion in financial markets, which has 

reached historic proportions. For housing markets, 

particularly in the credit-fueled boom markets of these 

four states, these financial market disruptions are 

compounding what would in any case have been a steep 

and extended housing market downturn. 

The housing market downturn in the Sand States is 

now having serious ripple effects on other parts of the 

local economy. Each of the Sand States lost jobs in 

2008. The losses have been most pronounced in the 

construction sector, which has shed more than 450,000 

jobs, or about 24 percent, between fourth quarter 2006 

and fourth quarter 2008 (see Chart 1). In addition, job 

losses have spread to the financial services and retail 

trade sectors. Retail sales also have declined, particularly for home improvement, furniture, and electronics 

store sales, contributing to additional layoffs. 

Although the Sand States entered this downturn with 

relatively low rates of unemployment, joblessness 

increased during 2008 to levels not seen since the 2001 

recession. The unemployment rates for California, 

Florida, and Nevada ranked among the top ten in the 

nation as of fourth quarter 2008. While Arizona’s 

unemployment rate remained slightly below the 

national average as of fourth quarter 2008, it too rose 

markedly during the year. These rising unemployment 

rates are due primarily to widespread job losses and, to a 

lesser degree, to additional people entering the labor 

force in search of employment, including college graduates and retirees.8 Also, rising unemployment claims are 

putting more pressure on already strained state budgets. 

Nonetheless, a few positive, albeit very preliminary, 

signs may be emerging. The volume of home sales in 

Arizona, California, and Nevada improved during 

2008 relative to year-ago levels. The increase in foreclosures sales is likely contributing to some renewal in 

sales activity. In addition, while a sharp decline in 

housing starts is eliminating construction jobs in the 

near term, it should eventually facilitate the return to 

a more stable housing landscape. Seasonally adjusted 

housing starts in the Sand States dropped 40 percent 

in 2007 and again in 2008. Also, despite the weakened 

housing and labor markets, population growth in 

Arizona, California, and Nevada was estimated to be 

above the national rate in 2008.9 This continued 

growth will be an important source of long-term housing demand that will eventually help bring a measure 

of stability to these troubled housing markets. 

Authors: Shayna M. Olesiuk, Regional Manager 

Kathy R. Kalser, Assistant Director 

8 California Employment Development Department. 9 U.S. Census estimates of state-level population growth between 

July 1, 2007, and July 1, 2008, the latest data available. 

FDIC QUARTERLY 32 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The 2009 Economic Landscape 

Financial Sector Woes Pressure the Northeast 

The downturn in U.S. housing markets that began in 

2006 was arguably the catalyst for the nation’s ongoing 

recession. However, turmoil in the financial sector has 

contributed to further deterioration in the U.S. and 

global economies. Since 2007, a succession of financial 

market disturbances has heightened risk aversion and 

credit spreads, and has severely limited the availability 

of credit across certain sectors of the economy. These 

developments have placed enormous pressure on some 

classes of financial companies, particularly those that 

exist outside of the regulatory umbrella and those that 

depend on the ability to sell loans or issue debt on the 

open market. 

The severity and duration of the recent distress has 

resulted in considerable job losses in the financial 

sector. Initially, job cuts were centered in residentialrelated financial employment, such as mortgage brokers, 

consistent with the nation’s housing downturn. 

However, as financial stress permeated the capital 

markets, job losses became widespread across the financial industry. By fourth quarter 2008, employment in 

the U.S. financial sector had declined by 2.4 percent 

from a year earlier, the sharpest decline since World 

War II.1 

Retrenchment in the Nation’s Financial Sector 

Is Centered in New York 

Contraction in the nation’s financial sector is magnified 

in New York State and particularly New York City— 

the nation’s financial center (see text box at right for 

the effects of financial sector contraction on other 

Northeast economies). Statewide, the contribution of 

financial jobs to total wages has increased in recent 

years. At its peak in 2007, wages from financial jobs 

accounted for 25 percent of statewide wages, considerably more than their contribution at the national level 

(see Chart 1). 

In New York City, the economy ebbs and flows with 

fluctuations in the financial sector because the city has 

a large share of financial jobs. Indeed, the proportion of 

financial jobs to total employment in New York City is 

Contraction in the Financial 

Sector Is Weighing on Other 

Northeast Economies 

Financial employment is a major economic driver in 

other parts of the Northeast, including some cities in 

New England and metropolitan areas along the East 

Coast. Like New York, these markets are vulnerable 

to contraction in financial employment. 

New Jersey, particularly the metropolitan areas 

around New York City, has a slightly higher concentration of financial employment than the nation. In 

fourth quarter 2008, New Jersey lost 12,500 financial 

jobs, about 4.6 percent, from one year ago. This rate 

of decline was nearly double the national rate and was 

the largest percentage decline for the state since first 

quarter 1991. 

Boston, Massachusetts, and Hartford, Connecticut, 

also had high concentrations of financial sector 

employment at 7.2 percent and 11.7 percent, respectively, at year-end 2008. Employment in Boston’s 

financial sector fell by 4.0 percent in fourth quarter 

2008, the largest decline since fourth quarter 1991. 

Much of the decline was centered in commercial 

banks and securities firms, although real estate employment also reported job losses. Employment in Hartford’s financial sector also continues to contract. 

During the fourth quarter, the area’s financial employment declined 0.8 percent from one year ago. 

The financial sector in Charlotte, North Carolina, is 

also contracting. This sector, which accounted for 8.5 

percent of the metro area’s total jobs in fourth quarter 

2008 and 40.5 percent of the area’s economic output in 

2006 (the most recent data available), has been losing 

jobs since mid-2007. The rate of decline rose during 

2008, reaching 5.4 percent in the fourth quarter. 

Wilmington, Delaware, also shed financial sector jobs 

in the fourth quarter, although the rate of loss was less 

than that of the nation. Employment associated with 

credit card banking, which has a substantial presence 

in Wilmington, has been relatively steady over the 

past year. 

1 Bureau of Labor Statistics. 

FDIC QUARTERLY 33 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chart 1 Chart 2 

5% 

10% 

15% 

20% 

25% 

30% 

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 

Source: Bureau of Economic Analysis (Haver Analytics). 

Note: Financial wages are those earned in the banking, insurance, real estate, and 

securities industries. 

Data are through fourth quarter 2008 (most recent available) and are seasonally adjusted 

at annual rates. 

New York State 

United States 

Ratio of Financial Wages to Total Wages 

New York’s Economy Has Grown More Dependent on 

Financial Wages 

Recessions 

-20% 

-15% 

-10% 

-5% 

0% 

5% 

10% 

15% 

20% 

00 01 02 03 04 05 06 07 08 

Source: Bureau of Labor Statistics (Haver Analytics). 

Note: Data are through fourth quarter 2008 and are not seasonally adjusted. 

Securities Industry - New York City 

Securities Industry - Rest of the U.S. 

Employment Losses in the Securities Industry 

Are Centered in New York City 

Year-over-Year Change 

12 percent, or double the national share. Perhaps more 

important, wages in the securities industry, a key 

component of the city’s financial sector, account for a 

disproportionate share of total wages paid in the city. 

Wages in the securities industry accounted for more 

than 25 percent of total wages paid in the city, but the 

industry itself accounted for only 5 percent of total jobs. 

Securities industry wages increased almost four times 

faster than wages in the rest of New York City between 

2003 and 2007.2 

As the disruption in financial markets persisted during 

2008, job losses in New York City’s financial sector 

continued to mount. The securities industry was 

particularly hard hit. During fourth quarter 2008, the 

city’s securities industry lost more than 9,000 jobs, a 

4.8 percent decline compared with one year earlier and 

the worst percentage decline since second quarter 2003 

(see Chart 2). 

Job losses in the city’s securities industry will be amplified across other sectors of the economy. According to 

the New York State Comptroller, for every new job in 

the securities industry, three additional jobs are created 

in New York City and its suburbs. Conversely, losses in 

the securities industry will have a ripple effect across 

the area’s economy. Estimates suggest that during the 

2001 recession, this sector directly and indirectly 

2 New York State Comptroller, The Securities Industry in New York 

City, November 2008. Data are as of 2007. The securities industry—a 

component of the broader financial industry—is composed of jobs 

classified as securities and commodities brokers, portfolio managers, 

and investment advisors. This sector accounted for more than onethird of financial jobs in New York City in fourth quarter 2008. 

contributed to more than half of the private sector jobs 

lost in the city.3 

In addition, the sharp downturn in New York’s financial sector is negatively affecting state and local tax 

budgets. In fiscal year 2007–2008, tax collections from 

the securities industry accounted for almost 20 percent 

of total tax collections in New York State. The New 

York State Comptroller estimated that state tax collections from the securities industry, including business 

and personal filings, could drop by 38 percent in fiscal 

2010.4 

Job losses and reduced compensation in New York 

City’s financial sector are also having a detrimental 

effect across real estate markets. Home prices in the 

New York City metro area declined by 9.2 percent on 

average in 2008. This year-over-year decline in home 

prices was the largest in the 22-year history of these 

data, slightly exceeding the previous high recorded in 

March 1991.5 Still, New York City home prices fell 

much less during 2008 than in some other major cities, 

which saw double-digit declines. 

New York City’s commercial real estate market is also 

showing signs of weakness, particularly in Manhattan. 

3 Ibid. 

4 Ibid. 

5 S&P/Case-Shiller Home Price Index. This index defines the New York 

metro area as the New York City metropolitan statistical area plus 

other counties in New York State, Connecticut, New Jersey, and Pennsylvania that are within commuting distance of New York City. 

Declines are calculated based on the year-over-year percentage change 

in home prices. 

FDIC QUARTERLY 34 2009, VOLUME 3, NO. 1 
 

2009 Economic Landscape 

The financial sector occupies as much as 30 percent of 

Manhattan’s office space.6

 With intensifying pressure in 

the financial sector, office rents are dropping. The area’s 

vacancy rates are also on the rise but remained below 

the national average at year-end 2008.7 However, a sizeable amount of office space is estimated to return to the 

market, which may further pressure rental and vacancy 

rates. Some estimates suggest that the percentage of 

available office space in Manhattan may soon rise to its 

highest level since 1996.8 

New York City’s Financial Industry Has Been 

Resilient in Past Cycles 

Forecasts suggest that job losses in New York City’s 

financial industry will get worse before they get better. 

A March 2009 report by the New York City Independent Budget Office states that the city could lose 

51,000 securities industry jobs through third quarter 

2011, which would be a decline of about 27 percent 

from the 2008 peak.9

 Job losses of this magnitude would 

6

 Grubb and Ellis Research, Office Market Trends: New York City, 

second quarter 2008. 

7

 Torto Wheaton Research, fourth quarter 2008. 

8

 David M. Levitt, “Banks Vacate Towers Pushing Empty NYC Space to 

Record,” Bloomberg.com, February 26, 2009, http://www.bloomberg. 

com/apps/news?pid=newsarchive&sid=aSYcApYsh.Dw (accessed on 

March 2, 2009). 

9

 New York City Independent Budget Office, Analysis of the Mayor’s 

Preliminary Budget for 2010: IBO’s Reestimate of the Mayor’s Preliminary Budget for 2010 and the Financial Plan through 2013, March 

2009. 

exceed the number of securities jobs lost in the city 

during either the 1990–91 or 2001 recession.10 In addition, job losses in New York City’s overall financial 

sector are projected to reach 89,800.11 According to the 

March report, job growth in the financial sector is forecast to resume in 2012 and 2013, but at a slow pace. 

Although the near-term outlook for the financial 

services industry in New York City remains tenuous, 

the city’s financial sector should recover as it has 

following every recession since World War II. During 

its long history, New York’s financial sector has proven 

resilient and resurgent following periods of adversity. 

Authors: Robert M. DiChiara, Regional Manager 

Kathy R. Kalser, Assistant Director 

The authors would like to thank Norman Gertner, Regional 

Economist, Division of Insurance and Research, for his 

contributions to this article. 

10 FDIC analysis, quarterly data from the Bureau of Labor Statistics, 

and annual data from the Securities Industry and Financial Markets 

Association. 

11 David Belkin (senior economist, New York City Independent Budget 

Office), in discussion with FDIC staff, April 2009, regarding the Analysis of the Mayor’s Preliminary Budget for 2010 dated March 2009. 

FDIC QUARTERLY 35 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The 2009 Economic Landscape 

How Long Can Energy and Agriculture Boost the 

Nation’s Midsection? 

The energy and agricultural sectors are important 

economic drivers for states in the center of the country. 

Extending from the oil patch of Texas, Louisiana, 

Arkansas, and Oklahoma, northward through the 

plains states and eastward to the Corn Belt, the states 

in the nation’s midsection are not only rich in land 

and other natural resources, but also tend to rely heavily on these resources as drivers of economic activity. 

Booming commodity prices during the middle years of 

this decade have helped buoy the economies of these 

states, even while the rest of the country was moving 

toward recession. However, recent declines in many 

of these same commodity prices raise concerns about 

wider economic repercussions for these regions as the 

U.S. recession continues. This article describes how 

commodity industries drive the economies of the 

nation’s midsection and evaluates their outlook after 

the commodity price boom. 

Energy and Agriculture Regions Do Not Always 

Follow the U.S. Business Cycle 

Energy prices can have a profound effect on the 

national economy. In fact, since World War II, nearly 

all recessions were preceded by oil price shocks. These 

shocks adversely affect businesses and consumers, causing economic growth to slow. For example, around the 

time of the Iranian revolution in 1979, oil prices 

doubled within a year, contributing to the 1980 and 

1981–82 national recessions. Similarly, the 1990–91 

recession was precipitated, in part, by another doubling 

of oil prices in the months following the invasion of 

Kuwait and leading up to the first Gulf War. 

Unlike the rest of the nation, oil-patch states tend to 

benefit from higher oil prices. In the early 1980s and 

early 1990s, higher oil prices helped these states grow 

even during national recessions. However, when prices 

collapsed during the mid-1980s, oil-patch states fell into 

their own regional recession. The lingering effects of 

the “oil bust” resulted in falling real incomes in the 

region. The subsequent loss of jobs, income, and output 

contributed to house price declines that created turmoil 

in residential real estate markets and led to hundreds of 

bank failures.1 

Like the energy sector, agriculture does not move in 

perfect tandem with the national economy, though 

influences from U.S. and global trends can be strong. 

For example, global economic conditions affect the 

demand for food, which helps drive agricultural 

commodity prices. In addition, large interest rate movements can have a profound effect on farmland prices. 

For example, in the early 1970s, strong demand for farm 

commodities caused farm incomes to rise rapidly. When 

combined with negative real interest rates, this favorable environment caused sharp increases in the value of 

farmland. In the late 1970s, however, soaring interest 

rates and changing conditions in global supply and 

demand brought the boom period to an end. The result 

was a significant decline in real farm incomes, a rapid 

and long-lasting decline in farmland values, and 

hundreds of farm bank failures in the 1980s.2 

Energy and Agriculture Boomed through 

Mid-Year 2008 

Current energy and agricultural conditions have, for 

the most part, played out independently of national 

economic trends. Despite the weakening U.S. economy, 

the health of the energy and agricultural industries has 

been very strong over the past several years. Crude oil 

prices quadrupled in dollar terms between 2003 and 

mid-2008, setting the trend for overall energy prices. 

This price inflation was an economic boon to oil-patch 

states.3 During the five-year period ending in second 

quarter 2008, inflation-adjusted economic growth in 

these four states grew at an annualized rate of 3.6 percent 

1 FDIC, History of the Eighties—Lessons for the Future (Washington, 

DC: FDIC, 1997): 291–336. 

2 Ibid., 259–290. 

3 While the energy discussion and analysis in this article focus on oilpatch states, it should be noted that Wyoming and Montana have 

characteristics similar to this region. Both states rely considerably on 

energy extraction and experienced employment growth above the 

national average during the period of high oil prices. Wyoming, in fact, 

had one of the most vibrant economies in the nation during that time. 

FDIC QUARTERLY 36 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2009 Economic Landscape 

Chart 1 Map 1 

60 

70 

80 

90 

100 

110 

120 

130 

140 

150 

160 

Jan-80 Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 

Source: U.S. Department of Agriculture 

Note: “Prices received by farmers” is a composite index of leading crop and livestock 

prices produced in the United States. The prices of these commodities are “farm-gate” or 

wholesale prices. 

Agricultural Prices Rose Steadily from Late 2002 through 

Mid-2008 but Have Settled Somewhat since Then 

Prices Received by Farmers 

Index: 1990-92=100 

compared with 2.8 percent for the nation.4 The biggest 

impact, however, was on real personal income, which 

grew at an annualized rate of 4.6 percent in the four oilpatch states compared with only 2.9 percent nationally. 

The region’s oil and gas industry not only supports a 

large number of high-paying jobs in the mining industry 

itself, but also has strong, indirect multiplier effects on 

job growth in professional and business services, wholesale and retail trade, and financial activities. 

The agricultural sector also has performed quite well 

over the past few years. A number of factors, including 

global economic growth and a weaker dollar, contributed to an extended period of rising prices for a broad 

array of agricultural products. Prices for these commodities generally began to rise in late 2002, and many 

reached new highs in the past two years before moderating in the second half of 2008 (see Chart 1). High 

commodity prices have led to record net farm incomes 

in three of the past four years and also have contributed 

to significant increases in farmland values.5 

Ethanol production has also played an important role in 

both agricultural and energy markets in recent years. As 

the price of crude oil increased from less than $26 per 

barrel in 2001 to more than $133 per barrel in July 

2008, ethanol became a viable and very profitable alter4 Growth rates used in this paragraph were calculated by the FDIC 

using data from the U.S. Bureau of Economic Analysis and Moody’s 

Economy.com. 5 For a detailed farmland analysis, see Richard D. Cofer, Jeffrey W. 

Walser, and Troy D. Osborne, “Do Record Farmland Prices Portend 

Another Steep Downturn for Agriculture and Farm Banks?” FDIC Quarterly 2, no. 4 (2008): 25. 

The Center of the Nation Has Avoided Significant Job Losses 

in This Recession 

Employment Growth, Percent Change 

December 2007 - January 2009 

>0% 

0% to -2% 

-2% to -4% Source: Bureau of Labor Statistics U.S. Average: -2.5% 

(Haver Analytics). <-4% 

native. Strong profitability, government mandates on 

renewable fuels that supported demand, and tariffs and 

subsidies that supported prices all led to considerable 

increases in ethanol output.6 Indeed, annual ethanol 

output in 2008 had grown by more than five times the 

levels of 2000.7 The growth in ethanol production, in 

turn, increased the demand for corn, the primary input 

in the production process, to a point where ethanol 

production is projected to use nearly 30 percent of the 

2008 crop.8 As farmers planted more corn to meet the 

higher demand from ethanol plants, they reduced plantings of soybeans, which contributed to higher prices for 

this commodity as well. The result was record incomes 

for farmers and double-digit average annual increases in 

farmland values in corn- and soybean-producing states 

between 2003 and 2007. 

The health of the energy and agricultural sectors, 

combined with relatively stable and affordable housing 

markets in the central United States, has caused the 

national recession to largely bypass the nation’s midsection so far (see Map 1). The energy-rich oil patch was 

6 Don Hofstrand, “Corn-Ethanol Profitability,” AgMRC Renewable 

Energy Newsletter, Agricultural Marketing Resource Center, November/ 

December 2008; and Bruce A. Babcock, Center for Agricultural and 

Rural Development at Iowa State University, statement before the U.S. 

Senate Committee on Homeland Security and Government Affairs, 

Hearing on Fuel Subsidies and Impact on Food Prices, 110th Cong., 

2nd sess., May 7, 2008. 

7 Renewable Fuels Association, Ethanol Industry Outlook 2009. 8 “World Agricultural Supply and Demand Estimates,” U.S. Department 

of Agriculture, January 12, 2009. 

FDIC QUARTERLY 37 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

the only region that added jobs after the national recession began in December 2007, and Farm Belt states 

reported small job losses relative to the rest of the 

nation. 

The Outlook for Energy and Agriculture Has Dimmed 

Though the energy and agricultural sectors have 

provided insulation against recession for the central 

United States, these sectors have weakened considerably in recent months. The Energy Information 

Administration’s (EIA) short-term energy outlook is 

projecting a long, severe global economic slowdown 

that will lead to further reductions in global energy 

demand and additional declines in crude oil and other 

energy prices.9 The EIA projects oil prices in 2009 to 

average between $40 and $50 per barrel on a quarterly 

basis, but prices could plunge below $30.10 Falling 

energy prices are now putting pressure on oil-patch 

employment growth (see Chart 2). This trend alone 

should not cause a repeat of the 1980s oil bust, as the 

region’s economy has become increasingly diverse since 

that time, somewhat muting the impact of oil price 

movements.11 However, when falling energy prices are 

combined with a severe national recession and a global 

financial crisis, a significant regional downturn cannot 

be ruled out. 

Declining agricultural commodity prices are also of 

concern. A severe downward price cycle in agricultural 

commodities and land values that causes farm incomes 

and land values to fall could result in prolonged 

economic weakness among farm states. Aggravating the 

situation could be a rapid and significant consolidation 

in the ethanol industry, which was already showing 

weakness in mid-2008 because of overcapacity and low 

margins caused by high corn prices. Some of the largest 

ethanol producers delayed the startup of ethanol plants 

last year, and some analysts predicted that many small 

and medium-sized plants would shut down.12 Deteriorating conditions in the ethanol industry will not only 

9 Energy Information Administration, Short-Term Energy Outlook, 

December 2008. 

10 Several leading analysts have discussed the possibility of oil prices 

falling below $30 per barrel in 2009. One notable example is “Oil May 

Fall Below $25 Next Year, Merrill Lynch Says,” Bloomberg.com, 

December 4, 2008. 

11 Stephen P.A. Brown and Mine K. Yucel, “Energy Prices and State 

Economic Performance,” Federal Reserve Bank of Dallas, Economic 

Review, second quarter 1995. 12 “Too Much Ethanol?” Farm Industry News, November 1, 2008. 

Chart 2 

$0 

$20 

$40 

$60 

$80 

$100 

$120 

$140 

$160 

1995 1997 1999 2001 2003 2005 2007 2009 

-2% 

-1% 

0% 

1% 

2% 

3% 

4% 

5% 

The Recent Downturn in Oil Prices Appears to Spell the 

End of the Growth Period in Oil-Patch Employment 

Sources: Wall Street Journal; Bureau of Labor Statistics (Haver Analytics) FDIC. 

Year-over-Year Employment Growth, 

Oil-Patch States 

Dollars per Barrel (2008 dollars) 

weigh on crop prices, but are also likely to affect farmers 

and rural communities who have come to rely on the 

industry for high-paying jobs. 

Though the economies in the nation’s midsection 

continue to perform well relative to the nation, the 

downward trends in the energy and agricultural sectors 

may weigh on the region in the near future. Moderating 

commodity prices are likely to put a damper on the 

area’s economic conditions, and the region may not 

only cease to be a source of economic strength but also 

could enter recession at a much later stage than the 

nation. 

Authors: Adrian R. Sanchez, Regional Economist 

John M. Anderlik, Assistant Director 

FDIC QUARTERLY 38 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Feature Article: 

Alternative Financial Services: A Primer 

Introduction 

Alternative financial services (AFS) is a term often 

used to describe the array of financial services offered by 

providers that operate outside of federally insured banks 

and thrifts (hereafter referred to as “banks”). Checkcashing outlets, money transmitters, car title lenders, 

payday loan stores, pawnshops, and rent-to-own stores 

are all considered AFS providers. However, many of the 

products and services they provide are not “alternative”; 

rather, they are the same as or similar to those offered 

by banks. AFS also sometimes refers to financial products delivered outside brick-and-mortar bank branches 

or storefronts through alternative channels, such as the 

Internet, financial services kiosks, and mobile phones. 

This article provides an overview of AFS and a description of the key products and services in this sector. It is 

intended as a primer for banks and others who are 

interested in understanding the competitive landscape 

in the financial services industry and exploring suitable 

opportunities in the AFS sector. Because of the large 

size of the AFS sector, some banks use less traditional 

products, services, and distribution methods to target 

new customers, particularly among unbanked and 

underbanked households.1 

AFS Transaction Volume 

Data on the volume of AFS transactions are incomplete 

because of the lack of a clear definition of the term AFS 

and because this sector is highly fractured among many 

different providers that are often small or privately held. 

As shown in Chart 1, the transaction volume is estimated at more than $320 billion annually. This figure is 

likely understated, as estimates are not current or available for various AFS segments. 

1 See “FDIC Survey of Banks’ Efforts to Serve the Unbanked and 

Underbanked, Executive Summary of Findings and Recommendations” 

(issued February 5, 2009), which describes the extent to which 

insured institutions reach out to unbanked and underbanked households, the challenges that banks face in serving these households, and 

innovative products and services that banks have used to overcome 

these challenges. The Executive Summary defines “unbanked” as 

people or families who rarely, if ever, held an account at an insured 

institution. “Underbanked” refers to those with accounts who also rely 

on nonbank AFS providers for financial products and services, often at 

a high cost. The Executive Summary can be found at http://www.fdic. 

gov/news/news/press/2009/pr09015.html. 

Chart 1 

The Dollar Volume of AFS Transactions 

Totals More Than $320 Billion Annually 

Buy-Here-Pay-Here Check Cashing, 

Auto Loans, 

$80 billion 

Money Orders, 

$17 billion 

Rent-to-Own 

Transactions, Payday Loans, $7 billion $48 billion 

Remittances, 

$46 billion 

Open Loop 

$58 billion 

Refund Prepaid Cards, Anticipation Loans, $39 billion $26 billion 

Sources: FiSCA, World Bank, Mercator Advisory Group, U.S. Treasury, Association of 

Progressive Rental Organizations, and Leedom and Associates LLC. 

AFS comprise two general categories of products and 

services: those that are transactional and those that are 

related to credit. The key products and services offered 

in these categories are described below, along with 

examples of the types of companies, including banks, 

that provide them. 

Transaction Products and Services 

Check Cashing, Money Orders, and Bill Payment 

Financial Service Centers of America (FiSCA) is the 

national trade association that represents nonbank 

financial service centers. According to FiSCA, more 

than 13,000 nonbank financial services companies 

operate nationwide, providing a variety of financial 

services, primarily check cashing. FiSCA estimates that 

financial service centers process more than 170 million 

checks per year, with a face value of more than $58 

billion. FiSCA also estimates that its members sell 

money orders with a face value of $17.6 billion per 

year, at an average cost of 64 cents each, and they 

process more than 57 million bill payment transactions, 

at an average cost of 86 cents per transaction.2 

2 FiSCA data points were obtained from the trade association’s Web 

site at http://www.fisca.org (accessed on September 12, 2008). 

FDIC QUARTERLY 39 2009, VOLUME 3, NO. 1 
Table 1 

Write-Offs Related to Check-Cashing 

Operations Tend to Be Low 

2008 2007 2006 

Average face value per check $442.30 $420.96 $408.87 

Average fee per check $13.77 $14.51 $14.13 

Average fee as a percentage 3.11% 3.45% 3.46% 

of face value 

Net write-offs as a percentage 0.31% 0.29% 0.26% 

of checks cashed 

Sources: Dollar Financial Corp. and Securities and Exchange Commission (SEC) 10(k) 

dated August 29, 2008. 

Check-cashing firms vary widely in size from very small 

mom-and-pop outlets to publicly traded companies. 

Ace Cash Express, with about 1,700 stores, is the largest 

check-cashing company.3 Dollar Financial Corporation 

is the largest publicly traded check-cashing company, 

with about 470 stores in the United States. In addition 

to check cashing, these companies and many other 

check cashers provide other products and services, 

including money orders, automated teller machine 

(ATM) access, electronic bill payment, payday loans or 

pawnbroking services, and electronic tax preparation 

and filing. Check cashers also sometimes sell public 

transit passes, postage stamps, and phone cards; issue 

motor vehicle license plates and titles; process parking 

tickets; and provide photocopying and faxing services. 

Check cashers typically charge 1 to 4 percent of the 

face value of the check, depending on the check issuer 

and subject to limitations of state law. About two-thirds 

of checks cashed at nonbank outlets are payroll checks; 

another 18 percent are state or federal benefits checks.4 

Table 1 provides data for Dollar Financial Corporation’s 

U.S. check-cashing operation to illustrate the cost of an 

average transaction. As the table shows, net write-offs, 

while increasing, remain less than 1 percent of the face 

value of checks cashed. This example suggests that, 

given the generally low-risk nature of most checks 

cashed, losses tend to be low. 

Retailers are increasingly recognizing the revenuegenerating potential of check cashing and other 

transaction-based financial services. For instance, the 

world’s largest retailer, Wal-Mart, opened its first 

3

 Examples of companies and banks used in this article are for illustration only. The FDIC does not endorse specific companies, products, or 

services. 

4

 Jennifer Tescher, Edna Sawady, and Stephen Kutner, The Power of 

Experience in Understanding the Underbanked Market, Center for 

Financial Services Innovation, July 2007. 

MoneyCenter in 2002; in fiscal 2008, it cashed 45 

million paychecks with a face value of $17 billion.5 

Wal-Mart currently processes more than 2 million 

money order, remittance, and check-cashing transactions per week, and the volume of these services grew 

more than 40 percent in the retailer’s 2008 fiscal year.6 

Convenience store chain 7-Eleven Inc. also offers check 

cashing, money orders, bill pay, and money transfer 

services in select stores through approximately 2,000 

self-service V-Com kiosks.7 

A number of banks also offer fee-based check-cashing 

services, frequently with the goal of migrating checkcashing customers to more traditional bank products. 

For example, KeyBank in Cleveland, Ohio, has been 

experimenting with fee-based check cashing and other 

transactional services under a program called KeyBank 

Plus. As of early 2008, KeyBank had cashed checks with 

a face value of more than $37 million and incurred only 

$10,000 in write-offs. KeyBank expanded the program 

from 5 branches in one market to 200 branches in six 

markets, and opened checking accounts for more than 

17,000 check-cashing clients.8

 Also, the First National 

Bank of Syracuse, Kansas, operates an innovative 

branch in the world’s largest beef-processing plant and, 

among other things, cashes close to 400 payroll checks 

a week through an ATM (see text box on page 42). 

Remittances

According to estimates from the World Bank, recorded 

remittances of money from one country to another 

totaled $355 billion in 2007, up from $307 billion in 

2006. Remittances are projected to top $375 billion in 

2008.9

 The United States is the leading remittancesending country. During 2007, U.S. remittances to 

5

 Digital Transactions, “Wal-Mart Exec Happy with Money Card, but 

Stays Mum on Details,” March 5, 2008. 

6

 Ibid. 

7

 V-Com kiosks are advanced-functionality automated teller machines 

(ATMs) that are owned and operated by Cardtronics Inc. Cardtronics 

Inc. has not publicly disclosed the dollar volume of transactions 

conducted through V-Com kiosks. 

8

 Information on KeyBank Plus was derived from a March 19, 2008, 

presentation by Michael Griffin, senior vice president, Key Bank, Cleveland, Ohio, to the FDIC’s Advisory Committee on Economic Inclusion. 

Meeting minutes are available at http://www.fdic.gov/about/comein/ 

minutesMarch1908.pdf. 9 See data spreadsheet for Dilip Ratha, Sanket Mohapatra, K. M. 

Vijayalakshmi, and Zhimei Xu, “Outlook for Remittance Flows, 

2008–2010,” Migration and Development Brief 8, World Bank, November 11, 

2008, http://siteresources.worldbank.org/INTPROSPECTS/Resources/

334934-1110315015165/RemittancesData_Nov08(Release).xls. 

FDIC QUARTERLY 40 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative Financial Services 

Chart 2 Chart 3 

12.9 13.6 14.4 

15.4 16.3 

17.3 

18.3 

Projections Indicate That Remittance Fees 

Will Top $18 Billion by 2010 

Billions of Dollars 

Source: AITE Group, “Competing in Money Transfers: A Market Overview,” news release, 

March 26, 2007. 

0 

2 

4 

6 

8 

10 

12 

14 

16 

18 

20 

2004 2005 2006 2007 2008 2009 2010 

Estimates Indicate That Only 13 Percent of 

Remittance Activity Is Conducted through 

Mainstream Financial Institutions 

Percent of Remittance Activity 

80 

70 

60 

50 

40 

30 

20 

10 

0 

70 

11 10 7 

2 

Wire Transfer Bank By Hand Mail Credit Union 

Source: Roberto Suro, “Remittance Senders and Receivers: Tracking the Transnational 

Channels,” Multilateral Investment Fund and Pew Hispanic Center, November 2003. 

other countries totaled $46 billion.10 However, activity 

has slowed recently as a result of the weakening economy. In a 2008 poll, the Inter-American Development 

Bank reported that 50 percent of Latin American adults 

in the United States regularly sent money home, 

compared with 73 percent in 2006.11 

The World Bank projects a slowdown in the growth of 

global remittances in response to the overall economic 

malaise but explains that remittances tend to be more 

resilient than other types of inflows, such as private 

capital or official aid.12 A market research firm, AITE 

Group, projects that global remittance flows will reach 

$500 billion by the year 2010 and remittance fees will 

top $18 billion (see Chart 2). 

International remittance activity is conducted primarily 

outside of banks (see Chart 3). The largest provider of 

international remittance services is Western Union 

Inc., with 335,000 agent locations in more than 200 

countries. In 2007, Western Union processed more 

than 167 million customer-to-customer transactions 

with a face value of $64 billion. Of that amount, about 

$57 billion represented international transfers.13 Western Union uses its Gold Card product to improve the 

efficiency of the remittance process. This card stores 

customer information, eliminating the need for forms 

10 See data spreadsheet for Ratha et al., “Outlook for Remittance 

Flows, 2008–2010,” http://siteresources.worldbank.org/ 

INTPROSPECTS/Resources/334934-1110315015165/ 

RemittancesData_Nov08(Release).xls. 11 Inter-American Development Bank, “Survey of Latin American Immigrants in the United States,” April 30, 2008, 

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=1417613. 12 Ratha et al., “Outlook for Remittance Flows, 2008–2010.” 

13 Western Union Inc., 2007 SEC Form 10(k), February 2008. 

and reducing transaction times. The Gold Card is also a 

loyalty mechanism, enabling consumers to earn points 

that are redeemable for goods and services.14 

Most banks offer wire transfer and automated clearing 

house (ACH) services as part of their normal course of 

business for account customers. However, others have 

specifically targeted international remittance business as 

an opportunity to generate fee revenue and to cross-sell 

accounts and other products. For example, Wells Fargo’s 

InterCuenta Express facilitates remittances between the 

United States and Mexico. To participate, customers 

must open a Wells Fargo account with at least $10 and 

must send money to a bank account in Mexico. Within 

the first seven months of offering InterCuenta Express, 

Wells Fargo opened 20,000 new accounts totaling $50 

million.15 Wells Fargo has also instituted a nonaccount, 

cash-to-cash remittance product, ExpressSend, targeted 

to certain parts of the world.16 

Other options are available for smaller banks that 

provide remittance services through cooperatives. For 

example, the Federal Reserve System and Banco de 

México, the central bank of Mexico, have established 

Directo a México, an account-to-account service that 

14 Information regarding Western Union’s Gold Card program was 

derived from the company Web site at http://www.westernunion.com 

(accessed on September 26, 2008). 

15 Information regarding Wells Fargo’s InterCuenta Express was 

derived from 2005 program information contained in a report by 

Appleseed, “Banking Immigrant Communities, A Toolkit for Banks 

and Credit Unions,” http://www.appleseednetwork.org/Publications/ 

ReportsToolkits/BankingImmigrantCommunities/tabid/96/Default.aspx. 16 Information regarding Wells Fargo’s ExpressSend product was 

derived from the company Web site, http://www.wellsfargo.com 

(accessed February 4, 2009). 

FDIC QUARTERLY 41 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

First National Bank of Syracuse’s Innovative Branch 

in the World’s Largest Beef-Processing Planta 

In first quarter 2008, the First National Bank of Syracuse, 

Kansas, acquired an innovative branch in the world’s 

largest beef-processing plant, operated by Tyson Foods 

Inc. The plant processes about 6,000 cattle a day and is 

located close to Garden City, Kansas. Garden City is an 

agribusiness community that has a large Latino immigrant population. The Tyson plant is the largest employer 

in the area, with approximately 3,000 workers, or roughly 

10 percent of the population of Garden City. 

The bank branch in the plant opened on July 1, 2002, and 

within six months had opened 200 new accounts and had 

started making consumer and mortgage loans. Tyson has 

a Donna Tanner (vice president, First National Bank of Syracuse, 

Kansas) and Rosa Rivera (branch manager, First National Bank of 

Syracuse, Kansas), discussion with the authors, March 26, 2008. 

uses the ACH payment channel for Mexican remittances. Since almost every bank routinely uses ACH, 

Directo a México allows banks to establish an international remittance program with no additional setup 

costs.17 Small banks interested in providing remittance 

services can also purchase a ready-to-use turnkey remittance product such as Citigroup’s QuikRemit. Citi 

launched QuikRemit in early 2008; the product is operational in more than 90 countries.18 

Prepaid Cards 

Consumer and issuer acceptance of stored value 

(prepaid) cards as a replacement for cash and checks 

has grown tremendously in recent years. The market for 

prepaid cards, as measured by dollars loaded, has nearly 

doubled in the past four years (see Chart 4). 

Prepaid cards can be “closed loop” or “open loop,” 

which refers to how the cards can be redeemed. In 

general, closed loop cards can be redeemed only at locations belonging to the issuer or other limited locations 

and are considered a way to facilitate payments rather 

than generate fees. As shown in Chart 4, $179.6 billion 

was loaded onto closed loop cards in 2007. 

17 Information regarding Directo a México was derived from the central 

bank’s Web site at http://www.directoamexico.com/en/infobancos.html 

(accessed on February 4, 2009). 

18 Citigroup Inc., “Citi Launches New QuikRemit Service, Follows 

Purchase of PayQuick, Aims to Grow Payment Services,” news 

release, February 8, 2008. 

been an active partner with the branch from the start. All 

new employees at the plant receive financial education as 

part of their paid new employee orientation. The orientation covers the basics of banking, including opening a bank 

account, establishing credit, and purchasing a home. In 

addition, bank employees conduct weekly financial education presentations in both English and Spanish in the 

plant’s cafeteria. Tyson believes that the branch’s presence 

and the bank’s commitment to financial education have 

been important factors in reducing employee turnover. 

A check-cashing ATM in the plant cashes about 400 

Tyson payroll checks a week for a fee of about $2.00 each. 

Close to one-third of Tyson’s employees currently have 

accounts with First National, and 650 have enrolled in 

direct deposit. Outstanding consumer and mortgage loans 

at the branch total $6.4 million. 

Chart 4 

The Amount of Money Loaded onto Prepaid Cards 

Has Grown Rapidly in Recent Years 

Billions of Dollars 

250 

200 

150 

100 

50 

0 

Closed Loop Prepaid Cards 

Open Loop Prepaid Cards 

$165 

$147 

$120 

$198 

$218 

2003 2004 2005 2006 2007 

Source: Tim Sloane, “5th Annual Network Branded Market Assessment: Measuring the 

Phenomenal Growth of the Open Prepaid Industry,” Mercator Advisory Group, August 2008. 

The most common type of closed loop prepaid card is 

the retail store gift card. In 2007, about $66.2 billion 

was loaded onto these cards, which are redeemable only 

at the issuer’s store or Web site.19 Government agencies 

are also prominent issuers of closed loop prepaid cards, 

loading $61.9 billion of benefits such as food stamps 

and Temporary Assistance for Needy Families onto 

prepaid cards in 2007. These cards are typically redeemable in multiple locations, such as supermarkets, gas 

stations, and pharmacies. Given their limited uses and 

options for fee generation, closed loop prepaid cards are 

19 In the case of a bankruptcy of the issuing retailer, holders of retail 

gift cards may lose all or a portion of the value of their cards. 

FDIC QUARTERLY 42 2009, VOLUME 3, NO. 1 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative Financial Services 

not considered to be alternative financial services for 

the purposes of this article. 

Conversely, open loop cards can be redeemed at numerous locations and typically create opportunities for issuers to generate fee-based income. While the open loop 

segment, with $38.7 billion loaded in 2007, is much 

smaller than the closed loop segment, it grew 44.4 

percent in 2007 compared with 4.9 percent for the 

closed loop segment. Open loop cards are also often 

referred to as “network branded” because the cards are 

issued with the Visa or MasterCard logo, allowing users 

to redeem funds anywhere those cards are accepted. 

Issuers of open loop cards can be banks or nonbank 

issuers who can gain access, for a fee, to the Visa or 

MasterCard payment systems through partnerships 

with banks. 

Payroll cards are the most prominent type of open loop 

card, with $15.9 billion loaded in 2007. Payroll cards 

are often used by companies with large numbers of 

lower wage or unbanked and underbanked employees as 

a replacement for direct deposit of paychecks. These 

cards are typically issued by banks that have a business 

relationship with the employer. 

Another common type of open loop card, with 

$5 billion loaded in 2007, is the general-purpose gift 

card, sold for a fee at retailers or through issuing banks. 

These include gift cards sold by American Express bank 

or by other banks that brand them with the Visa or 

MasterCard logo. Open loop gift cards are typically 

marketed to the general public as a more flexible alternative to retail store gift cards. General-purpose gift 

cards are sold in predetermined amounts but can usually 

be reloaded for a fee. 

Another type of open loop prepaid card is the financial 

services card, which, unlike the general-purpose gift 

card, is not sold in predetermined amounts. Rather, 

financial services cards are initially funded and reloaded 

in amounts determined by the cardholder. Another 

distinction between general-purpose gift cards and 

financial services cards is that financial services cards 

provide features beyond the ability to pay for goods and 

services, such as direct deposit, ATM access, and bill 

payment. Moreover, issuers of these cards are beginning 

to add more advanced features, such as linked savings 

accounts and credit lines. Given their multiple functions, financial services cards are often marketed as an 

alternative to a traditional checking account and are 

students, and recent immigrants. These cards typically 

carry monthly maintenance fees and various transaction 

fees that can be much higher than traditional accounts, 

but they offer consumers other benefits, such as immediate liquidity and the ability to control spending by 

limiting the amount of money on the card. 

The market for financial services cards doubled in 2007 

to $2.2 billion.20 Generally, these cards are sold at retailers or over the Internet and can be offered by banks or 

nonbanks. The Green Dot card, offered by nonbank 

Green Dot Corporation, is sold online or at retailers, 

such as grocery stores and pharmacies. Fees include a 

$9.95 activation fee, a $4.95 monthly maintenance fee, 

and a $2.50 ATM withdrawal fee.21 The Green Dot 

Corporation and other nonbank issuers of networkbranded cards gain access to the payment networks 

through agency relationships with banks; some banks 

also offer fee-based, prepaid financial services cards 

directly to consumers. For example, H&R Block Bank, 

an FDIC-insured subsidiary of tax preparer H&R Block 

Company Inc., offers the Emerald Card, which allows 

H&R Block’s tax preparation customers to load their 

refunds onto a prepaid debit card. H&R Block also 

offers a savings product tied to the Emerald Card and 

provides small-dollar loans for qualifying consumers.22 

Credit Products and Services 

Payday Lending 

Payday loans are short-term loans typically extended 

to consumers who have a checking account and can 

prove that they are employed. A check or debit authorization, which is postdated to the borrower’s next 

payday, provides security to the lender. Payday loans 

typically involve low balances, in the $300 to $500 

range, and have a two-week term coinciding with the 

consumer’s pay cycle. Most payday loans are made 

through stand-alone payday stores and multiline financial service centers. In 2006, these outlets generated 

20 Information regarding breakdowns of the types of prepaid cards was 

obtained from a report by Tim Sloane, “5th Annual Network Branded 

Market Assessment: Measuring the Phenomenal Growth of the Open 

Prepaid Industry,” Mercator Advisory Group, August 2008. 

21 Information regarding the Green Dot prepaid card was derived from 

the Green Dot Corporation Web site at http://www.greendotonline.com 

(accessed on February 4, 2009). 

22 Information regarding the Emerald Card prepaid card was derived 

from the H&R Block Corporation Inc. Web site at http://www.hrblock. 

frequently targeted to the unbanked or underbanked, com/bank/emerald_prepaid_mastercard/index.html (accessed on October 1, 2008). 

FDIC QUARTERLY 43 2009, VOLUME 3, NO. 1 
Table 2 

Small-Dollar Loan Pilot 3Q08: Summary of Loan Characteristics 

Number of Banks 

Reporting 

Loans Up to $1,000 

Loan Amount 22 

Term (months) 22 

Interest Rate 23 

Non-Zero Fees (dollars) 10 

Loans Between $1,000 and $2,500 

Loan Amount 15 

Term (months) 14 

Interest Rate 15 

Source: FDIC. 

Note: For purposes of determining whether there is a “bright line” for what constitutes a small-dollar loan, banks in the pilot were asked to report on loans above and below a $1,000 threshold. 

Average Minimum Maximum 

$677 $300 $1,000 

10 2 36 

17.11 9.65 31.78 

$29 $5 $70 

$1,726 $1,250 $2,200 

15 5 21 

15.18 9.16 30.13 

about $42 billion in payday loans, with Internet lenders 

adding another $5.65 billion.23 

QC Holdings Inc. is the largest publicly traded 

company primarily dealing in payday lending, with 532 

stores in 27 states as of year-end 2007. QC Holdings 

generated $183 million in payday loan fees on approximately $1.3 billion in loan volume in 2007. The 

company reports that the average loan for the past 

three years has been about $360, the term has been 

about 16 days, and the fee has been about $53. The 

annual percentage rate (APR) on these loans is approximately 400 percent. The average customer of QC 

Holdings receives six payday loans per year, and the 

company reports that gross losses approximated 7 

percent of total loan volume in 2007.24 

Payday loan customers are by definition also bank 

customers, because they must have a checking account 

to obtain a payday loan. However, many banks have 

not been involved in extending small-dollar loans on a 

large scale, primarily because of concerns about the 

costs and feasibility of such programs. 

To explore the feasibility of banks offering small-dollar 

loan programs, the FDIC selected 31 banks in February 

2008 to participate in its Small-Dollar Loan Pilot Program. 

23 Dennis Telzrow, “Payday Loan Industry,” Industry Report, Stephens 

Inc. Investment Bankers, March 27, 2007. A September 6, 2008, article by Bob Driehaus in the New York Times, entitled “Some States Set 

Caps to Control Payday Loans,” cites figures from Stephens Inc. indicating that the payday loan industry originated $50 billion in loans in 

2007. However, the FDIC has been unable to obtain the source data for 

the citation. 

24 Data regarding QC Holdings were obtained from the company’s 

2007 SEC Form 10(k), filed March 14, 2008. 

This program is a two-year case study designed to identify the most effective features of profitable, scalable, 

small-dollar loan business models for banks.25 During 

the first three quarters of the pilot, participating banks 

originated more than 11,700 loans with a principal 

balance of $13.5 million. For banks participating in the 

pilot, loan balances are typically higher, loan terms are 

longer, and interest rates are lower than loans offered by 

payday lenders (see Table 2). 

Bankers in the pilot program have indicated that they 

believe their small-dollar loan programs are an important way to serve their communities and create goodwill 

for their banks. Most of the bankers view small-dollar 

loan programs as a long-term strategy intended to 

attract customers and create relationships. Although 

many of the programs in the pilot are new, banks with 

established programs indicate that small-dollar loan 

customers have tended to migrate to other products, 

which contributes to profitable relationships over the 

long term. 

Refund Anticipation Loans 

Refund anticipation loans (RALs) are short-term loans, 

usually 7 to 14 days, offered by tax preparers as a 

purported way to speed the taxpayer’s receipt of a tax 

refund. They are secured by the expected refund, and 

the RAL fee is deducted from the refund. Generally, 

RALs are funded by banks through partnerships with 

tax preparers. For tax years 2005 to 2007, approximately 

25 More information is available at http://www.FDIC.gov/SmallDollar

Loans. Also, an article that describes the pilot program and summarizes first quarter results can be found at http://www.fdic.gov/bank/ 

analytical/quarterly/2008_vol23.html. 

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Alternative Financial Services 

10 million consumers received these loans.26 The price 

of a RAL for an average refund of $2,600 can range 

from $58 to $136.27 H&R Block Inc., the largest issuer 

of RALs, issued 3.9 million RALs in fiscal 2007, generating revenues of $189.8 million.28 

Although banks do not generally offer RALs directly to 

consumers, some banks participate in the Volunteer 

Income Tax Assistance (VITA) program operated by 

the Internal Revenue Service (IRS). This program 

offers free preparation of income tax returns for lowand moderate-income people. VITA sites are generally 

located at community centers, libraries, nonprofit organizations, and other convenient locations. VITA sites 

are staffed by volunteers, and most locations offer free 

electronic filing to help taxpayers receive their refunds 

quickly, in lieu of paying a fee to obtain a RAL. 

Bank employees can participate at VITA sites, offering 

to open checking or savings accounts for customers who 

can then use the accounts to electronically deposit 

their tax refund. Customers can also elect to split the 

refunds between accounts so they can more easily save a 

portion of the refund. The FDIC partners with the IRS 

in the VITA program and has issued reminders to the 

banking industry and others that banks involved in 

VITA programs may be eligible for favorable consideration under the Community Reinvestment Act (CRA) 

rules and also are likely to benefit from opportunities to 

open accounts and provide other banking-related 

services to underserved consumers.29 

Other Credit Products 

AFS providers offer a number of other credit products 

that banks typically do not provide. The following is a 

brief description of several products that are used when 

26 Treasury Inspector General for Tax Administration, “Many Taxpayers 

Who Obtain Refund Anticipation Loans Could Benefit from Free Tax 

Preparation Services,” Reference Number: 2008-40-170, August 29, 

2008, http://www.ustreas.gov/tigta/auditreports/2008reports/ 

200840170fr.pdf. 27 Chi Chi Wu and Jean Ann Fox, “Coming Down: Fewer Refund Anticipation Loans, Lower Prices from Some Providers, but Quickie Tax 

Refund Loans Still Burden the Working Poor,” National Consumer Law 

Center Inc. and Consumer Federation of America, March 2008. 

28 H&R Block, SEC Form 10(k), June 30, 2008. 

29 FDIC, “Volunteer Income Tax Assistance: Potential CRA and Business Opportunities May Start Before Tax Season,” Financial Institutions Letters, FIL-97-2007, November 7, 2007; “Volunteer Income Tax 

Assistance: A Reminder and Update About Potential CRA and Business 

Opportunities,” January 16, 2007; Financial Institution Letters, FIL-5-

2007, January 16, 2007; and FDIC, “FDIC Encourages Taxpayers to 

Take Advantage of IRS Programs and Save More of Their Refunds,” 

news release, January 16, 2007. 

consumers do not qualify for, or otherwise do not wish 

to use, credit from mainstream financial institutions: 

Rent-to-own (RTO): The RTO business sells big-ticket 

consumer products—such as furniture, computers, appliances, and electronics—under rental-purchase agreements that allow consumers to own the goods at the 

end of the agreement. According to the Association of 

Progressive Rental Organizations, a national trade group 

for RTO firms, the market had 3 million customers and 

a total transaction volume of $6.8 billion in 2007. For 

the past 12 years, revenues have grown at an average 

rate of about 3.5 percent per year.30 

Buy-here-pay-here (BHPH): BHPH is a form of auto 

financing, generally for credit-impaired borrowers, that 

is similar to the RTO business. With BHPH, the dealer 

finances the sale of a used car and usually requires the 

borrower to return to the dealership weekly or biweekly 

to make payments. BHPH is a fractured industry with 

few large or publicly traded participants, making it difficult to estimate transaction volume. However, according to a 2002 report by an industry consultant, BHPH 

transactions top $80 billion per year.31 

Pawn lending: Pawn lending is a short-term, secured 

lending transaction in which the lender typically takes 

physical possession of the item securing the loan (often 

jewelry or other personal goods). The lending agreement allows the pawn lender to take possession of and 

sell the collateral if the borrower does not meet the 

terms of the agreement. Recent estimates of the overall 

scale of pawn lending are not available. However, the 

largest publicly traded pawn lender, Cash America 

International Inc., with 500 stores in 22 states, reported 

making $514 million in pawn loans in 2007, with 

APRs ranging from 12 to 300 percent.32 

Auto title lending: Auto title lending is similar to pawn 

lending, except that title lenders make short-term loans 

that are secured by clear car titles. Interest rates on title 

loans are restricted in many states. The industry is fractured and limited largely to small, privately held compa30 Information regarding RTO statistics was derived from the Association of Progressive Rental Organizations Web site at http://www.rtohq. 

org (accessed on October 22, 2008). 31 Brian Grow and Keith Epstein, “The Poverty Business: Inside U.S. 

Companies’ Audacious Drive to Extract More Profits from the Nation’s 

Working Poor,” Business Week, May 21, 2007. This article used information from Christopher M. Leedom, “Analysis of the Buy Here-Pay 

Here Capitalization Market,” Leedom and Associates, LLC, December 

2002, to derive figures on the BHPH industry. 

32 Cash America, SEC Form 10(k), February 29, 2008. 

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nies. Publicly available data are limited, but in 2005, the 

Center for Responsible Lending (CRL) and the 

Consumer Federation of America (CFA) reported some 

state data regarding car title lending from various sources 

(2003–2005 data). The CRL and CFA reported that 

there are more than 900 pawnshops (most engaging in 

title lending) in Alabama, more than 272 title lending 

licensees in Mississippi, more than 230 title loan locations in Missouri, and about 116 title loan offices in one 

county in Tennessee. They also noted that car title loans 

are a $20 million industry in California, according to one 

lender’s estimates.33 In addition, a recent Public Action 

Foundation and Woodstock Institute report on automobile title lending in Illinois found that 63 title loan 

companies were operating 260 storefronts throughout 

that state in 2005.34 

The Future of AFS 

Innovation is constant across AFS, and many products, 

processes, and technologies are emerging that could 

significantly transform this sector. A complete discussion of innovations is beyond the scope of this article, 

but key trends for banks and others to watch include 

expansion of cellular (mobile) phone financial services 

and person-to-person (P2P) lending. 

Mobile Banking 

Banks and others are actively seeking to leverage 

advances in wireless telecommunications to offer financial services through mobile phones. Cell phones could 

prove to be an important tool for financial companies 

to engage consumers, particularly in nations with developing economies and large rural populations. For example, MasterCard, the Inter-American Development 

Bank, mobile phone providers, banks, and others have 

partnered with GSM Association, a global trade group 

for wireless carriers, to test cell phones as a vehicle for 

international remittances.35 

Domestically, the proliferation of mobile phones in the 

United States increases the attractiveness of mobile 

33 Amanda Quester and Jean Ann Fox, “Car Title Lending: Driving 

Borrowers to Financial Ruin,” Center for Responsible Lending and 

Consumer Federation of America, April 14, 2005. 

34 Woodstock Institute and the Public Action Foundation, “Debt Detour: 

The Automobile Title Lending Industry in Illinois,” September 2007, 

http://www.responsiblelending.org/research/?issue= 

Issue_cartitle&pubtype. 35 GSM Association, “Global Money Transfer Pilot Uses Mobile to 

Benefit Migrant Workers and the Unbanked,” news release, February 

12, 2007; and “GSMA and IDB to Drive Mobile Financial Services to 

Latin America,” news release, September 25, 2008. 

banking. According to one estimate, the overwhelming 

majority (88 percent) of Americans will own a cell 

phone by 2012.36 Mobile network providers, technology 

service providers, nearly all of the 20 largest U.S. banks, 

and many regional and community banks have started 

planning, piloting, or deploying mobile banking applications.37 For example, Bank of America introduced 

mobile banking nationwide in May 2007 as part of its 

online services and now has more than 1 million active 

mobile banking customers.38 Bank of America’s mobile 

services are free and currently allow users to check 

balances, view 70 days of transactions, transfer funds, 

pay bills, and locate ATMs.39 While mobile banking is 

currently not a fee-generating service, it may provide a 

new, convenient, and perhaps preferred delivery channel, particularly for younger consumers. Bank of America reports that two-thirds of its mobile banking users 

are under 35 years old, and four out of five are under 

45 years old.40 

P2P Lending 

P2P lending refers to Web site platforms that apply an 

operational and legal structure to personal loan transactions between individuals. Some P2P platforms, such 

as VirginMoney.com, facilitate and formalize loan 

transactions between borrowers and lenders that know 

each other. Other models, such as Prosper.com and 

Lending Club Corp., serve as online loan auction sites, 

where borrowers post the purpose of their loan and the 

terms that they are willing to accept. After viewing 

these loan requests, lenders bid for all or a portion of 

loans, depending on their risk/return appetite and desire 

for diversification. Some P2P models bypass banks, 

while others rely on bank partners as intermediaries to 

fund loans and then sell all or a portion to individual 

lenders. 

P2P lending is a new concept, with an estimated 

volume of just $600 million in 2007.41 Moreover, like 

many innovations, business models are evolving. For 

36 Catherine Graeber, “Raining on the Mobile Banking Parade,” 

Forrester Research Inc., September 18, 2007. 

37 Bob Egan, Mobile Banking Evolution: Issues and Considerations for 

2008, TowerGroup, November 2007. 38 Bank of America, “Bank of America Reaches One Million Active 

Mobile Banking Customers,” news release, June 11, 2008, 

http://newsroom.bankofamerica.com/index.php?s=press_releases 

&item=8186. 

39 Information derived from Bank of America’s Web site at 

http://www.bankofamerica.com (accessed on October 16, 2008). 40 Bank of America, news release, June 11, 2008. 

41 Kathy Chu, “Peer-to-Peer Lending Hits Its Stride,” USA Today, 

December 25, 2007. 

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Alternative Financial Services 

example, early P2P platforms had few restrictions on 

borrower eligibility, which resulted in adverse selection 

problems and very high loss rates. In general, borrowers 

must now meet certain minimum creditworthiness 

requirements. In addition, some investors viewed the 

lack of liquidity for these loans, most of which have a 

minimum three-year term, as undesirable. As a result, 

Lending Club Corp. recently gained approval from the 

Securities and Exchange Commission (SEC) to operate 

a secondary market system to enable its lenders to trade 

loans among themselves.42 Prosper.com also recently 

filed with the SEC to form a secondary market and 

amended its filing to allow banks to sell previously 

funded loans on the Prosper platform.43 

Conclusion 

This article provides a current snapshot of key AFS 

products and services, but emerging products and technologies could transform this sector. Banks are encouraged to monitor AFS trends to gain an understanding of 

competition in the financial services industry as well as 

to identify emerging markets, products, and delivery 

channels that may be appropriate for a given bank’s 

business plan. Banks involved in offering AFS need to 

42 Daniel Wolfe, “New Approach Puts Secondary Market to Work in 

P-to-P,” American Banker, October 15, 2008. 43 Daniel Wolfe, “Prosper, Forming Secondary Market, Halts Applications,” American Banker, October 16, 2008; and Daniel Wolfe, 

“Prosper to Open Secondary Market to Bank-Issued Loans,” American 

Banker, December 8, 2008. 

be aware of and adhere to applicable laws, regulations, 

supervisory policies, and sound business practices 

related to consumer protection and safety and soundness. Banks that have questions about, or are considering engaging in AFS directly or through third-party 

arrangements, are encouraged to contact their regulator. 

Authors: Christine Bradley, Senior Policy Analyst 

cbradley@fdic.gov 

Susan Burhouse, Senior Financial Economist 

sburhouse@fdic.gov 

Heather Gratton, Senior Financial Analyst 

hgratton@fdic.gov 

Rae-Ann Miller, Special Advisor to the Director 

rmiller@fdic.gov 

The authors wish to thank Luke Reynolds, Chief, Outreach 

and Program Development Section, Division of Supervision 

and Consumer Protection, FDIC; Martha Solt, Senior 

Economist, Division of Insurance and Research, FDIC; and 

Donna Tanner, Vice President, and Rosa Rivera, Branch 

Manager, First National Bank of Syracuse, for their contributions to this article. 

FDIC QUARTERLY 47 2009, VOLUME 3, NO. 1 
 

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