HPS FDIC QUARTERLY BANKING PROFILE PREVIEW

February 14, 2013

Executive Summary
The HPS FDIC Quarterly Banking Profile Preview examines FDIC-regulated entities progress in three key areas: safety and soundness, performance, and support to the economy. In the Q412, we find: U.S. commercial banks Tier One Common Capital Ratio was 12.6 percent as U.S. commercial banks increased common capital levels to $1.13 trillion. U.S. commercial bank's Net Income decreased slightly quarter-over-quarter to $32.26 billion, but is the most profitable year since the crisis on an annual basis. U.S. commercial bank's ROAA and ROAE followed the same pattern as Net Income on both a quarterly and annual basis, and ended the year at 1.02 and 9.08, respectively. U.S. commercial banks Loan-to-Deposit ratio fell to 70.3 percent, in a large part due to the increase in deposits. U.S. commercial banks topped $10 trillion in deposits, an all-time high. Total bank deposits rose to near $11 trillion. Total reserves fell by three percent to $151 million for U.S. commercial banks; while non-performing assets as a percentage of total assets fell to 2.0 percent, a six percent drop. Total loans and leases reached 7.7 trillion for all U.S. banks, a record high. U.S. banks employed 2.1 million full-time workers. Domestic business loans broke pre-crisis highs as commercial banks held $2.1 trillion.
Note: With the 2010 adoption of the Dodd-Frank Act, which mandated that the Office of Thrift Supervision be eliminated as a banking regulator, savings institutions (thrifts) are now filing call reports instead of thrift financial reports. This means that analysts and other industry observers no longer have to reconcile two different data sources when examining the universe of FDIC-insured institutions. Please take note of these changes when conducting analysis using data on savings banks, or a combination of commercial and savings banks.

Hamilton Place Strategies | 2

Outline

SAFETY AND SOUNDNESS PERFORMANCE MEASURES SUPPORTING THE ECONOMY

Hamilton Place Strategies | 3

SAFETY AND SOUNDNESS

The Hamilton Financial Index Is 28% Above PreCrisis Norms

The Hamilton Financial Index

Index Value Pre-Crisis Norms

1.3 1.2 1.1 1.0

Index +28%

0.9 0.8 0.7 0.6 0.5 0.4

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2011

Source: HPS Insight, SNL Financial, FDIC, St. Louis Federal Reserve

Hamilton Place Strategies | 4

SAFETY AND SOUNDNESS

Tier 1 Common Capital Ratio Is 12.6% For U.S. Commercial Banks

Tier 1 Common Capital Tier 1 Common Capital And Tier 1 Common Capital Ratio for Commercial and Savings Banks Commercial Banks Savings Banks Tier 1 Common Capital Ratio Commercial Banks Savings Banks

1.3 1.2 1.1

Tier 1 Common Capital ($T)

20 19 18
Tier 1 Common Risk-Based Ratio (%)

17 16 15 14 13 12
+37%

1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

11 10 9 8 7 6 5

Source: FDIC, SNL Financial

Hamilton Place Strategies | 5

SAFETY AND SOUNDNESS

Equity-To-Assets Is 11.1% In Q412 For Commercial Banks, Slightly Down From 11.3%
Total Equity Total Equity and Equity/Assets for Commercial and Savings Banks Commercial Banks Savings Banks Equity/Assets Commercial Banks Savings Banks

1.7 1.6 1.5 1.4 1.3

Bank Equity ($T)

13

12

1.2 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
+19%

11

Equity/Assets (%)

10

Source: FDIC, SNL Financial

Hamilton Place Strategies | 6

SAFETY AND SOUNDNESS

U.S. Commercial Banks Risk-Weighted Assets Fell To 67.3% As A Percent Of Total Assets In Q412
Commercial and Savings Banks Risk-Weighted Assets as a Percent of Total Assets Risk-Weighted Assets as a Percent of Total Assets Commercial Banks Savings Banks

80

Risk-Weighted Assets/Total Assets (%)

75
-14%

70

65

60

55

50
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 7

SAFETY AND SOUNDNESS

By A Simpler Measure, Bank Capital Levels Are Up 33 Percent Since 2008

Tangible Equity to Tangible Assets for Commercial and Savings Banks Tangible Equity to Tangible Assets Commercial Banks Savings Banks

11

Tangible Equity/Tangible Assets (%)

10

+33%

5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 8

SAFETY AND SOUNDNESS

Commercial Banks Loan-To-Deposit Ratios Continued To Fall In Q412

Commercial and Savings Banks Loans-to-Deposits Ratio Loans/Deposits (%) Commercial Banks Savings Banks

100 95
-23%

90 85 80 75 70 65 60
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Percent (%)

Hamilton Place Strategies | 9

SAFETY AND SOUNDNESS

Commercial Banks Increased Their Liquidity Ratio To 35.2% In Q412

Liquidity Ratio Liquidity Ratio for Commercial and Savings Banks Commercial Banks Savings Banks +13%

36 34 32 30
Liquidity Ratio (%)

28 26 24 22 20 18 16 14
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 10

Outline

SAFETY AND SOUNDNESS PERFORMANCE MEASURES SUPPORTING THE ECONOMY

Hamilton Place Strategies | 11

PERFORMANCE MEASURES

Commercial Bank Assets Rose To $13.4 Trillion In Q412

Total Assets Total Assets for Commercial and Savings Banks Commercial Banks Savings Banks

16 14 12
Total Assets ($T)

10 8 6 4 2 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 12

PERFORMANCE MEASURES

Total U.S. Commercial Bank Deposits Topped $10 Trillion In Q412

Total Deposits for Commercial and Deposit Banks Total Deposits Commercial Banks Savings Banks

11 10 9 8
Total Deposits ($T)

7 6 5 4 3 2 1 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 13

PERFORMANCE MEASURES

Commercial Bank Net Income Was $32.2 Billion In Q412

Commercial Banks Commercial Banks ROAA, ROAE, Net Income ROAA (%) ROAE (%) Net Income ($B)

16 14 12 10
ROAA and ROAE (%)

40 35 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 -30

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net Income ($B)

8 6 4 2 0 -2 -4 -6 -8 -10 -12

Source: FDIC, SNL Financial

Hamilton Place Strategies | 14

PERFORMANCE MEASURES

Savings Banks Net Income Dipped Slightly To $2.8 Billion In Q412

Savings Banks ROAA, ROAE and Net Income for Savings Banks ROAA (%) ROAE (%) Net Income ($B)

27 24 21 18
ROAA and ROAE (%)

3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net Income ($B)

15 12 9 6 3 0 -3 -6 -9

Source: FDIC, SNL Financial

Hamilton Place Strategies | 15

PERFORMANCE MEASURES

Led By A Steep Drop In Noncurrent Real Estate Loans, Total NCLs Fell 6% In Q412 To $254 Billion
Noncurrent Loans for Commercial Banks Commercial Banks Noncurrent Real Estate Loans (%) Noncurrent Non-RE Loans (%) Total Noncurrent Loans (%) Total Noncurrent Loans ($B)

9
-23%

400 350 300

-36% Total Noncurrent Loans ($B)

8 7 6
Percent (%)

250 200

5 4 3 2 1 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

150
-65%

100 50 0

Source: FDIC, SNL Financial

Hamilton Place Strategies | 16

PERFORMANCE MEASURES

Noncurrent Loans Fell Under $22 Billion In Q412 For Savings Banks
Noncurrent Loans for Savings Banks Savings Banks Noncurrent Real Estate Loans (%) Noncurrent Non-RE Loans (%) Total Loans & Leases (%) Total Noncurrent Loans ($B)

5.0 4.5 4.0 3.5

Percent (%)

24 22 20 18
Noncurrent Loans ($B)

16 14 12 10 8 6

3.0 2.5 2.0 1.5 1.0 0.5 0.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

4 2 0

Source: FDIC, SNL Financial

Hamilton Place Strategies | 17

PERFORMANCE MEASURES

NPAs Continue To Fall As A Percent Of Total Assets For Commercial Banks In Q412
Non-Performing Assets/Total Assets Non-Performing Assets as a Percent of Total Assets For Commercial and Savings Banks 3.0 Commercial Banks Savings Banks -28%

Percent (%)

0.0

0.5

1.0

1.5

2.0

2.5

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: FDIC, SNL Financial

Hamilton Place Strategies | 18

2012

PERFORMANCE MEASURES

Commercial Bank Reserves Fell 3% In Q412 To $151 Million

Total Reserves for Commercial and Savings Banks 260 240 220 200 180 Dollars ($M) 160 140 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total Reserves Commercial Banks Savings Banks

Source: FDIC, SNL Financial

Hamilton Place Strategies | 19

PERFORMANCE MEASURES

Commercial Banks Net Chargeoffs Totaled $17 Billion In Q412

Commercial Banks Chargeoffs for Commercial Banks Net Chargeoffs/ Avg Loans: Real Estate (%) Net Chargeoffs/ Avg Loans: Non Real Estate (%) Net Chargeoffs/ Avg Loans (%) Total Loan & Lease NCOs ($B)

55 50

45 40

Percent (%)

35
Dollars ($B)

30 25 2 20 15 1 10 5 0
2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2012Q4

Source: FDIC, SNL Financial

Hamilton Place Strategies | 20

PERFORMANCE MEASURES

Net Chargeoffs For Savings Banks Fell To $1.34 Billion In Q412

Chargeoffs for Savings Banks Savings Banks Net Chargeoffs/ Avg Loans: Real Estate (%) Net Chargeoffs/ Avg Loans: Non Real Estate (%) Net Chargeoffs/ Avg Loans (%) Total Loan & Lease NCOs ($M)

2.5

1,650 1,500

2.0

1,350 1,200

Percent (%)

1.5

1,050
Dollars ($M)

900 750 1.0 600 450 0.5 300 150 0.0

2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2012Q4

Source: FDIC, SNL Financial

Hamilton Place Strategies | 21

Outline

SAFETY AND SOUNDNESS PERFORMANCE MEASURES SUPPORTING THE ECONOMY

Hamilton Place Strategies | 22

SUPPORTING THE ECONOMY

Gross Loans And Leases For Commercial Banks Topped $7 Trillion In Q412, An All-Time High
Gross Loans and Leases for Savings and Commercial Banks Gross Loans and Leases Commercial banks Savings Banks*

6
Dollars ($T)

2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 23

SUPPORTING THE ECONOMY

U.S. Banks Employed Over 2 Million Full-Time Workers In Q412

Full-Time Employees FTE For Commercial and Savings Banks Commercial Banks Savings Banks*

2,000

160 140

FTE Commercial Banks (Thousands)

1,900 120 100 80 1,700 60 40 1,600 20 1,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

FTE Savings Banks (Thousands)

1,800

Source: FDIC, SNL Financial

Hamilton Place Strategies | 24

SUPPORTING THE ECONOMY

Non-Real Estate Loans Increased In Q412, While Total Real Estate Remained Essentially Flat
Non-Real Estate and Real Estate Loans for Commercial and Savings Banks Commercial and Savings Banks Total Real Estate Loans ($T) Total Non-Real Estate Loans ($T)

8 7 6 5 4 3 2 1 0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Dollars ($T)

Hamilton Place Strategies | 25

SUPPORTING THE ECONOMY

Commercial And Industrial Loans Increased 4% To $1.5 Trillion In Q412

Commercial and Savings Banks Commercial and Industrial and Consumer Loans at Commercial and Savings Banks Commerical and Industrial Loans ($T) Consumer Loans ($T)

3.0 2.7 2.4 2.1

Dollars ($T)

1.8 1.5 1.2 0.9 0.6 0.3 0.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 26

SUPPORTING THE ECONOMY

Domestic Business Loans Rose To $2.14 Trillion In Q412, An All-time High

Domestic Business Loans Domestic Business Loans from Commercial and Savings Banks Commercial Banks Savings Banks

2.4 2.2 2.0 1.8

Dollars ($T)

1.6 1.4 1.2 1.0 0.8 0.6

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: FDIC, SNL Financial

Hamilton Place Strategies | 27

About HPS
HPS is a policy and communications consulting firm based in Washington. Our focus and expertise lie at the intersection of government, business and media. Our deep experiences in all of these fields allow us to serve clients who need to navigate the paths between Washington and the private sector. HPS provides clients invaluable insight and advice on what governments are doing now, what theyre likely to do in the future, and the global implications of those actions. Our team includes those who have recently served at the highest levels of government and can show clients how the policy process works and how it can be shaped. This report was prepared by: Matt McDonald, Partner Robert Terra, Managing Director Patrick Sims, Director Ashley Smith, Senior Associate Russ Grote, Senior Analyst

Hamilton Place Strategies | 28