Montana Analytics

FDIC released the Q1 2024 Quarterly Business Profile. Some key observations: 1.       Total loan and lease balances increased $205.2 billion (1.7 percent) from the previous year with almost 85 percent of banks reporting annual loan growth. 2.       Domestic deposits increased $190.7 billion (1.1 percent) from fourth quarter 2023, the second consecutive quarterly increase. Growth in transaction accounts led the increase, offsetting a decline in savings deposit balances. 3.       Provisions for credit losses totaled $20.6 billion in the first quarter 2024, down $4.3 billion from the previous quarter. Provision expenses have been higher than the pre-pandemic average (2015-2019) for the past seven quarters. 4.       The share of loans and leases that were 90 days or more past due or in nonaccrual status increased to 0.91 percent, up 16 basis points from the year-earlier quarter. ·       The noncurrent rate for non-owner occupied CRE loans of 1.59 percent in first quarter 2024 was at its highest level since fourth quarter 2013, driven by office portfolios at the largest banks.  5.       The industry’s net charge-off rate of 0.65 percent was 24 basis points higher than a year ago and this ratio remains 17 basis points above the pre-pandemic average #creditrisk #capitalmarkets #financialinstitutions #riskmanagement #financialservices #riskanalytics #interestrates #banking #economics #finance #loans #deposits #riskmanagement #analytics #interestraterisk #IRR #fdic https://lnkd.in/ePc6Xzmx

The Q4 2023 Report on the Farm Credit System (FCS) Conditions was recently released by the Farm Credit Administration (FCA). Key takeaways: 1.    The FCS loan portfolio growth declined almost 7% YoY, but total portfolio increased: •       total assets climbed 6.5% to $508B and total loans increased 6.7% to $398B •       Rural infrastructure loans, the smallest loan type at 14% of total portfolio, increased most in 2023 at a 23% rate 2.    Portfolio credit risk remained low, but nonaccruals and less than Acceptable loans increased 0.45% in non-performing assets to $1.8B total 3.    System capital increased $4.7B (6.9% YoY), with capital-to-assets ratio at 14.4% 4.    FCA expects a challenging operating environment moving forward: •       Declining net farm income and margin compression (especially for cash grains) resulting from lower commodity prices •       Increased stress in certain industry segments including swine, dairy, tree nuts, and poultry •       Higher interest rates during a period of declining liquidity and increased reliance on operating lines  #FarmCredit #AgLender #AgricultureLoans #FarmCreditSystem #GSEs #Agsystems  #farmlending  #Economy #finance  #interestrates #liquidity #liquidityrisk #creditrisk https://lnkd.in/g2zxGv3d

The FHFA-OIG disclosed that the FHFA inspected several nonbank seller/servicers (to Fannie and Freddie) in the past few years. The reviews focused on the following: (1) risk management framework, (2) underwriting and quality control processes to ensure loans adhered to the Enterprises’ selling guides, and (3) adequacy of liquidity and funding sources. FHFA is developing an Operating Procedures Bulletin (OPB) for reviews of nonbank seller/servicers with an expected completion date of June 30, 2024. #HousingFinance #RealEstate #HousingMarket #Economy #compliance #bankingindustry #banks #mortgage #fhfa #gse #finance #housing #interestrates #liquidity #liquidityrisk https://lnkd.in/ez-9Nwhq

SIFMA estimates the U.S. fixed income markets outstanding totaled $44.3 trillion at the end of Q4 2023, up 6.8% y-o-y  o  Treasuries led the yearly increase, up 10.2% y-o-y  o  The other categories of fixed-income securities were up slightly over 2022, with Corporates increasing the most at 3.0% y-o-y  #SIFMA #municipalbonds #bonds #corporatebonds #bondmarket #fixedincome #treasuries #mbs #PLS #MBS #RMBS  #ABS #securitization #structuredfinance #credit #structuredproducts #capitalmarkets #banking https://lnkd.in/eYKnSueB

FDIC released the Q4 2023 Quarterly Business Profile. Some key observations: 1.) Full-year 2023 net income, in aggregate, fell 2.3 percent from 2022 *The decrease was caused by higher noninterest expense (9.7 percent), increased provision expense (67.2 percent), and significantly higher realized losses on securities (194.3 percent) 2.) The industry’s net charge-off rate increased 29 basis points from the prior year to 0.65 percent, 17 basis points above its pre-pandemic average 3.) Domestic Deposits, led by growth in time deposits, increased for the first time in seven quarters #creditrisk #capitalmarkets #financialinstitutions  #riskmanagement  #financialservices  #riskanalytics #interestrates #banking #economics #finance  #loans  #deposits #riskmanagement #analytics  #interestraterisk #IRR #fdic https://lnkd.in/eJ8uwCZv

The Fall 2023 edition of the OCC's Semiannual Risk Perspective was recently released. A few highlights: 1.) Retail credit performance remains satisfactory with asset quality indicators have largely returned to pre-pandemic levels and remain in line with long-term averages. 2.) CREDIT RISK is increasing due to higher interest rates, increasing risk in commercial real estate lending (majority driven by the Office sector), prolonged inflation, declining corporate profitability, and potential for slower economic growth. 3.)Competition for deposits and higher interest rates are raising deposit rates. Deposit and liquid asset trends stabilized in the latter half of 2023, but these levels were supported by increased reliance on wholesale funding. Deposit competition has pushed rates higher and resulted in increasing usage of higher cost CDs, brokered deposits, and borrowings. #riskmanagement #banks #financeandeconomy #liquiditymanagement #creditrisk #interestrates  #banking #economics #finance #marketrisk #deposits https://lnkd.in/eArZwqTq

The latest FDIC Quarterly Report compares Bank performance in the Recent Interest Rate-Hike Cycle to 2004-2006 period. The following are the key findings per FDIC: - “While the effects of higher interest rates on banking outcomes generally followed a similar pattern between the two cycles, the effects have been somewhat more pronounced in the 2022 cycle. - In 2022, higher interest rates boosted net interest income but banks eventually encountered decelerating loan growth, lower deposits, and increased funding costs by first quarter 2023. - Banks benefited from higher rates in the 2004 cycle, but to a smaller degree, and were also challenged by decelerating loan growth and deposits, and eventually reduced profitability. - The sharply higher interest rates in 2022 strained certain banks, as highlighted by severe liquidity strains and the bank failures in March and May of 2023. Banks encountered liquidity pressures during the 2004 cycle but to a smaller degree. Banks also reported very large declines in securities values in 2022, the largest declines in decades. The securities value declines during the 2004 cycle were much more modest.” #financialinstitutions  #riskmanagement  #financialservices  #riskanalytics #interestrates #banking #economics #finance  #loans  #deposits #riskmanagement #analytics  #interestraterisk #IRR #fdic https://lnkd.in/e7u5BUdJ

The OCC released its latest Interest Rate Risk statistics report based on data from 891 banks. The as-of date of the data ranges from September 30, 2021, to June 30, 2023. Observations for all banks: 1.) NII/Earnings at Risk(“EaR”) is negative for down shocks (parallel curve shifts) at 75% percentile and below; NII is positive for all upward shocks at Median and greater percentiles 2.) Economic Value of Equity(“EVE”) is negative for all shocks at the median and below; positive in all upward shocks at 75 percentiles and greater  #financialservices  #riskanalytics #interestrates #banking #economics #finance  #loans  #deposits #riskmanagement #analytics #OCC #alm #assetliabilitymodel #interestraterisk #IRR https://lnkd.in/gDV5snys

Does your accounting firm need help from financial specialists for audits? Montana Analytics personnel have deep expertise in financial modeling and pricing. We can assist you in evaluating your clients’ consistency with GAAP standards in topics such as CECL analysis and financial instrument valuation. #accounting #financialservices #audit #CECL #creditrisk #riskanalytics #quantitative #lossforecasting #CECL #valuation #loanvaluation

The Federal Reserve Board kept the short-term interest rate target unchanged yesterday as expected. The central bank's latest economic projections: • One more quarter-point rate increase this year • Two quarter-point cuts in 2024; Fed officials project short-term interest rates coming down to 5.1% in 2024 • Unemployment rate rising to 3.8% this year, up slightly higher to 4.1% next year, and then remaining at that level through 2025. • GDP growth is forecasted to be low in the next two years: 2.1% this year, 1.5% in 2024, 1.8% in 2025 https://lnkd.in/eRVTUYTF #interestrates #federalreserve #fedpolicy #banking #economics #finance