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Maine Bankers Association
2012 CEO Midwinter Meeting
“Overview of Industry Conditions”
February 2, 2012
2
Disclaimer
The views expressed in this presentation are those of the presenter and do not necessarily reflect official positions of the FDIC. Some of the information used in the preparation of this presentation 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 FDIC. This presentation and comments made are not for attribution, quotation, or distribution.
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382
271
181
50
15 8 6 1 3 8 7 4 11 3 4 0 0 3
157
92
7
140
25
0
50
100
150
200
250
300
350
400
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Nu
mb
er
of
Ins
titu
tio
ns
Peak Year was 1989 with 534 Failures/Assisted Transactions
1980-1994 - 2,935 Failures/AT
Total Assets - $992B
Failures during cycle
Cumulative – 424 Failures
Total Assets - $674B
Failures peaked in 2010 and should continue to trend downward
Source: FDIC (Failures through 2/2/12).
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0
200
400
600
800
1000
1200
1400
4Q06 4Q07 4Q08 4Q09 4Q10
844 Problem Banks
399 Cumulative Failures
As of 9/30/2011
The Problem Bank List declined in June for the first time since 2006
Problem Banks
Cumulative Failures
Source: FDIC
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Deposit insurance assessments reflect the extent of the stressful banking conditions
Source: September 30, 2011 FDIC Quarterly Banking Profile
Total 30.53%
6
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
The overall past-due rate has stabilized in ME.
Total Past-Due Rate (median %)
Maine
Nation
7
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Early-stage past-dues are starting to decline which may signal some improvement
Past-Due Rate (median %)
30-89 days
90+ days or nonaccrual
Maine
8
0.00
0.50
1.00
1.50
2000 2002 2004 2006 2008 2010
Source: FDIC. Data reflects YTD net charge-offs through September 30.
Maine institutions have had a comparatively low loan loss experience during this cycle
Aggregate Net Charge-offs to Avg Loans% for banks < $10 billion
Nation
Maine
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Approximately 10% of Maine banks have CRE concentrations > 300% of Total Risk Based Capital
0%
10%
20%
30%
40%
50%
60%
70%
80%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
>=300%
>=200%
>=100%
Source: FDIC. Data as of September 30 for each period.
10
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Earnings have bounced back in Maine but remain well below pre crisis levels
Pretax ROA (median %)
Maine
Nation
11
90%
86%
60
65
70
75
80
85
90
95
100
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
While earnings are strained, nearly 90% of Maine’s banks were profitable in Q3
% of banks reporting profits
Maine
Nation
12
2.50
3.00
3.50
4.00
4.50
5.00
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Net interest margins remain under pressure and are likely heading lower
Net Interest Margin (median %)
ME Commercial Banks
ME Savings Banks
13
Assets Yields are likely to come under continued pressure through 2014
68
14
58
5
-5
5
15
25
35
45
55
65
75
Savings Commercial
Maine Median Percentage of Assets/Liabilities Repricing in over 3 Years to Earning Assets as of 12/31/08
Based on 12/31/08 Call filings. On December 16, 2008, Fed funds were lowered to 0-25 bp.
Assets
Liabilities
14
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Long term asset concentrations heighten interest rate risk
Assets > 5 years to Earning Assets (median %)
ME Savings Banks
ME Commercial Banks
15
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Asset duration has increased during the 2000s to buffer the impact of stressed margins
Assets > 15yrs to Earning Assets (median %)
ME Savings Banks
ME Commercial Banks
Nation Savings
Nation Commercial
16
2.50
3.00
3.50
4.00
4.50
5.00
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Net interest margins remain under pressure and are likely heading lower
Net Interest Margin (median %)
ME Commercial Banks
ME Savings Banks
Fed Funds Rate increased 425 bp
between 6/30/04 and 8/17/07
17
2.50
2.75
3.00
3.25
3.50
3.75
4.00
4.25
4.50
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Overhead has converged as commercial banks trim costs and savings banks diversifyOverhead/AA (median %)
ME Commercial Banks
ME Savings Banks
18
0
5
10
15
20
25
30
35
40
00 01 02 03 04 05 06 07 08 09 10 11
Source: FDIC. Data through September 30, 2011.
Savings and commercial banks also have become more similar into of asset mix
Higher Risk Loans to Assets (median %)
ME Commercial Banks
ME Savings Banks
19
Maine Banks have strong capital
5.0
3.0
10.0
6.0
8.5
14.2
10.0 10.5
15.5
7.0
15.9
0
5
10
15
20
Leverage Tier1RB Tot RB TCE RB
*Includes 2.5% Capital Conservation Buffer for risk based measures
PCA – “Well Capitalized”%
ME Bank Median %**Basel III Proposed %*
*Data as of 9/30/11 – TCE RB is a rough estimate!
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The DIF has turned positive and on track to
achieve minimum target set by Dodd/Frank
-0.25
-0.39
0.12
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
Restoration Plan 1.15 by 2018
Dodd/Frank minimum of
1.35 by 9/30/20
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Systemic Resolution Responsibility
• Resolution Plan or “Living-will”– U.S. Bankruptcy Code– Holding companies $50 billion or more and nonbank
financial companies designated as Systemically Important Financial Institutions (SIFI)
• Orderly Liquidation Authority– Alternative to bankruptcy– Strictly prohibits bailouts – Uses FDIC’s traditional resolution powers– Ensures creditors and shareholders appropriately bear the
losses
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Focus on the Future of Community Banks
• Critical role in the U.S. economy– Importance to small business community– Role in providing banking to the underserved
• FDIC Initiatives– Research evolution of community banking– Evaluation of supervisory practices– Outreach/conference on community banking– Evaluating key challenges facing community banks
• Capital• Technology• Staffing challenges• Regulatory burden
• Advisory Committee of Community Banks
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Questions/Other Topics?
