Samantha: Hello, this is Samantha Shares.
This episode covers the Office of the Comptroller of the Currency's
Semiannual Risk Perspective Spring 2025.
The following is an audio version of that document.
This podcast is educational and is not legal advice.
We are sponsored by Credit Union Exam Solutions Incorporated, whose
team has over two hundred and forty years of National Credit
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We assist our clients with N C U A so they save time and money.
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Before we dive in, it's worth noting that while this report focuses on
O C C supervised institutions, the principle-based guidance and risk insights
it contains serve as an excellent tool for credit unions to assess and manage
similar risks in their own operations.
And now the document.
The Office of the Comptroller of the Currency charters, regulates,
and supervises national banks and federal savings associations and
licenses, regulates, and supervises the federal branches and agencies
of foreign banking organizations.
The O C C supervises these banks to ensure that they operate in a
safe and sound manner, provide fair access to financial services, treat
customers fairly, and comply with applicable laws and regulations.
The O C C's National Risk Committee monitors the condition of the federal
banking system and identifies key risks.
The N R C also monitors emerging threats to the federal banking system's
safety and soundness and banks' ability to provide fair access to financial
services and treat customers fairly.
This spring 2025 report presents data in three main areas:
trends in key risks, operating environment, and bank performance.
The report reflects data as of December 31, 2024, unless otherwise indicated.
Let's start with the executive summary and the key themes for
the federal banking system.
The strength of the federal banking system remains sound.
Consumer sentiment, geopolitical risk, sustained higher interest
rates, and downward movement in some macroeconomic indicators have
increased economic uncertainty.
Commercial credit risk is increasing.
This is driven by growing geopolitical risk, sustained higher interest
rates, growing caution among businesses and their customers, and
other macroeconomic uncertainty.
Pockets of risk remain for some commercial real estate property types and vary
by geographic market and product type.
Refinance risk remains high for loans underwritten during a
period of lower interest rates.
Retail credit risk remains stable despite economic uncertainty.
Most consumer borrower segments continue to withstand elevated prices,
interest rates, and growing debt levels, supported in part by growth in wages
exceeding aggregate inflation since 2019.
However, wage growth is decelerating, and economic uncertainty is driving
adverse changes in consumer sentiment.
Market and liquidity risk are stable.
Net interest margins in O C C supervised banks improved in the latter half of
2024 as effective federal funds rate cuts enabled banks to lower funding costs.
Robust interest rate risk scenario analysis and sensitivity testing
are critical due to uncertainty surrounding inflation and future
effective federal funds rate movement.
Asset-based liquidity was stable in 2024, but unrealized investment
portfolio losses remain a focus.
Deposits were also stable, but deposit competition warrants continued monitoring.
Operational risk is elevated.
Banks continue to seek opportunities to gain efficiencies and respond
to an evolving and increasingly complex operating environment.
Failure to upgrade systems and digitize may result in loss of market
share to competitors offering faster and cheaper payment alternatives.
Criminals continue to exploit traditional payment methods.
Fraud schemes commonly target checks, wire transfers, peer-to-peer
payment platforms, and insiders.
Evolving cyber threats by sophisticated malicious actors
continue to target banks and their key service providers, emphasizing the
importance of operational resilience.
Recent disruptions across many sectors, including the financial
sector, highlight the importance of sound third-party risk management.
Compliance risk remains elevated.
This is due in part to Bank Secrecy Act anti-money laundering and consumer
compliance risks associated with elevated fraud levels, account access
concerns, and evolving business models.
The report notes that adoption of new technologies, products, and services,
and or engagement with financial technology companies to deliver
banking products and services, can offer benefits to banks and customers.
These benefits can include gaining efficiencies, furthering
digitalization efforts, and meeting evolving customer expectations.
That said, these engagements potentially introduce complexities to the operating
environment, with implications for banks' governance, change management,
and risk management programs.
Now let's look at the global and domestic economic operating environment.
Global economic growth is forecast to slow in 2025 with uncertainty stemming from
trade policy and geopolitical tensions.
Moreover, asynchronous monetary policy decisions by global central
banks could result in currency and bond market volatility.
After the brief pandemic-era recession in the second quarter of 2020, U S real
gross domestic product has grown solidly and, by the first quarter of 2025,
was 12 percent above its pre-pandemic peak in the fourth quarter of 2019.
Payroll employment in April of this year was fifty-five million above its
pre-pandemic peak, while unemployment remains near historical lows, at 4.2
percent.
However, the first quarter of 2025 saw a slight decline in economic
activity, driven by a sizeable increase in the volume of imports.
At the same time, job creation continued at pre-pandemic levels, with
177,000 jobs created in April 2025.
The near-term economic outlook remains cautious as economic
uncertainty has grown.
Some forecasters note that consumers appear poised to slow spending as
households have depleted much of their excess savings built up during
the pandemic, wage growth continues to slow, and job gains have eased.
The Blue Chip Consensus Forecast projects full-year growth to be 1.2
percent in 2025 and 1.3
percent in 2026.
The Consensus projects personal consumption expenditure
inflation to accelerate to 3.6
percent at an annual rate by the third quarter of 2025.
By the fourth quarter of 2026, P C E inflation is projected to fall to 2.2
percent, only slightly above the Board of Governors of the Federal
Reserve System's 2 percent target.
Moving to bank performance, the report states that profitability for the federal
banking system was stable in 2024.
For 2025, the earnings outlook will depend on how banks navigate
an uncertain economic climate and the future path of interest rates.
The federal banking system remains resilient and well-positioned to
absorb stress, with capital ratios and liquidity high by historical standards.
Recent changes in banks' balance sheets have positioned banks to potentially
benefit more from a decline in interest rates relative to prior periods when
the Federal Reserve lowered rates.
Loan growth for the federal banking system remained weak in 2024, growing by 1.6
percent.
Behind the tepid growth was a decline in commercial and industrial loans.
Federal banking system deposits grew at the same pace as loans, 1.6
percent.
The loan-to-deposit ratio, one measure of liquidity, remained below the pre-pandemic
level for the federal banking system.
For banks with assets less than 10 billion dollars, loan to deposit ratios have
nearly returned to pre-pandemic levels.
Now let's dive into Part One, which covers trends in key
risks, starting with credit risk.
Commercial credit risk is increasing, driven by growing geopolitical
risk, sustained higher interest rates, growing caution among
businesses and their customers, and other macroeconomic uncertainty.
This environment may implicate certain effective risk management practices,
including prudent concentration risk management, loan and portfolio
level stress testing, accurate risk ratings, and appropriate allowance
for credit losses methodologies.
Pockets of risk remain for some commercial real estate property types and vary
by geographic market and product type.
The multifamily market is projected to stabilize later this year and
the industrial market is expected to stabilize within the next 12 to 18 months.
Office vacancies are projected to continue to rise into 2026, and
property values may continue a slow decline before stabilizing.
Hotel performance is bifurcated by asset class.
Economy hotels continue to experience declines in demand, while luxury
hotels are experiencing demand growth.
Regardless of asset class, average daily room rates remain below
pre-pandemic averages, reflecting limited pricing power in hospitality.
Retail properties, except malls, continue to remain in demand
due to limited new supply.
Banks have generally recognized the riskiest commercial real estate properties
and have written down loans or put in place loss mitigation strategies.
However, geopolitical risks and economic uncertainties remain that have the
potential to impact various type of commercial real estate properties.
Refinance risk remains high for loans underwritten during a period of lower
interest rates and to companies with higher leverage and marginal repayment
capacity, smaller and lower-rated firms with near-term debt maturities, and
firms with limited financial flexibility.
Refinance risk is also high for commercial real estate loans underwritten
during the period of lower interest rates, often with interest-only terms.
These loans are typically secured by properties with significant
declines in property values or lower net operating income.
Trade disruptions due to tariffs and geopolitical risks may compress
margins across numerous industries with lower ability to pass through
costs on imported goods and materials.
In addition, industries with heavy exports may be adversely affected by
changes in global tariff policies.
Given the continuing growth in private capital markets, examiners
continue to monitor banks' involvement in venture lending activity and
novel lending structures to private capital providers, such as net
asset value and hybrid facilities.
Agricultural commodity prices remain below the long-term average,
increasing risk to banks with concentrations in agricultural lending.
While farm bankruptcies have increased, farm cash income is expected to
increase in 2025 due to government disaster assistance payments and
a modest decrease in expenses.
Increased farmland values support a relatively low debt-to-assets
ratio across agricultural borrowers.
However, agricultural producers heavily reliant on export products,
such as soybeans and corn, may experience additional challenges from
changes in global trade policies.
For retail credit, the report states that retail credit performance
remains satisfactory, and overall retail credit risk is stable.
Most consumer segments continue to withstand elevated prices
and interest rates, supported in part by growth in wages exceeding
aggregate inflation since 2019.
However, wage growth is decelerating and economic uncertainty is driving
adverse changes in consumer sentiment.
This adverse sentiment has the potential to impact personal consumption,
which has been one of the main drivers of past, robust G D P growth.
Currently, bank delinquency and loss rates remain manageable.
Consumers continue payment prioritization of low-rate mortgage loans with
historically low, albeit increasing, levels of delinquency and loss rates.
Delinquencies in other retail asset classes, namely credit cards and
automobile loans, reflect an increasing trend, but are forecast to stabilize
during the first half of 2025.
However, delinquency rates may be higher than reported due to some banks
temporarily freezing delinquencies to provide borrowers time to qualify
for the re-aging of accounts as part of loan workout programs.
Such practices can be used to help borrowers overcome temporary financial
difficulties but can obscure the true delinquency status of the portfolio if
not prudently structured and controlled.
Banks reported tighter lending standards for the year across most
categories of consumer lending.
Portfolio growth was generally flat for 2024 across all consumer portfolios.
Flat loan growth, desire to increase lending margins, and current housing and
automobile affordability challenges may impact a bank's credit risk appetite.
Changing market and economic conditions can also affect the
performance of retail credit models.
Recent hurricanes, wildfires, and other natural disasters have increased risks
concerning insurance and residential real estate collateral administration,
including risks from lapses in coverage, collateral coverage sufficiency,
nonstandard coverage related to perils, riders, and exclusions, and
blanket bond insurance sufficiency in recovering uninsured losses.
Affordability pressures in some geographies, notably increases in
taxes and insurance premiums including significant increases in premiums for
flood and homeowners' insurance, are more material and may adversely affect
borrowers' ability to repay debts.
Moving to market risk, the report explains that market and liquidity risk are stable.
Net interest margins improved in the second half of 2024 as banks were able
to pass on lower rates to depositors due to effective federal funds rate
reductions and improved funding mix.
Asset-based liquidity and deposits in O C C supervised
banks were fairly stable in 2024.
Deposit competition and deposit assumptions warrant continued monitoring
through liquidity and interest rate stress testing and modeling.
Unrealized investment portfolio losses remain a concern and
heighten the importance of banks' access to operationally ready
contingent funding sources.
Inflation uncertainty and impact of effective federal funds rate movement
heighten the importance of robust interest rate risk scenario analysis
and assumption sensitivity testing.
Banks with assets greater than one billion dollars reported a 17 basis
point decline in earning asset yields in the fourth quarter, while margins
improved due to a 21 basis point decline in funding costs as banks began
to benefit from the 100 basis point reduction in the federal funds target
rate that started in September 2024.
Funding costs in the fourth quarter also benefited from less reliance
on brokered deposits and borrowings.
Elevated unrealized losses in investment portfolios remain a concern.
Fluctuations in the yield on 10 year U S Treasury securities resulted
in large quarter-to-quarter changes in unrealized losses, particularly
in held-to-maturity securities.
The 10 year U S T market yield declined to 3.81
percent as of September 30, 2024, and unrealized losses in held to maturity
securities fell to two-year lows of 10.4
percent and 6.5
percent in banks with assets greater than one billion dollars
and banks with assets less than one billion dollars, respectively.
The 10 year U S T market yield subsequently moved back up to 4.58
percent by year-end 2024 and unrealized losses rose above year-end 2023 levels.
Banks are reducing unrealized losses in available-for-sale portfolios.
Unrealized losses in banks with assets greater than one billion dollars
declined from 5 percent at year-end 2023 to 4 percent at year-end 2024 despite
volatility and the large fourth-quarter increase in the 10 year U S T yield.
Unrealized losses in available for sale portfolio losses in banks with
less than one billion dollars in assets rose back to year-end 2023 levels of
approximately 9 percent despite the 10 year U S T yield being 70 basis
points higher than one year prior.
Exposure to unrealized losses in investment portfolios continues
to underscore the importance of operational readiness to access
alternative funding sources.
Banks can use liquidity stress testing as part of contingency planning
to help identify model reliability and access investment portfolio
liquidity without exposing earnings and capital to realized losses.
Uncertainty surrounds the direction and magnitude of inflation and what,
if any, effect this may have on the direction and impact of Federal
Open Market Committee decisions on the federal funds target rate.
This uncertainty continues to heighten the importance of a robust suite of interest
rate risk stress testing scenarios in both rising and falling rate environments as
well as assumption sensitivity testing.
Scenarios involving yield curve flattening and inversion may also be effective to
consider in light of recent history.
Now let's examine operational risk.
The report states that operational risk remains elevated as cyber
threat actors continue to target banks and their service providers.
Simultaneously, banks continue to increasingly rely on third
parties, including fintech firms, expanding the cyberattack surface.
The risks posed by the increasing reliance on a few third parties,
in certain instances, increases the likelihood of a single point of failure.
A single point of failure due to an operational disruption or cyberattack
could trigger widespread and cascading effects across the financial sector.
The O C C continues to observe cyber threat actors targeting banks of
all sizes with ransomware attacks, emphasizing the importance of operational
resilience, including testing business continuity and incident response plans.
Cyber threat actors are also increasing their use of double extortion attacks.
This tactic pressures the bank into paying a ransom even if it can restore impacted
systems and data from unaffected backups.
The United States Secret Service alerted financial institutions to an increase
in automated teller machine jackpotting, or A T M cashout, attempts in 2024.
Criminals, sometimes disguised as service technicians, access
and alter the A T M's security controls to illegally dispense cash.
Jackpotting can involve using a universal A T M key to open the A T M units, install
malware to the A T M's system, connect the A T M to an unauthorized external
device called a black box, or install an unauthorized device between the A T M's
computer and network cable connection.
Examples of controls that may be relevant to mitigating risks related
to A T M jackpotting attempts include cybersecurity and technology controls,
such as installing software updates and patches in a timely manner, and physical
security controls, such as security cameras, alarms, changing universal keys,
and ongoing monitoring of A T M activity.
Banks are exposed to a wide range of potential disruptive
events, including technology-based failures, cyber incidents, pandemic
outbreaks, and natural disasters.
While advances in technology have improved banks' ability to identify and recover
from various types of disruptions, cyber threats are increasingly sophisticated
and interdependencies with counterparties and service providers are growing.
These operational risks highlight the importance for banks to
ensure continued maintenance of effective operational resilience.
The report discusses innovation and adoption of new products and services,
noting that banks continue to adopt new technology and innovative products
and services to gain efficiencies, in furtherance of digitalization efforts, and
to meet evolving customer expectations.
Incorporating new products and services can assist with marketplace
competition, lower consumer costs, and enhance customer experience.
While adoption of new technologies and novel business arrangements with third
parties to deliver products and services to end users can offer benefits to banks
and their customers, these activities may add additional complexity to the
operating environment, impacting banks' governance, change management, and risk
management needs depending on the bank's size, complexity, and risk profile.
Banks have approached artificial intelligence, including generative A
I adoption cautiously, but overall, global adoption continues to increase,
with banks, businesses, and governments exploring various use cases.
Responsible A I use can help banks make more informed decisions, enhance
efficiency, and provide better and more customized services to
households and businesses of all sizes.
A I in banking currently includes real-time fraud and anomaly detection
and prevention; some components of credit underwriting, such as
financial analysis and collateral evaluation processes; document reading
and information extraction; and personalized customer recommendations.
Banks continue to explore the use of generative A I and implement use cases.
A I may also be helpful for regulatory compliance management, enterprise
risk management, and data analysis.
While beneficial, using any form of A I, whether produced internally or by
a third party, can introduce model, cybersecurity, and compliance risks.
The O C C is attentive to ongoing developments regarding digital
assets in the federal banking system.
On March 7, 2025, the O C C issued Interpretive Letter 1183
rescinding Interpretive Letter 1179.
Interpretive Letter 1183 reaffirms that the crypto-asset
custody, distributed ledger, and stablecoin activities discussed
in prior letters are permissible.
On May 7, 2025, the O C C issued Interpretive Letter 1184, providing
further clarification on bank's authority regarding crypto-asset custody services.
As with all novel banking activities, the O C C expects banks engaging in
crypto-asset activities to do so in a safe, sound, and fair manner; consistent
with effective risk management practices; in alignment with the bank's overall
prudent business plans; and in compliance with applicable laws and regulations.
Many banks and service providers face challenges with maintaining legacy
technology architectures while responding to increasing digitalization demands.
Innovations in payment systems using emerging technologies, such as distributed
ledger technologies and mobile payment platforms, can bypass traditional legacy
banking infrastructure and disrupt fee revenue streams that banks rely upon.
There is a risk that failure to upgrade systems and digitize may result in loss
of market share to competitors offering faster and cheaper payment alternatives.
Additionally, there is a risk that prolonged use of older or legacy
systems could increase the likelihood of operational outages, introduce security
vulnerabilities, create system maintenance challenges, and create other concerns
that could reduce operational resilience.
The board of directors may delegate the bank's daily managerial duties
to others; however, the board is ultimately responsible for providing
the appropriate oversight to ensure that the bank operates in a safe and
sound manner and in compliance with applicable laws and regulations.
This includes consideration of whether new activities are consistent
with the bank's strategic goals and risk appetite and comply with
applicable laws and regulations.
The board is also responsible for ensuring management implements an
effective risk management system that identifies, measures, monitors, and
controls risks related to new activities.
This includes management informing the board and the board understanding
any material risks that may impact earnings and capital.
Regarding fraud risk management, the report notes that fraud
affects numerous stakeholders, including banks and their customers.
The interconnected payments ecosystem highlights the importance of
information sharing and collaboration.
Banks can support their customers by providing information about fraud
trends and ways to protect themselves.
Customer education can help consumers be aware of fraud schemes and trends.
Ongoing training can help bank staff to identify red flags and respond to
customers seeking to conduct transactions outside their usual transaction patterns.
Bank trade groups may be able to facilitate sharing of information
at a level that could help reduce or mitigate risks in the banking system.
Criminals continue to exploit traditional payment methods.
Fraud schemes commonly target checks, wire transfers, peer-to-peer
payment platforms, and insiders.
While fraud schemes are constantly evolving, social engineering, phishing,
account takeover, business email compromise, impersonation of business
executives, government officials, third parties, or tech support, romance
and investment scams, and identity theft schemes remain lucrative.
First-party fraud or friendly fraud occurs when an external party, including
a bank customer, uses their own identity to commit fraud against the bank.
Card holders may attempt to take advantage of chargeback rules to dispute
a legitimate charge on their card.
Foundational controls, such as customer authentication and continuous monitoring
of account transaction activity using historical data and technology
tools, may help banks to identify higher-risk accounts and prevent fraud.
Insider abuse can expose banks to excessive risk and cause a
loss of customer confidence.
The digital environment presents opportunities for employees to
manipulate information to misappropriate assets, commit financial statement
fraud, steal information to resell, or conduct other illicit activity.
Mobile phones and other electronic devices facilitate the capture
and theft of sensitive customer information, especially when permitted
in sensitive areas of the bank.
Required step-aways, such as mandatory vacation and job rotation,
can limit a single employee's control over a specific task.
Moving to compliance risk, the report discusses Bank Secrecy Act
anti-money laundering and Office of Foreign Assets Control issues.
Elevated levels of fraud, including traditional fraud schemes and use of
innovative technology to perpetrate fraud, may result in increased volumes
of suspicious activity alerts and increased S A R filing obligations.
In some cases, banks are leveraging B S A staff to help manage related risks in
other areas of the bank, for example, fraud investigations, which could
affect continuity of B S A operations.
As banks continue to implement innovative technologies, including
partnering with fintechs to deliver new or expanded products and services,
the fintechs may not always have appropriate experience, technical
expertise, and resources in place.
This could undermine their ability to effectively manage these associated
risks, particularly regarding a bank's B S A A M L or sanctions risk profile,
which may be altered by changing business models or global events.
The Treasury Department in March 2025 issued an interim final rule
that removes the requirement for U S companies and U S persons to report
beneficial ownership information to the Financial Crimes Enforcement Network
under the Corporate Transparency Act.
O C C supervised banks must continue to comply with the existing F I N C
E N 2016 Customer Due Diligence rule and other existing B S A requirements.
There are currently no specific requirements for banks to incorporate
the National Priorities issued by F I N C E N into their risk based B S A
compliance programs until the effective date of final revised regulations.
For consumer compliance, the report notes that compliance risk increases when banks
do not promptly investigate, resolve, and, as appropriate, credit funds in
accordance with applicable laws, such as the Electronic Fund Transfer Act,
the Expedited Funds Availability Act, and the Federal Trade Commission Act.
As discussed above, increased levels and sophistication of fraud
may necessitate reasonable delays as allowed by law or regulation.
However, this may also exacerbate compliance risk when banks take prolonged
timeframes to complete investigations or implement broad account access
limitations, preventing customers, including those who are not victims
of fraud, from accessing their funds.
As interest rates fluctuate, banks may offer new or updated deposit
products, such as high-yield savings accounts or a greater
variety of certificates of deposit.
Compliance risk may increase when communications on C D rollover
processes or maturity options lack clarity or cause confusion, for
example, when rates paid on rolled-over C D s are far below the original
promotional rates offered by a bank.
Compliance risk may rise as insurance premiums rise.
For example, failure to maintain adequate flood insurance coverage
can lead to violations of the Flood Disaster Protection Act
and its implementing regulations.
Finally, let's look at Part Three, which covers bank performance.
The report states that profitability in the federal banking system was stable
in 2024, with return on equity at 11.7
percent, compared with 11.5
percent a year prior.
For banks with less than 10 billion dollars in total assets,
profitability declined slightly from a year ago, from 10.7
percent to 10.4
percent, but remained at a solid level compared with historical averages.
Though the Federal Reserve started to ease monetary policy in the latter
half of 2024, interest rates remained relatively high throughout the year,
leading to subdued loan growth and compression of net interest margin.
For 2025, the earnings outlook will depend on how banks navigate
an uncertain economic climate and the future path of interest rates.
The federal banking system remains resilient and well-positioned to
absorb stress, with capital ratios and liquidity high by historical standards.
The federal banking system's ratio of liquid assets to total
assets was at 31 percent in 2024, compared with 16 percent in 2008.
Net interest income growth, a key driver of bank profitability, slowed
in 2024, in part due to higher funding costs and lower loan growth.
For the federal banking system, N I I was largely unchanged, with a slight 0.3
percent decline, while banks with assets less than 10 billion dollars saw a 2.7
percent growth.
For both the federal banking system and banks with assets less than 10
billion dollars, higher noninterest income offset some of the weakness
in N I I and supported revenue, while growth in expenses was modest.
In addition, the federal banking system benefited from gains in the
equity securities portfolio in 2024, which also supported profitability.
Overall, this led to an improvement in net income for the federal banking
system and banks with assets less than 10 billion dollars, increasing 5.7
percent and 6.4
percent, respectively.
Bank funding costs increased in 2024, as interest rates remained
elevated and depositors continued to switch into higher-yielding accounts.
While the increase in funding costs was more pronounced among banks with assets
less than 10 billion dollars, those banks also realized greater gains on asset
yields compared with the overall system, resulting in smaller N I M compression.
Banks with assets less than 10 billion dollars were slower to reprice deposits
in response to the cuts in the federal funds rate that began in September,
compared with the overall system.
Both the federal banking system and banks with assets less than 10 billion
dollars, however, have repriced deposits faster than in the last
interest rate cutting cycle in 2019.
Recent changes in banks' balance sheets have positioned banks to potentially
benefit more from a decline in interest rates relative to prior periods when
the Federal Reserve lowered rates.
For example, a higher proportion of banks carry more short-term liabilities
relative to short-term assets compared with the beginning of 2019, the start
of the previous rate-lowering cycle.
Though a number of factors can affect how changes in interest rates impact N I
M, this suggests that a greater share of banks could benefit from lower deposit
rates compared with prior periods.
Loan growth remained weak in 2024, at 1.6
percent.
Weak growth was primarily driven by a decline in commercial and industrial and
nonfarm nonresidential real estate loans.
Loan growth was supported by increases in credit card balances and loans to
nondepository financial institutions.
Real estate loans drove a 4 percent increase in loan balances
at banks with assets less than 10 billion dollars in total assets.
Residential real estate, nonfarm nonresidential, and multifamily
lending account for more than 60 percent of community bank lending.
Federal banking system deposits grew at the same pace as loans, 1.6
percent, following deposit outflows in 2022 and 2023.
The loan-to-deposit ratio, one measure of liquidity, remained below the pre-pandemic
level for the federal banking system.
For banks with assets less than 10 billion dollars, with slightly faster
loan growth, loan-to-deposit ratios have nearly returned to pre-pandemic levels.
Net charge-off rates slightly increased from the prior year
but remained historically strong.
For the federal banking system, the net charge-off rate for
total loans increased to 0.8
percent, compared with 0.6
percent a year ago.
Nonfarm, nonresidential real estate loans were the only outlier as the
net charge-off rate rose slightly above the 1991 to 2019 average rate.
However, net charge-off rates for all other loan categories remained
below their historical averages.
For banks with assets less than 10 billion dollars, net charge-off rates
were little changed from the historically low levels of a year ago and remained
low across all loan categories.
This concludes our summary.
If your credit union could use assistance with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and we thank you for listening.