Semiannual Risk Perspective: Spring 2014

The financial performance of federally chartered institutions improved in 2013. The federal banking system set a new record level of net income in 2013, but this took seven years and $1.5 trillion (or 20 percent) growth in assets to achieve, highlighting the slow pace of the recovery from the recent financial crisis. This new nominal record was only $5 billion (5 percent) higher than the previous record set before the financial crisis in 2006. Return on assets and return on equity remain below pre-recession peaks. Overall, the federal banking system returned almost 10 percent on equity, but small banks continue to lag behind larger ones. Revenue declined modestly as lower net interest income more than offset modestly higher noninterest income. Sluggish loan growth and prolonged low interest rates continue to weigh on net interest margins (NIM). The improvement in earnings still comes largely from lower noninterest and provision expenses instead of organic growth.