USA Bank Charge-Offs Drop To Post-Crisis Low

USA Bank Charge-Offs were at a 19-quarter low of 0.97% for the QE December 31, 2012. This is the lowest since the QE March 31, 2008 (0.99%). The financial crisis losses have been mostly worked off – at least the worthless credits the regulators have identified and ordered written-off.

Net Loans increased by +1.7% from the prior QE September 30, 2012. However, banks have been more risk-averse than before the 2008 – 2009 USA financial system crisis. Therefore, Loan Charge-Offs should continue to level off at a relatively lower rate or even decease further as loan underwriting standards are more conservative. The Net Charge-Off Rate is still high compared to historical rates.

USA Banks Net Charge-Off Rate by Quarter
The USA Banks Net Charge-Off Rate was at a 19-quarter low of 0.97% for quarter ended December 30, 2012. The Net Charge-Off Rate peaked at 2.89% at the QE 12-31-09, during the USA financial system crisis.

USA Banks Net Charge-Off Rate by Segment
For the quarter ended December 31, 2012, the Net Charge-Off Rates by segments were:
All institutions 0.97%
Credit card banks 3.55%
International banks 1.04%
Agricultural banks 0.34%
Commercial lenders 0.70%
Mortgage lenders 0.59%
Consumer lenders 1.50%
Other specialized (< $1 billion total assets) 0.64%
All other (< $1 billion total assets) 0.46%
All other (> $1 billion total assets) 0.85%

Loan Losses Improve Across All Loan Categories (FDIC Quarterly Banking Profile, February 26, 2013) Asset quality indicators continued to improve in the fourth quarter. Net charge-offs (NCOs) totaled $18.6 billion, down $7 billion (27.4 percent) from fourth quarter 2011. This is the 10th consecutive quarter that NCOs have declined. It is the lowest quarterly NCO total since fourth quarter 2007. All major loan categories showed year-over-year improvement in quarterly NCO amounts. The largest declines occurred in 1-to-4 family residential mortgages, where quarterly NCOs fell by $1.5 billion (29.3 percent), in real estate construction and development loans, where NCOs declined by $1.3 billion (62.6 percent), in credit cards, where NCOs were $1 billion (14.1 percent) lower, and in loans to commercial and industrial (C&I) borrowers, where NCOs were also $1 billion (39.7 percent) lower.