First Glance 12L (1Q16)

Conditions Remained Healthy but Prone to Greater Volatility

May 20, 2016

Authors: Judy Plock, Martin Karpuk, Michael Nimis

Editors:Cynthia Course, Gary Palmer, Sarah Mangi, Ron Pavlik, Marty Tunnell, Ken Wang, Wallace Young

This report is based upon preliminary data from 1Q2016 and prior Condition & Income Reports as well as other examination andeconomic sources. Data has been prepared primarily for bank supervisors and bankers. The opinions expressed in this publication arethose of the authors. Opinions are intended only for informational purposes, and are not formal opinions of, nor binding on, the FederalReserve Bank of San Francisco or the Board of Governors of the Federal Reserve System.

Data Inquiries: please contact sf.bsr.publications@sf.frb.orgPress Inquiries: please contact Media Relations at http://www.frbsf.org/our-district/press/

First Glance 12L: http://www.frbsf.org/banking/publications/first-glance-12l/

Financial Performance of Banks in the 12th Federal Reserve District (“12L”)

Table of ContentsHighlights: 12th District Overview and Hot Topics 3 – 6

Section 1: Economic ConditionsJob and Real Estate Price Growth Solid (but Can Be Volatile in West) 7 – 17

Section 2: Commercial Bank Performance

EarningsCost Controls and Wider Margins Led Profits Higher

Provisions and Loan Loss ReservesSeasonal Declines in Provisions, Except at Large Banks

Loan Growth and UnderwritingPortfolios Expanded Further; Some Signs of Tightening Standards

Credit QualityCredit Metrics Continued to Improve With Growth Playing a Role

Liquidity and Interest Rate RiskOn-Balance Sheet Liquidity Tightened Further

Capital and Cyclical VolatilityCapital Levels Merit Focus Given District’s History of Higher Volatility

18 - 39

19 – 22

23 – 24

25 – 29

30 – 32

33 – 36

37 – 39

Section 3: Commercial Bank Regulatory Ratings and Trends 40 – 44

Appendix 1/2: Summary of Institutions / Technical Information 45 – 46

12-Month Trend

Mar-16

ID 3.75%

NV 3.30%

OR 3.22%

ID 3.13%

AZ 3.02%

WA 2.78%

UT 2.61%

CA 2.41%

AK -0.32%

Nation 1.93%

Year-Over-Year Change in Nonfarm Jobs (%)

(Based on 3-Month Moving Average, Seasonally Adj.)

In aggregate, the 12th District’s economy continued to expand through first quarter 2016. Averageemployment grew 2.9% year-over-year, down slightly from an annual rate of 3.0% in the fourth quarter,but faster than the national growth rate of 1.9%. The education/health, professional/business services,leisure/hospitality, and construction sectors drove nearly two-thirds of net job gains in the District. Growthlanguished in energy-producing Alaska, but topped the national average in the District’s other states.

In the 12 months ending March, home price appreciation was above-average across most District statesand outpaced household income gains, straining affordability. Price and job trends stimulatedhomebuilding, with growth in single-family starts outpacing multifamily by an increasing margin.

Historically, growth in employment and home prices has been more volatile in most of the District’sstates when compared with the U.S. (measured by standard deviation in annual growth). This implies thepotential for higher peaks and lower troughs among many District states through the economic cycle.

Commercial real estate (CRE) vacancies and rents maintained their stable-to-improving trend. However,debt market volatility during the first quarter led to further credit spread widening in the commercialmortgage-backed securities (CMBS) market. Consequently, CMBS issuance volumes sank. Thisweighed on CRE price indices in several property sectors, especially downtown offices in major markets.The pace of future real estate price gains remains reliant on the trajectory of interest rates, capital flows,and/or credit availability. Jittery stock markets also weighed on venture capital activity, which has beenan important engine for job growth and CRE demand in the District.

Commodity prices found a footing in the first quarter as foreign economies began to recover (see chartbelow). Meanwhile, the dollar weakened mildly, but remained strong relative to prior-year levels,especially against the District’s major trading partners. This kept aggregate exports from 12th Districtstates nearly 9% below first quarter 2015 levels.

12th District Overview“Conditions Remained Healthy but Prone to Greater Volatility”

40

60

80

100

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

EnergyIndustrial MetalsAg. & Livestock

Commodity Prices (Indexed, March 2011=100)*

3FRB-SF*S&P GSCI indices, based upon end-of-period spot values

% of Banks with Component or Composite Rating 3, 4, 5

12th District Overview, Continued

Avg. 12th District Credit Ratios

13.7%

8.7%

10.6%29.9%

15.0%

11.5%

8.7%

0% 10% 20% 30%

Composite

Sensitivity

Liquidity

Earnings

Management

Asset Quality

Capital

Nation12th Dist.

*Trimmed Means

12%

-7%

0%

7%

14%

21%

28%

0%

2%

4%

6%

8%

10%

Mar

-02

Mar

-04

Mar

-06

Mar

-08

Mar

-10

Mar

-12

Mar

-14

Mar

-16

Deliquencies (left)YTD Net C/O (left)Net Ln. Growth (right)

FRB-SF*Delinquent=30+ days past-due or nonaccrual; C/O= chargeoff (year-to-date annualized); trimmed means

Banking conditions improved modestly during the quarter. Average District net chargeoff (C/O)and problem asset ratios remained very low, benefiting in part from sustained rapid loan growth(see chart at left). That said, many mid- and large-sized banks reported further increases incommercial and industrial (C&I) loan delinquencies and losses, led by energy sector creditstress. The average one-year net loan growth rate cooled slightly to 12.2% districtwide, but stillfar outpaced a national average growth rate of 7.4%. Construction and land development(C&LD) and multifamily mortgages remained the most rapidly-growing, albeit small, loansegments. In dollar terms, most new lending was in nonfarm nonresidential and C&I.

Notwithstanding growth, the April 2016 Senior Loan Officer Survey (SLOS) suggested modestlytighter underwriting among a small net fraction of lenders for C&I and commercial real estate(CRE) loan categories, continuing an earlier trend. In the case of C&I, lenders tightened loancovenants and premiums charged on riskier loans during the quarter. In the past year, CREloan pricing and requirements for collateral and debt service coverage became more restrictive.

As with prior quarters, bank earnings improved modestly, led by further declines in overheadratios and a small lift in net interest margins. Profits also benefited from benign credit conditionsand low (albeit increasing) provision expense burdens. Provision expense ratios increased themost among large banks, often prompted by energy sector stress. Credit seasoning withinrapidly-growing portfolios could lift provision expense burdens and pressure earningsprospectively.

Historically, rising short-term interest rates have been associated with widening net interestmargins among the District’s commercial banks. This trend held true in first quarter, as assetyields responded to rising short-term interest rates while funding costs held steady. Still,exposures to longer-dated loans and securities remained high by historical standards,potentially delaying some asset repricing.

As with economic measures, loan growth, credit, earnings, and liquidity metrics in the Districthave been more volatile than the nation since at least 2001. This implies potentially greaterdownside risk in a recession and the need for vigilant monitoring of loan loss reserves (to coverexpected losses) and capital (to cover unexpected losses).

Safety and soundness and consumer compliance ratings continued to improve. Roughly 86% ofDistrict banks were rated satisfactory or strong for safety and soundness (see chart at left). Inaddition, 96% or more were rated satisfactory or better for consumer compliance and/orCommunity Reinvestment Act (CRA) performance. 4

FRB-SF

The following have been identified as areas of higher concern within the 12th District,based on risk exposures and metrics of Federal Reserve-supervised institutions:

• Cyberthreats. Attacks continue to evolve in both complexity and frequency and exposeinstitutions to financial, operational, reputational, legal, and compliance risks. Accordingto PricewaterhouseCoopers (PwC), 30% of surveyed financial services firms reportedIT security-related incidents cost their firm at least $1 million in 2015 (see chart at right).This was atop budgeted information security costs. For institutions outsourcing corebanking operations and/or security administration, vendor management programsremain critical to managing and mitigating cyberthreats. Inherent risks can increasefrom a variety of factors, such as system complexity, services, and visibility. For anoptional tool to help assess vulnerabilities, see SR letter 15-9, FFIEC CybersecurityAssessment Tool for Chief Executive Officers and Boards of Directors.

• Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) compliance. Although mostbanks in the District have satisfactory BSA compliance programs, BSA/AML continuesto be a significant “hot topic” due to the geography of the District and the array andstrategic focus of institutions we supervise. BSA/AML-related criticisms noted at bankexaminations most often relate to internal controls (e.g., institutional risk assessments;customer due diligence, including customer risk assessments; and suspicious activitymonitoring programs). Concerns related to scarce compliance resources and ineffectiveindependent tests are also emerging as examination themes.

• Quality of loan growth. The District’s average annual net loan growth continued tooutpace the national average with Nevada, California, and Utah leading the way.Economic expansion played a role, as did commercial property price appreciation andan easing of underwriting standards. Although credit performance has been good, nowis a critical time for banks to maintain their lending discipline and continue to enhancetheir controls and practices where they can.

• Lengthening asset maturities. In part because of the steep yield curve, institutionsincreased their holdings of longer-dated assets over the past few years (see chart atright). In a rising interest rate environment, higher concentrations in longer-dated assetscould mute asset repricing and margin expansion and/or lead to mismatches in rate-sensitive assets and liabilities, if not appropriately managed.

Hot Topics: Areas We are Monitoring Most Closely

Average Loans & Securities Repricing > 3 Yrs. / Assets*

5

Estimated Financial Losses as a Result of All Security Incidents

North American Financial Svcs. Firms

11%

24%15% 18% 15% 15%

1%0%5%

10%15%20%25%

< $5

0K

$50K

-$10

0K

$100

K-50

0K

$500

K-$1

M

$1M

-$10

M

> $1

0M

Unk

now

n

28%

43%

32%

45%

20%

25%

30%

35%

40%

45%

Mar

-02

Mar

-04

Mar

-06

Mar

-08

Mar

-10

Mar

-12

Mar

-14

Mar

-16

12th Dist. Nation

PwC, The Global State of Information Security®

Survey 2016 (may not total 100% due to rounding)

*Trimmed means FRB-SF

FRB-SF

Additionally, these areas pose more moderate, but increasing, concern:

• Nonmaturity Deposit (NMD) reliance. NMDs (traditionally viewed as “core” deposits) have becomean increasingly important source of funding for most institutions. While these products provedinexpensive in a low-rate environment, these funds may disintermediate or transition to higher-costdeposit products in a rising interest rate environment. During the last economic expansion and ratetightening cycle (2004-2006), the mix of bank funding shifted away from NMDs and toward higher-cost time deposits and borrowings as growth in core deposits lagged loans and leases.

• Overhead expense ratios. Asset growth has led to some economies of scale and improved efficiencyratios have helped boost profitability. Still, some banks may not be devoting sufficient resources toback-office operations, internal controls, and compliance programs commensurate with theirincreasing size and complexity.

• Commercial real estate (CRE) lending concentrations. CRE (i.e., nonfarm-nonresidential, multifamily,C&LD, and unsecured CRE-purpose loans) loan concentrations to capital declined during therecession, but have edged higher since 2013 and remained above average in most District states(see table at right). Loan concentration levels and trends, combined with prior competitive easing ofunderwriting standards and recent signs of property price pressure, elevate regulatory concern. Apotentially rising interest rate environment could impact debt service coverage ratios on variable-ratecommercial mortgages negatively and weaken commercial property values. Given the increasingrisks, lenders should review SR letter 15-17, Interagency Statement on Prudent Risk Managementfor CRE Lending, which reiterates important CRE risk management considerations.

• Redlining. While not new, this is an area of renewed focus across the Federal banking agencies.Redlining, a form of illegal discrimination in which a financial institution makes it more difficult forcustomers to access credit based on the racial or ethnic composition of a neighborhood, could resultin Department of Justice fines, public regulatory enforcement actions, and downgrades to consumercompliance/CRA performance ratings.

• Financial technology (fintech) firms. Increasingly, depository institutions are partnering with fintechcompanies, in particular marketplace lenders. Given origination and underwriting methods that onlinealternative lenders may use, banks should closely evaluate transactions for credit risk, fair lending,and unfair/deceptive acts or practices. Because credit decisions may use nontraditional datasources, it will be important to ensure that this does not lead to disparate treatment or have disparateimpact on a prohibited basis.

6*Trimmed Means

Hot Topics: Areas We are Monitoring Most Closely

2006-16 Mar-16

NV 416.3%

OR 383.5%

CA 368.7%

AZ 361.4%

WA 345.8%

AK 300.0%

ID 253.5%

UT 220.7%

HI 179.5%

Nation 194.8%

Average Commercial Real Estate Loans / Total Capital* (%)

526%

490%

572%

482%

343%

359%

408%

215%

231%

440%

7

Job Growth

Housing Market Metrics

Commercial Real Estate Market Conditions

Venture Capital Trends

Historical Volatility

Section 1 - Economic Conditions

For more information on the national economy, see:FRBSF FedViews

(http://www.frbsf.org/economic-research/publications/fedviews/)FOMC Calendar, Statements, & Minutes

(https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm)

8

3.5% 3.1%

-6.7%

2.9%

-1.5%

2.1%

-4.9%

1.9%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

District Nation

Year-Over-Year Nonfarm Job Growth

Based on average nonfarm payroll levels over trailing three months; Source: Bureau of Labor Statistics via Haver Analytics.

District Job Growth Slowed From the Fourth Quarter’s PaceBut Exceeded the Nation by a Wide Margin

FRB-SF

Job Growth Rates Were Highest for the Construction and Information Sectors, but Larger Sectors Drove Most New Jobs

9

Based on average nonfarm payroll levels during 1Q of each year; because of data limitations, “Construction” includes mining in Hawaii and “Information” excludes Hawaii and Nevada; “Other Private” includes logging and mining (other than Hawaii) plus private industries in 2-digit NAICS code 81 category; Source: Bureau of Labor Statistics via Haver Analytics.

10-Year Trend 1Q 2016

Education & Health Services 4.10% 20.93% 14.80%Professional & Business Services 3.19% 16.20% 14.57%Leisure & Hospitality 3.78% 15.68% 11.99%Construction 6.34% 10.65% 4.97%Retail Trade 2.59% 9.87% 10.87%Government 1.52% 8.49% 15.81%Financial Activities 2.48% 4.49% 5.17%Transportation & Utilities 3.45% 4.29% 3.58%Information 4.39% 3.97% 2.62%Wholesale Trade 2.38% 3.47% 4.15%Manufacturing 0.41% 1.12% 7.69%Other Private 0.64% 0.86% 3.78%

Total 2.86% 100.00% 100.00%

12th District Sectoral Profile of Job Growth - 1Q 2016Year-Over-Year %

Change Mix of New Jobs

Mix of Overall

JobsFRB-SF

10

Annual Home Price Gains Were Above-Average in Most District States; Appreciation High and Accelerating in HI, UT, OR, WA

Source: Core Logic

Year-Over-Year Change in Home Prices

FRB-SF

3.3%

5.8% 6.

2% 6.9% 7.1% 7.3% 8.

0%

10.0

%

13.0

%

6.7%

0%

2%

4%

6%

8%

10%

12%

14%

AK AZ CA NV HI ID UT OR WA US

Mar-15 Dec-15 Mar-16

11

Affordability Slipped; Not Yet as Tight as Pre-Crisis Era(But Getting Close to Prior Troughs in Some CA Markets)

Represents the share of homes sold that could be considered affordable to a family earning the median income (with a 10% downpayment, a gross income-to-housing cost ratio of 28%, and a fixed-rate, 30-year mortgage loan); housing costs include principal, interest, property taxes, and hazard insurance (not mortgage insurance); the timing of worst and best affordability varied by market, but generally occurred in 2006/07 and 2011/12, respectively; *excludes markets with < 1,000 transactions in 1Q16. Source: National Association of Homebuilders/Wells Fargo

0%

15%

30%

45%

60%

75%

90%

San

Fran

. CA

Los

Ange

les

CA

Ora

nge

Co.

CA

San

Jose

CA

San

Die

go C

A

Sta.

Ros

a C

A

Oxn

ard

CA

Oak

land

CA

Sta.

Bar

b. C

A

Hon

olul

u H

I

Stoc

kton

CA

Sacr

amen

to C

A

Riv

ersi

de C

A

Bend

OR

Visa

lia C

A

Valle

jo C

A

Fres

no C

A

Seat

tle W

A

Med

ford

OR

Portl

and

OR

Mod

esto

CA

Ren

o N

V

Pres

cott

AZ

Bake

rsfie

ld C

A

Euge

ne O

R

Nat

ion

Worst (1Q05-16) Best (1Q05-16) 1Q15 1Q16

Affordability Index – 12th District Metros Below U.S. Avg.*Share of Homes Sold Affordable to Median Family Income (High Ratio = More Affordable)

FRB-SF

165 152178

100 93 95

0

50

100

150

200

250

300

350

400

450

500

1995

1995

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

1Q 1

51Q

16

Single Family 2+ Family

12

Average Housing Starts – West (Thousands Of Units, SAAR)

SAAR=seasonally adjusted annual rate; West=12th District plus CO, MT, NM, and WY; Source: Census Bureau via Haver Analytics

Home Price Gains Prompted New Construction; Meanwhile, Growth in Multifamily Construction Slowed

FRB-SF

Year-Over-Year %Change

West Nation

2015 1Q 2016 2015 1Q

20161-Family 13.4% 16.6% 10.2% 23.2%2+ Family 10.8% 2.1% 11.6% 1.9%

13

According to Third-Party Forecasts, Vacancy Rates May Tick up and/or Rent Growth may Slow for all Sectors but Retail

FRB-SF

Based on aggregates across 15-16 large metropolitan areas; apartment data based upon number of units; other property types based upon square footage; Source: CBRE-Econometric Advisors

Industrial

RetailApartment

Industrial

Retail

Apartment

-15.0%

-12.0%

-9.0%

-6.0%

-3.0%

0.0%

3.0%

6.0%

9.0%

Mar

-03

Mar

-05

Mar

-07

Mar

-09

Mar

-11

Mar

-13

Mar

-15

Mar

-17

Average Annual Rent Growth12th District

Office

Fore

cast

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

18.0%

21.0%

Mar

-03

Mar

-05

Mar

-07

Mar

-09

Mar

-11

Mar

-13

Mar

-15

Mar

-17

Weighted Avg. Vacancy or Availability - 12th District

Office Fore

cast

14

80

100

120

140

160

180

200

220

240

260

280

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Industrial

ApartmentCBD Office

Retail

According to Moody’s/RCA repeat-sales index, CRE price growth has slowed and even begun to decline in some sectors. The slowdown in price appreciation comes on the heels of an extended run of significant price increases. Lenders and property investors have become more cautious, pressuring credit spreads and capitalization rates. This appears to have had the most significant impact on downtown office properties, especially in major markets.

SuburbanOffice

National Real Estate Prices (Indexed, March 2001 = 100)

Sources: Moody’s/RCA (Commercial Property Price Indices), Core Logic (Home Price Index); both indices are repeat sales indices; CBD = central business district (downtown)

CRE Price Appreciation is Showing Signs of Slowing, Especially Among Downtown Office Properties

FRB-SF

SingleFamilyHomes

44%

-2%

-19% -21%(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

Banks Life Insur.Companies

CMBS/Conduit

Fannie/Freddie

Year-Over-Year Change in Commercial and Multifamily Mortgage Origination Index – 1Q16

15

Credit Market Volatility Caused CMBS Spread Widening andDampened CMBS Origination Volumes; Banks Picked Up Share

FRB-SF

Source: Mortgage Bankers Association Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations

Disruptions in the broader capital markets caused CMBS credit spreads to widen in the second half of 2015 and early 2016. Consequently, some CMBS originators could not price deals profitably and CMBS origination volumes declined relative to first quarter 2015. With their more stable financing sources, banks gained origination market share. Increased lending caps for Fannie and Freddie and changes in risk retention rules for securitizers(effective late 2016), could influence the distribution of originations for the balance of 2016.

16

Market Volatility Also Weighed on Venture Capital Deals, Nearly Half of Which Benefit 12th District Firms

FRB-SF

VC = venture capital; exits include initial public offerings (IPOs), acquisitions, and buyouts; Source: PitchBook

VC firms became cautious in late 2015 and early 2016, particularly for seed/early stage funding, as IPOs declined and exit opportunities weakened. Although VC investments softened, VC fundraising was relatively strong in the first quarter.

$0

$4

$8

$12

$16

$20

0

500

1,000

1,500

2,000

2,500

1Q10

1Q11

1Q12

1Q13

1Q14

1Q15

1Q16

$Bils (Right) # Deals (Left) # Exits (Left)

Quarterly VC Invested - Nation

Mid-Atl., 20%

New Eng.

Great Lakes

SouthSo. East Mid-west

L.A. Metro San Diego Metro

Seattle MetroOther West

Mountain

Geographic Mix of VCAggregate Deal Count, 1Q13 – 1Q16

West Coast &

Mtn.47%

Bay Area63%

Software39%

Other 16%

Healthcare12%

Pharma & Biotech

11%

Com'l. Svcs.

IT Hardware

Media

Consumer Goods &

Rec.Energy

Sector Mix of VCAggregate Investment 1Q13 -1Q16

17

* States above 1.0 are more volatile than the nation as a whole; those below are less volatile; measured by taking the standard deviation (SD) of state average 1-year growth rates, divided by the SD of U.S. growth rates; data based on quarterly figures between 1Q91 and 1Q16 for nonfarm jobs and between 1Q92 and 4Q15 for home prices; Sources: Bureau of Labor Statistics and Federal Housing Finance Administration (FHFA) via Haver Analytics

Economic Activity in Most District States Has a History of Above-Average Volatility—Are Downside Risks Greater?

FRB-SF

Nonfarm Job Growth Volatility Location Quotient

(Nation = 1.0)> 1.30

1.20 - 1.30

1.00 - 1.20

< 1.00

FHFA Expanded Home Price Index Volatility Location Quotient

(Nation = 1.0)

> 1.40

1.20 - 1.40

0.80 - 1.20

< 0.80

1.11

1.38

1.292.29

1.44

1.47

1.82

0.511.05

1.26

1.39

2.382.57

1.44

1.44

2.32

0.631.73

Job Growth Volatility* Home Price Volatility*

18

Earnings

Provisions and Loan Loss Reserves

Loan Growth and Underwriting

Credit Quality

Liquidity and Interest Rate Risk

Capital

Historical Volatility

See also “Banks at a Glance,” Bank Profiles by State:http://www.frbsf.org/banking/publications/banks-at-a-glance/

Section 2 Commercial Bank Performance

Note: Bank size groups are defined as small (<$10B), mid-sized ($10B-$50B), and large (>$50B) banks. The large bank group covers nationwide banks (a larger statistical population), while the other two groups cover 12th District banks.

19

1.87%2.13%

1.30% 1.20%1.26%1.57% 1.58%1.24% 1.21%1.26%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Mar

-15

Mar

-16

District Nation

Earnings: First Quarter Pretax Profit Ratios Improved Year-Over-Year, Similar to the Nation

FRB-SF

Average Annualized Pretax Return on Average Assets (ROAA) (TE)

Based on commercial banks, excluding De Novos; year-to-date annualized trimmed means; preliminary 3/31/16 data; for comparability, pretax ROAAs are adjusted on a tax-equivalent (TE) basis to assume taxes are paid on income from tax-free municipal loans and securities

Net Interest Margins, Which Often Exhibit a First Quarter Seasonal Dip, Were Buoyed by Rising Short-Term Rates

Based on 12th District commercial banks, excluding De Novos; quarterly annualized trimmed means; preliminary 3/31/16 data; data are presented on a tax-equivalent (TE) basis; average 3-month constant maturity U.S. Treasury (UST) Rate from Federal Reserve via Haver Analytics

6.86%

5.80%

7.98%

4.13% 4.21%

4.94%

3.80%3.89%

1.89%1.04%

3.03%

0.31%0.30%

0.00%

2.00%

4.00%

6.00%

8.00%

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Avg. 3-Month U.S. Treasury Rate Interest Income / Avg. Earn. Assets Net Interest Income / Avg. Earn. Assets Interest Expense / Avg. Earn. Assets

Average Quarterly Annualized Rate – 12th District

Dots denote first quarters

20

FRB-SF

0.87

%

0.63

%

0.60

%0.

56%

0.75

%

0.60

%

0.58

%0.

58%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Mar

-15

Mar

-16

District

Nation

21Based on commercial banks, excluding De Novos; year-to-date annualized trimmed means; preliminary 3/31/16 data

Avg. Noninterest Inc. / Avg. Assets

Noninterest Income Ratios Slipped Further, PartiallyOffsetting the Benefit of Steep Drops in Overhead Ratios

FRB-SF

3.41

% 3.53

%

3.07

% 3.18

%3.

03%

3.02

% 3.09

%

2.86

%

2.83

%2.

83%

2.65%

2.75%

2.85%

2.95%

3.05%

3.15%

3.25%

3.35%

3.45%

3.55%

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Mar

-15

Mar

-16

District

Nation

Avg. Noninterest Exp. / Avg. Assets

FRB-SF

Lower Overhead Burdens and Wider Margins Benefited Efficiency Ratios, Especially at Smaller Banks

Based on commercial banks, excluding De Novos; year-to-date annualized trimmed means; preliminary 3/31/16 data; *efficiency ratio = noninterest expense divided by sum of net interest income and noninterest income

74%70%

53% 52%

64%63%

0%

20%

40%

60%

80%

0%

2%

4%

6%

8%

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

District Small (<$10B) District Mid-Sized ($10-$50B) Nation Large (>$50B)

Efficiency Ratio (Right) Noninterest Expense (Left) Noninterest Income (Left) Net Interest Income (Left)

Average % of Average Total Assets Efficiency Ratio*

22

FRB-SF

23%

47%

43%

23%

13%

10%

0%

10%

20%

30%

40%

50%

60%

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Mar

-15

Mar

-16

Negative Zero

% of 12th District Banks with YTD Provision Expense that was:

Banks are more likely to have lower chargeoffs and

provisions early in the year

23Based on commercial banks, excluding De Novos; year-to-date (YTD); preliminary 3/31/16 data

Loan Loss Reserves: Year-Over-Year, Provision ExpenseRatios Increased, Notably at Large Banks

FRB-SF

Average Provision Expense / Average

Assets (%)

Bank Size Mar-2015

Mar-2016

District Small

(<$10B)0.03% 0.05%

District Mid-Sized

($10B-$50B)

0.02% 0.05%

Nation Large

(>$50B)0.13% 0.28%

2.71%

1.69%1.53%

5.56X

4.00X

1.28%1.81%

1.46% 1.38%

3.14X

1.08X

2.49X

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

ALLL / Loans Not HFS ALLL / Noncurrent

District Nation

ALLL Coverage of Loans not HFS (%) and Noncurrent Loans (X)

24

Growth in Loans Outpaced ALLL, but Reserves Increased as a Share of (Declining) Noncurrent Loans

FRB-SF

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; ALLL = allowance for loan and lease losses; HFS = held for sale; noncurrent = loans past due 90+ days or on nonaccrual status

7.83

10.53

14.42

16.47

6.99

13.11

9.34

7.92

9.56

25Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 3/31/16 data

Loan Growth: Average Net Loan Growth WasBrisk Throughout Much of the West

FRB-SF

Avg. Year-Over-YearNet Loan Growth, Mar-16

>= 10.0%

7.5% to 10.0%

6.0% to 7.5%

< 6.0%

U.S. = 7.4%

Average Year-Over-Year Net Loan Growth (%)21% 19%

12% 9% 8%

-30%

-20%

-10%

0%

10%

20%

30%

Mar

-08

Mar

-12

Mar

-16

Mar

-08

Mar

-12

Mar

-16

Mar

-08

Mar

-12

Mar

-16

Mar

-08

Mar

-12

Mar

-16

Mar

-08

Mar

-12

Mar

-16

Construction &Land Dev.

(C&LD)

Multifamily Nonfarm-Nonresidential

Commercial &Industrial

1-4 FamilyMortgages

District Nation

Average Year-Over-Year Loan Growth Rate

26

Growth Was Fastest Among (Relatively Small) C&LD and Multifamily Portfolios; Larger Categories Also Expanded Solidly

FRB-SF

Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 3/31/16 data

District 5.7% 5.1% 45.1% 15.6% 13.7%Nation 4.9% 2.1% 24.3% 12.6% 25.2%

Memo: Average Share of Total Loans, Mar-16

441%

345%

147% 141% 144%

34%

231%195%

70%66%

29%0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Mar

-08

Mar

-10

Mar

-12

Mar

-14

Mar

-16

Mar

-08

Mar

-10

Mar

-12

Mar

-14

Mar

-16

Mar

-08

Mar

-10

Mar

-12

Mar

-14

Mar

-16

All CRE Nonowner-Occupied CRE C&LD

District Nation

Average Commercial Real Estate Concentrations to Total Capital

27

Loan Growth Pushed CRE Loan Concentrations Even Higher, but C&LD Holdings Remained Well-Below Prior Peak

FRB-SF

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; All CRE= multifamily, nonfarm-nonresidential (NFNR), construction and land development (C&LD), and other CRE-purpose loans; Nonowner-Occupied CRE= multifamily, nonowner-occupied NFNR, C&LD, and other CRE-purpose loans; *per Basel III, HVCRE generally includes nonresidential C&LD loans with high leverage and/or low developer cash equity

High Volatility CRE (HVCRE)* /

Total Capital, Mar-1612th District 4.18%Nation 2.56%

(20%)

(10%)

0%

10%

20%

30%

40%

Apr-1

4

Apr-1

5

Apr-1

6

Apr-1

4

Apr-1

5

Apr-1

6

Apr-1

4

Apr-1

5

Apr-1

6

Apr-1

4

Apr-1

5

Apr-1

6

Commercial &Industrial

CommercialReal Estate (CRE)

1-4 FamilyMortgages*

Consumer

Small Borrowers

Non-Traditional/Non QM-Jumbo*

Nonfarm-Nonresid.

Multifamily

C&LDLarge

Borrowers Credit Card

Prime/GSEEligible*

Auto

Net Percentage Reporting Tightening (Loosening) Standards During 3 Mos.

28

Growth Occurred In Spite of Tighter Lending Standards on Commercial & Industrial and CRE Loans in Early 2016

FRB-SFBased on a sample of loan officers at 70+/- domestic banks (number varies by period and loan type); *beginning January 2015, two categories were replaced with six based on GSE eligibility, qualifying mortgage (QM) status, and size (making comparisons imperfect); C&LD = construction and land development; Source: Federal Reserve Senior Loan Officer Opinion Survey (http://www.federalreserve.gov/BoardDocs/snloansurvey/)

3.583.47

3.36

3.01

3.103.04

2.872.90

1.5

2.0

2.5

3.0

3.5

4.0

2001

2002

*200

3

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

*201

4

*201

5

*201

6

Spreadover Costof Funds

Max. LoanSize

Max. LoanMaturity

Loan-to-Value(LTV)

DebtServiceCoverage(DSC)

29

Avg. Change to CRE Lending Standards During Prior 12 Months(1-2: tightened considerably-somewhat; 3: basically unchanged; 4-5: eased somewhat-considerably)

Based on an annual sample of loan officers at 54-76 domestic banks (number varies by reporting period); survey conducted in January or April (*) of each year; Source: Federal Reserve Senior Loan Officer Opinion Survey

In the Past Year, CRE Lenders Shifted Standards for Pricing Spreads and Collateral and Debt Service Coverage Ratios

FRB-SF

Ease

d

>>>

<<<<

Tig

hten

ed 1.64%

0.23% 0.35%

4.76%

0.57%0.69% 0.86%

0.00%

0.75%

1.50%

2.25%

3.00%

3.75%

4.50%

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Past Due 30-89 Days* Past Due 90+ Days or Nonaccrual

District Nation

Past Due + Noncurrent Loans / Gross Loans & Leases

30

Credit Quality: District Bank Loan and Lease Delinquencies Moderated Further and Were Below the National Average

FRB-SF

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; *delinquent but still accruing interest

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Mar

-14

Mar

-15

Mar

-16

Mar

-14

Mar

-15

Mar

-16

Mar

-14

Mar

-15

Mar

-16

Mar

-14

Mar

-15

Mar

-16

Mar

-14

Mar

-15

Mar

-16

Construction &Land Dev.

(C&LD)

Commercial &Industrial (C&I)

Nonfarm-Nonresidential

1-4 FamilyMortgages

Consumer

District Small (<$10B) District Mid-Sized ($10-$50B) Nation Large (>$50B)

Average % Past Due by Loan Type and Bank Size

31

Average Past Due Ratios Increased for C&I at Mid/Large Banks (Energy Stress) and for Commercial Mortgages (Seasonality)

FRB-SF

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; past due = loans 30+ days past due or on nonaccrual status

Oil and gas sector stress lifted C&I delinquencies at many mid- and

large-size banks

Average nonfarm-nonresidential delinquencies

often tick up in first quarter

32

0.11%

2.15%

0.02%

0.72%

0.10%

0.00%

0.40%

0.80%

1.20%

1.60%

2.00%

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Mar

-15

Mar

-16

District

Nation

Avg. YTD Net Chargeoffs / Avg. Loans and Leases

Based on commercial banks, excluding De Novos; year-to-date (YTD) annualized trimmed means; preliminary 3/31/16 data; C&I = commercial and industrial loans

Average District Net Chargeoff Rate Remained Near Zero; Energy Sector Woes Caused Higher C&I Losses at Large Banks

FRB-SF

Average YTD C&INet Chargeoffs(Recoveries) /

Avg. C&I Loans (%)

Bank Size Mar-2015

Mar-2016

District Small

(<$10B)(0.03%) (0.02%)

District Mid-Sized

($10B-$50B)0.17% 0.18%

Nation Large

(>$50B)0.15% 0.43%

67%

76%

63%

68%

61%

65%

58%

63%

50%

55%

60%

65%

70%

75%

80%

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

District

Nation

FRB-SF

33

Avg. Net Loans and Leases / TA

Liquidity: On-Balance Sheet Liquidity Tightened FurtherAs Assets Shifted Towards Loans

28%

18%

30%27%

34%

29%

37%

32%

10%

15%

20%

25%

30%

35%

40%

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

District Nation

Avg. Securities & Liquid Invest. / TA

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; TA = total assets; Liquid invest. = cash, due from balances, and Federal funds sold & securities purchased under agreements to resell

12%

29%

7%7%6%

-6%-2%

11%

20%

8% 10%

4%-4%

0%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

District >$100K District >$250K Nation >$100K Nation >$250K

Average Net Noncore Funds Dependence Ratio*

34

Net noncore funding ratio remained negative if CDs

between $100K and $250K were excluded.

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; *net noncore funds dependence is sum of borrowed funds, foreign and brokered deposits, large CDs (previously defined as > $100K—green bars, now defined as > $250K—blue bars) less short-term investments divided by long-term assets

Avg. Net Noncore Funds Dependence* (%)

by Bank Size (Using CDs > $100K)

Bank Size Mar-2015

Mar-2016

District Small(<$10B) 6.0% 7.0%

District Mid-Sized

($10B-$50B)15.3% 12.8%

Nation Large(>$50B) 16.5% 15.2%

Reliance on Noncore Funding Remained Moderate,Especially Among Small Banks

FRB-SF

A First Quarter Decline in Long-Term Interest Rates BoostedInvestment Portfolio Values and AOCI

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; *accumulated other comprehensive income is comprised mainly of net unrealized gains and losses on available-for-salesecurities; Constant Maturity (CM) Treasury Rate from Federal Reserve via Haver Analytics

-1.59%

1.53%

0.42%

5.15%

1.65% 1.78%1.00%

1.60%

2.20%

2.80%

3.40%

4.00%

4.60%

5.20%

5.80%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

Mar

-05

Sep-

05M

ar-0

6Se

p-06

Mar

-07

Sep-

07M

ar-0

8Se

p-08

Mar

-09

Sep-

09M

ar-1

0Se

p-10

Mar

-11

Sep-

11M

ar-1

2Se

p-12

Mar

-13

Sep-

13M

ar-1

4Se

p-14

Mar

-15

Sep-

15M

ar-1

6

AOCI (Left Axis) 10-Yr. UST Rate (Right Axis)

Avg. Accumulated Other ComprehensiveIncome (AOCI)* / Tier 1 Cap. – 12th District

End-of-Period 10-YearU.S. CM Treasury Rate

35

FRB-SF

The Share of Assets Funded by Nonmaturity DepositsCould Decline as Rates Rise (as in 2004-2006)

Deposit data based on commercial banks based in the 12th District, excluding De Novos; trimmed means; preliminary 3/31/16 data; *nonmaturity includes demand, money market, and savings; Constant Maturity (CM) U.S. Treasury (UST) Rate from Federal Reserve via Haver Analytics 36

0.93%

5.12%

0.29%0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

35%

40%

45%

50%

55%

60%

65%

70%

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

Nonmaturity Deposits (Left Axis)

3-Mo. UST Rate (Right Axis)

56%

42%

65%

Avg. Nonmaturity Deposits* / Total Assets –12th District

Qtly. Avg. 3-Month U.S. CM Treasury Rate

FRB-SF

11.0%

14.5%15.7%

10.5%

15.6%16.7%

5%

7%

9%

11%

13%

15%

17%

Mar

-08

Mar

-12

Mar

-16

Mar

-08

Mar

-12

Mar

-16

Mar

-08

Mar

-12

Mar

-16

Tier 1 Leverage Tier 1 Risk-Based Capital Total Risk-Based Capital

District Nation

Average Regulatory Capital Ratios

37

Capital: District Bank Capital Ratios Moderated;Risk-Based Measures Underperformed the Nation

FRB-SF

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; new risk-based capital reporting became effective March 2014 for advanced approach adopters and March 2015 for others

76%

85%

71%

75%

67%

71%

64%

69%

60%

65%

70%

75%

80%

85%

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

District Nation

FRB-SF

38

Average Risk-Weighted Assets* / Total Assets

Low and Declining Risk-Based Capital Ratios Reflected a High and Increasing Mix of Assets in Higher Risk Weight Categories

Based on commercial banks, excluding De Novos; trimmed means; preliminary 3/31/16 data; *Assets risk weighted according to regulatory risk-based capital rules in effect as of the report filing date; weights generally reflect perceived credit risk

A period following sustained, rapid

loan growth, which led to high loan-to-

asset ratios

39

Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 3/31/16 data;*States above 1.0 are more volatile than the nation as a whole; those below are less volatile; measured by taking the standard deviation (SD) of state average 1-year net loan growth rate and quarterly pretax ROAA, divided by the SD of comparable U.S. averages (1Q01 through 1Q16)

Banking Metrics in the District Have Shown Above-Average Volatility Historically, Suggesting Greater Cyclical Risks

FRB-SF

1-Year Net Loan Growth Volatility Location Quotient

(Nation = 1.0)> 2.00

1.50 - 2.00

1.00 - 1.50

< 1.00

Quarterly Pretax ROAA VolatilityLocation Quotient

(Nation = 1.0)

> 2.40

1.40 - 2.40

0.90 - 1.40

< 0.90

2.40

2.54

2.094.43

3.41

2.66

2.60

0.82 1.67

2.74

2.93

2.495.81

3.13

3.64

4.93

0.80 1.96

1-Year Net Loan Growth Volatility* Pretax ROAA Volatility*

40

Section 3 – Regulatory Ratings and Trends

Focusing on trends in safety and soundness, consumer

compliance, and Community Reinvestment Act

examination ratings assigned by regulatory agencies to

commercial banks headquartered within the

12th Federal Reserve District.

11%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

% Upgrades

% Downgrades44%

41

Percentage of 12th District Exams that Resulted in CAMELS Composite Rating Upgrade or Downgrade (downgrades shown as negative percentages)

Includes any change in composite CAMELS rating for commercial banks; quarterly data based on examination completion dates (mail dates); preliminary first quarter 2016 data updated through 04/19/16

Regulatory Ratings: Upgrades Continued to Outpace Downgrades in the First Quarter

FRB-SF

23%

32%

8%

0%

10%

20%

30%

40%

50%

60%

Mar

-92

Mar

-93

Mar

-94

Mar

-95

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

Mar

-16

12th Dist. - Composite "3"

12th Dist. - Composite "4"

12th Dist. - Composite "5"

Nation - Composite "3", "4", "5"

61%

14%

39%

Percentage of Banks Rated Composite 3, 4, or 5

42Trends for all commercial banks based on examination completion dates (mail dates); preliminary first quarter 2016 data updated through 04/19/16

FRB-SF

The Share of District Banks with Composite Ratings of 3, 4, or 5 Moderated; District is Historically More Volatile

2.7

2.0

3.2

2.0

3.4

2.32.42.0

2.5

1.8

2.9

2.2

1.6

1.9

2.2

2.5

2.8

3.1

3.4

Mar

-08

Sep

-08

Mar

-09

Sep

-09

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

Average CAMELS Component Ratings for 12th District Banks (1: strong; 2: satisfactory; 3-5: less-than-satisfactory)

Recession

Earnings

Asset QualityCapital

Sensitivity*

Liquidity

Earnings and Management often garnered weaker ratings compared with other component areas—even before the financial crisis.

43Trends for all commercial banks based on examination completion dates (mail dates); preliminary first quarter 2016 data updated through 04/19/16; *Sensitivity to Market Risk

Earnings and Management Remained Weakest Components

FRB-SF

Management

44Trends for all commercial banks based on examination completion dates (mail dates); CRA = Community Reinvestment Act; preliminary first quarter 2016 data updated through 04/19/16

27%

13%

4%

14%

2%0%

5%

10%

15%

20%

25%

Mar

-92

Mar

-94

Mar

-96

Mar

-98

Mar

-00

Mar

-02

Mar

-04

Mar

-06

Mar

-08

Mar

-10

Mar

-12

Mar

-14

Mar

-16

Percentage of 12th District Banks with Less-than-Satisfactory Ratings

Consumer

CRA

The Vast Majority of Banks Continued to Have Satisfactory Consumer Compliance and CRA Ratings

FRB-SF

1. Summary of Institutions

2. Technical Information

Appendices

45

Area Commercial Banks(De Novos)

Industrial Banks

(De Novos)

Savings Institutions (De Novos)

Mar-15 Mar-16 Mar-15 Mar-16 Mar-15 Mar-16

AK 4 (0) 4 (0) - - 1 (0) 1 (0)

AZ 21 (0) 17 (0) - - 1 (0) 1 (0)

CA 190 (1) 173 (0) 4 (0) 3 (0) 12 (0) 12 (0)

GU 2 (0) 2 (0) - - 1 (0) 1 (0)

HI 6 (0) 5 (0) 1 (0) 1 (0) 2 (0) 2 (0)

ID 11 (0) 11 (0) - - 1 (0) 1 (0)

NV 12 (0) 11 (0) 4 (0) 4 (0) 2 (0) 2 (0)

OR 23 (0) 22 (0) - - 3 (0) 3 (0)

UT 31 (0) 30 (0) 18 (0) 16 (0) 4 (0) 2 (0)

WA 46 (0) 42 (0) - - 12 (0) 10 (0)

12L 346 (1) 317 (0) 27 (0) 24 (0) 39 (0) 35 (0)

US 5,502 (11) 5,260 (4) 29 (0) 26 (0) 884 (2) 833 (1)

This report focuses on the financial trends and performance of commercial banks headquartered within the 12th Federal Reserve District (“12L”). 12L includes 9 western states: AK, AZ, CA, HI, ID, NV, OR, UT, and WA, as well as Guam. NV data excludes credit card and zero loan banks. Industrial banks and savings institutions, which have different operating characteristics, are excluded from graphics (other than the table to the left).

De Novos: Many of the charts exclude “De Novo” banks, or banks less than five years old.

Groups by Asset Size: “Small”, and “Mid-Sized” bank groups are based on 12th District community banks (<$10B) and regional banks ($10B-$50B), respectively. The “Large” bank group is based on nationwide banks with assets >$50B because a larger statistical population was needed to construct trimmed means.

Trimmed Mean (also referred to as “average”): Many of the charts present trends in ratio averages, adjusted for outliers. The method used is to eliminate or “trim” out the highest 10% and the lowest 10% of ratio values and average the remaining values.

Aggregate: In some cases, the trimmed mean method is not appropriate (e.g., when many banks have zero values for a particular ratio or for some growth rates where there may be many highly positive and highly negative values). In these cases, District aggregates sometimes are computed (i.e., summing numerator values across all District banks and dividing by the sum of all denominator values), as opposed to averaging individual bank ratios. When an aggregate is used, it is indicated on the chart.

46Based on preliminary 3/31/16 data.

Appendix 1: Summary of Institutions

Appendix 2: Technical Information