First Glance 12L (4Q14)

2014: A Year of Opportunities and Challenges

February 23, 2015

Authors: Judy Plock, Colin Perez, Martin Karpuk, Grant LaCorte, Josephine Chan

Editors: Eva Chow, Cynthia Course, David Doyle, Diego Maldonado, Michael Nimis, Gary Palmer, Marty Tunnell

This report is based upon preliminary data from 4Q2014 and prior Condition & Income Reports as well as other examination and economicsources. Data has been prepared primarily for bank supervisors and bankers. The opinions expressed in this publication are those of theauthors. Opinions are intended only for informational purposes, and are not formal opinions of, nor binding on, the Federal Reserve Bank ofSan 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/

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

Table of ContentsHighlights: 12th District Overview 3 - 4

Section 1: Economic Conditions 5 – 12

Section 2: Commercial Bank Performance

EarningsHot Topic – Net Interest Margins Flat

Provisions and Loan Loss Reserves

Loan Growth and MixHot Topic – Loan Growth Driven in Part by Loosening Standards?

Credit Quality

Liquidity and Interest Rate RiskHot Topic – Nonmaturity Deposits and Asset Maturities

Capital and Dividends

Merger Activity

13

14 – 21

22 – 24

25 – 33

34 – 39

40 – 45

46 – 47

48

Section 3: Commercial Bank Regulatory Ratings and Trends 49 – 53

Section 4: Savings Institution and Industrial Bank Performance 54 – 58

Appendix 1/2: Banks Covered in This Report / Technical Information 59

Appendix 3: Regulatory Hot Topics 60

The District’s economy continued to expand at a slightly above-average rate. Growth in jobs,single-family homebuilding, and residential and commercial property prices outpaced the nation.Job growth helped the District’s aggregate unemployment rate decline to 6.6% in December2014, down from 7.6% in the prior year, but still above a national figure of 5.6%.

The District is fairly insulated from the direct negative effects of the slump in oil prices, exceptwhere oil is an important economic driver (e.g., Alaska and pockets of Utah and California).Overall, lower energy costs are expected to benefit consumers and provide some economic lift.Still, banks are vulnerable to the indirect effects of a concurrent “flight to safety”, such as theimpact of lower interest rates on margins and of a strengthening dollar on the export economyand foreign currency translation adjustments. Trade-related risks posed by currency fluctuationsand a slowing global economy could be compounded by the West Coast port disruption.

2014 was generally a year of continued financial improvement among District banks. Withproblem asset volumes easing, earnings inched higher but remained below long-term, pre-recession averages due to ongoing margin pressures. Loan growth accelerated further. Liquidityand capital measures moderated but remained well above pre-crisis troughs.

Year-to-date pretax profit ratios generally increased year-over-year but were flat on a linked-quarter basis and trailed national averages. Improved credit quality and stronger financial healthdrove noninterest and provision expenses lower, more than offsetting margin and fee incomepressures.

12th District Overview“2014: A Year of Opportunities and Challenges”

NV

3.69%UT

2.11%

WA

CA

1.60%

OR

0.05%

AZ

1.36%

ID

AK

HI

2.14%

0% 1% 2% 3% 4%

2.85%

2.37%

Nation

State-Level YOYJob Growth, 4Q14

2.55%

2.70%

FRB-SF

3.66 3.41

0.68 0.08

1.06 0.84

3.64 3.24

0.65 0.05

1.17 0.86

0.0%

1.0%

2.0%

3.0%

4.0%

Net InterestIncome (TE)

NoninterestExpense

NoninterestIncome

ProvisionExpense

Pretax NetIncome

Net Income

Dec-13 Sep-14 Dec-14

Year-to-Date Annualized, % of Average Assets - 12th District Banks

3

Banks Rated CAMELS Composite 3, 4, or 5

District annual net loan growth remained strong, accelerating to 12%. Among theDistrict’s states, year-over-year net loan growth ranged from 15% in California to 4% inAlaska. Only two states, Washington and Alaska, trailed the national average growth rateof 7%. Districtwide, commercial and industrial lines and certain real estate loancategories continued to lead in dollar terms. However, the relatively small constructionand land development category continued to register the largest segment-level growthrate. While economic gains likely fueled most loan growth, Federal Reserve Senior LoanOfficer Opinion Surveys suggest that looser underwriting may have contributed as well.

Asset quality continued to improve, especially among smaller banks. The districtwideaverage nonperforming asset ratio, which includes both noncurrent loans and foreclosedreal estate, ended the year at 0.94%, comparable to the nation. Although lower, theDistrict ratio still exceeded pre-recession averages. Prospectively, rising interest ratescould increase debt service coverage requirements for loans priced with variable interestrates. An expanding economy and strengthening incomes, revenues, and rents, whichtypically accompany rising interest rates, could provide some offset to higher credit costs.

Ongoing shifts in balance sheet maturities also pose risks in a rising interest rateenvironment. Longer-duration loans and securities drifted higher and their value maydecline more severely than short-term assets should interest rates increase. Meanwhile,non-maturity deposit reliance increased further. These deposits’ sensitivity to risinginterest rates may be difficult to forecast accurately.

District on-balance sheet liquidity and capital measures moderated slightly but were stillstrong overall. Noncore funds reliance remained relatively low. However, history suggestsa rising interest rate environment may alter the mix of deposits and fundingprospectively. Meanwhile, risk-based capital ratios ebbed as banks continued to shiftassets towards higher risk-weight buckets in response to stronger loan demand.

Examination ratings improved along with financial performance. The share of Districtbanks with less-than-satisfactory examination ratings declined to 22%, still above anational ratio of 13%, but well below a peak of 60% in late 2010. Consumer complianceratings also continued to recover from the Crisis.

12th District Overview, Continued

Average Nonperforming Assets/Assets (%)

FRB-SF

0.98

0.92

1.53

1.49

1.22

0.74

0.79

0.96

0.94

0.95

0.0%

0.4%

0.8%

1.2%

1.6%

NationLarge

(> $50B)

12L Mid-Sized($10-$50B)

12LSmall

(< $10B)

12LTotal

NationTotal

Dec-13 Sep-14 Dec-14

4

0%

10%

20%

30%

40%

50%

60%

Dec

-90

Dec

-94

Dec

-98

Dec

-02

Dec

-06

Dec

-10

Dec

-14

12L Composite "3" 12L Composite "4" 12L Composite "5" Nation Composite "3"-"5"

5

Job Growth

State Leading Index

Housing Market Metrics

Commercial Real Estate Market Metrics

Oil-Related Employment Exposures

Section 1 - Economic Conditions

6

3.4%

2.8%2.1%

-4.9%

2.1%

-8%

-6%

-4%

-2%

0%

2%

4%

Dec

-94

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

District

Nation

2.3%

3.7%

-6.7%

3.1%

Annual Nonfarm Job Growth Rate

Based on average nonfarm payrolls over trailing three months; Source: Bureau of Labor Statistics, Haver Analytics.

District Job Growth Outpaced the Nationbut Was Relatively Flat

FRB-SF

Leading Index Measure by State - December 2014

7

The Leading Index predicts the 6-month growth rate of state's coincident economic index (also calculated by the Philadelphia FRB). Inputs include state-level nonfarm payroll jobs, average hours worked in manufacturing, unemployment rate, wages and salaries, 1-4 family permits, and initial unemployment claims, as well as national manufacturing delivery times and the 3-mo. vs. 10-yr. Treasury yield spread. Source: Federal Reserve Bank of Philadelphia, Haver Analytics

Leading Index Measures Suggest Continued Economic Improvement; Oregon’s Prospects are Particularly Strong

Leading index predicts if a local economy might expand

(+) or slow (-) in the near term

FRB-SF

Leading Index ReadingNation = 1.74

Strongest 10 States

Other States Above U.S.

Other States Below U.S.

Weakest 10 States

2.74

8

While District Home Prices Continue to Rise, They Remained Below Pre-Recession Peaks in All but Alaska

FRB-SF

Current HPI / Pre-Recession Peak HPINation = -13.4%

Strongest 10 States

Other States Above U.S.

Other States Below U.S.

Weakest 10 States

Year-Over-Year Change in Home Price Index (%)

U.S. AK AZ CA HI ID NV OR UT WA

December 2014 5.0% 5.4% 2.8% 7.0% 6.6% 1.3% 7.3% 6.7% 4.3% 6.7%

December 2013 12.0% 4.8% 14.6% 22.5% 11.6% 12.4% 25.3% 13.6% 11.9% 12.0%

Source: Core Logic

12%

Home Price Index - % Recovered From Pre-Recession Peak - December 2014

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Single Family

2+ Family

9

Year-Over-Year Change in 12-Mo. Housing Starts - West (%)

Based on average new privately owned housing units started in trailing 12 months (seasonally adjusted); West: AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY; Source: Census Bureau, Haver Analytics

Home Permit Growth Continued, With Moderate Slowing Among Annual Multifamily Starts

FRB-SF

PropertyType West U.S.

Single-Family 8.3% 4.1%

2+ Family 9.2% 15.6%

2.8%

6.7%

4.4%

11.2%

18.8%

13.9%

5.4%

11.8%10.2%

7.4%

12.8%

8.1%

2%

6%

10%

14%

18%

Dec

-00

Dec

-02

Dec

-04

Dec

-06

Dec

-08

Dec

-10

Dec

-12

Dec

-14

Dec

-16

Forecast

10

Quarterly Aggregate Vacancy and Availability Rates – 12th District

FRB-SF

CRE Markets: Vacancy and Availability Rates May Be Near Cyclical Lows, Except Among Retail Properties

Office

IndustrialRetail

Multi-Housing

Retail and Industrial trends are availability rates; Office and Multi-Housing trends are vacancy rates; based on an aggregate of rates for 15-16 large metropolitan areas; Source: CBRE-Econometric Advisors

-32%

11% 12%

23%

-40%

-30%

-20%

-10%

0%

10%

20%

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

West* Nation

11*West: AZ, CA, CO, ID, MT, NV, NM, OR, UT, WA, WY; Source: NCREIF Transactions-Based Index of Institutional Commercial Property Investment Performance

Year-Over-Year Change in Commercial Real Estate Price Index

Commercial Property Price Appreciation AcceleratedYear-Over-Year

FRB-SF

Year-Over-Year Change in National

CRE Price Index by Type

Sector 4Q 13 4Q 14

Apartment 10.5% 10.0%

Industrial 9.4% 9.8%

Office 9.4% 11.0%

Retail 9.4% 10.8%

All 9.5% 10.0%

12

Compares the concentration of oil and gas exploration jobs for the county to the nationwide employment concentration. Source: Bureau of Labor Statistics, U.S. Department of Labor, “The Economics Daily”, 1/9/2015 (http://www.bls.gov/opub/ted/2015/counties-with-highest-concentration-of-employment-in-oil-and-gas-extraction-june-2014.htm)

Average Oil and Gas Extraction Employment Location Quotient – 2Q 2014

Oil and Gas Job Concentrations Highest in AK, Parts of CA,and Eastern UT (and Bordering Counties in WY and CO)

FRB-SF

Oil & Gas Extraction

Employment Location QuotientNation = 1.0

< 2.0

2.0 – 7.9

8.0 – 13.9

14.0 – 19.9

=> 20.0

UT Counties: Duchesne (67.4)

& Grand (2.1)

CA: Kern County

(7.4)

AK Boroughs: Kenai (11.7) &

Anchorage (8.1)

FRB-SF

13

Earnings

Provisions and Loan Loss Reserves

Loan Growth and Mix

Credit Quality

Liquidity and Interest Rate Risk

Capital and Dividends

Merger Activity

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

14

2.13%

-1.20%

1.17%

1.58%

0.59%

1.21%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

Earnings: Pretax Profitability Improved Incrementally

FRB-SF

Pretax Return on Average Assets (TE)

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 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

15

1.65% 1.33% 1.22% 1.21% 0.99% 0.97% 0.96% 0.88% 0.81%1.17% 1.21%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

UT AK CA NV* ID OR WA HI AZ 12thDist.

Nation

201420132001-14 Peak2001-14 Trough

Range of Annual Pretax Return on Average Assets (TE) by State, 2001 - 2014

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 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; *NV: excludes credit card and zero-loan banks

In Most District States, Average Pretax EarningsContinued To Recover From Crisis-Era Troughs

FRB-SF

16

-1.25%

1.14%

2.67%

0.61%

1.65%

2.13%

-0.05%

1.41%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

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

Pretax Return on Average Assets (TE) by Bank Size

FRB-SF

Pretax Returns at Smaller Institutions Lagged Those ofLarger Firms but Improved Year-Over-Year

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 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

Margin Compression Continued to Weigh onEarnings, Especially at Large and Mid-Sized Banks

17

5.1% 5.2%

3.9%4.3%

3.8%

2.0%

3.0%

4.0%

5.0%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; for comparability, net interest income is adjusted on a tax-equivalent (TE) basis to assume taxes are paid on income from tax-free municipal loans and securities

Net Interest Income (TE) / Average Earning Assets Average Net Interest Income (TE) / Average

Earning AssetsBank Size 2013 2014

District Small

(<$10B)3.95% 3.90%

District Mid-Sized

($10B-$50B)3.48% 3.39%

NationLarge

(>$50B)2.97% 2.77%

FRB-SF

HOTT O P I C

Large banks rely more heavily on noninterest income than mid-sized and small banks for earnings.

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; figures are adjusted on a tax-equivalent (TE) basis to assume taxes are paid on income from tax-free municipal loans and securities

4.27%4.19% 4.22%

0.35%0.33% 0.32%

3.90% 3.84% 3.89%

0%

1%

2%

3%

4%

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Interest Income Interest Expense Net Interest Margin (NIM)

District Nation

One-Quarter Annualized Income or Expense / Average Earning Assets

18

Quarterly Margins Improved from Early 2014But Were Flat on a Linked-Quarter Basis

FRB-SF

HOTT O P I C

0.87%

0.68%0.65%

0.75%

0.60%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

Declines during the crisis were partially due to losses

on the sale of foreclosed real estate

19Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data

Noninterest Income / Average Assets

Improvements in Overhead More Than OffsetDeclines in Noninterest Income

FRB-SF

3.4%

3.5%

3.4%

3.2%

3.0%

2.9%

2.8%

2.9%

3.0%

3.1%

3.2%

3.3%

3.4%

3.5%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

Noninterest Expense / Average Assets

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data

1.74%1.85%

1.81%

0.45% 0.40%0.37%

1.12% 1.14%1.04%

0.0%

0.3%

0.6%

0.9%

1.2%

1.5%

1.8%

2008

2009

2010

2011

2012

2013

2014

2008

2009

2010

2011

2012

2013

2014

2008

2009

2010

2011

2012

2013

2014

Personnel & Benefits Occupancy Expense All Other NoninterestExpenses

DistrictNation

Noninterest Expense Category / Average Assets

20

Overhead Improvements Mainly in “All Other” Expenses

FRB-SF

Among other things, includes legal, consulting, audit, deposit

insurance, data processing, telecommunications, marketing,

and intangible amortization/ impairment expenses

66¢

83¢

73¢

63¢

72¢ 70¢

25

35

45

55

65

75

85

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

21

Efficiency ratios were somewhat flat at large banks but improved among smaller firms.

Efficiency MeasuresCost to Produce $1 of Revenue

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; efficiency measure = overhead / (net interest income + noninterest income)

Noninterest Expense Controls Fueled Further EfficiencyGains, Primarily Among The District’s Smaller Banks

Average Efficiencyby Bank Size

Bank Size 2013 2014

District Small(<$10B) 77¢ 74¢

District Mid-Sized

($10B-$50B)57¢ 56¢

Nation Large(>$50B) 64¢ 64¢

FRB-SF

3% 2%7%

14%23%

27%

2% 3%

5%

9%

18%

21%

0%

10%

20%

30%

40%

50%

2009

2010

2011

2012

2013

2014

Negative

Zero

% of District Banks with Prov. Exp. of:

0.16%

2.04%

0.08%0.05%

0.66%

0.0%

0.3%

0.6%

0.9%

1.2%

1.5%

1.8%

2.1%

2.4%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

22Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data

Provision Expense / Avg. Assets

Loan Loss Reserves: The Recent Pace of Provision Expenses May Not be Sustainable for Long Given Loan Growth Rates

FRB-SF

1.5%

2.7%

1.7%

1.4%

1.8%

1.5%

0.0%

0.4%

0.8%

1.2%

1.6%

2.0%

2.4%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

23Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; ALLL = allowance for loan and lease losses

ALLL / Total Loans

Reserves Slipped Relative to Total Loans but Coverage of (Declining) Noncurrent Loan Balances Improved

FRB-SF

2.9X

7.0X

0.7X

2.8X

2.6X

3.5X

2.4X

0X

1X

2X

3X

4X

5X

6X

7X

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District

Nation

ALLL / Noncurrent Loans (X)

2.3% 2.3%

1.6%

1.0%0.8%

1.9%

2.4%

1.4%1.1% 1.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-14

Jun-

14Se

p-14

Dec

-14

Mar

-14

Jun-

14Se

p-14

Dec

-14

C&LD Consumer C&I** CommercialReal Estate

ResidentialReal Estate

12th District ($1B-$50B)

Nation ($1B-$50B)

Allowance for Loan and Lease Losses / Total Evaluated* Loans and Leases

24

Reserves Trailed Loan Growth AcrossMost Loan Segments, Similar to National Trends

FRB-SF

Based on aggregate data for commercial banks with assets between $1 billion and $50 billion (smaller banks are not required to report this information); preliminary 12/31/14 data; *evaluated excludes loans accounted for at fair value or held for sale; **C&I also includes “all other” loan types not specified above

18.5%

-6.2%

11.9%

7.0%

-10%

-5%

0%

5%

10%

15%

20%

Dec

-01

Jun-

02D

ec-0

2Ju

n-03

Dec

-03

Jun-

04D

ec-0

4Ju

n-05

Dec

-05

Jun-

06D

ec-0

6Ju

n-07

Dec

-07

Jun-

08D

ec-0

8Ju

n-09

Dec

-09

Jun-

10D

ec-1

0Ju

n-11

Dec

-11

Jun-

12D

ec-1

2Ju

n-13

Dec

-13

Jun-

14D

ec-1

4

District Nation

FRB-SF

25

Year-Over-Year Growth in Net Loans & Leases

Based on aggregate data for commercial banks, preliminary 12/31/14 data; excludes banks with assets <$1 billion, which do not report this information; *evaluated excludes loans accounted for at fair value or held for sale; **C&I also includes “all other” loan types not specified above

Loan Growth: District Loan Growth Accelerated Faster Than Nation; Historically Prone to Broader Swings

Year-Over-Year Growth in Net Loans & Leases

26Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 12/31/14 data

Average Net Loan Growth in MostDistrict States Outpaced the Nation

FRB-SF

YOY Net Loan GrowthNation = 7.0%

Strongest 10 States

Other States Above U.S.

Other States Below U.S.

Weakest 10 States

27

15.5%

10.4% 10.4% 9.5% 8.2% 8.0% 7.5% 6.8%4.4%

11.9%7.0%

-14%

-7%

0%

7%

14%

21%

28%

35%

42%

CA ID OR UT AZ HI NV* WA AK 12thDist.

Nation

201420132001-14 Peak2001-14 Trough

Range of Year-Over-Year Average Net Loan Growth by State, 2001 - 2014

Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 12/31/14 data; *NV: excludes credit card and zero-loan banks

Annual Loan Growth Accelerated in Most District StatesBut Continued to Trail Pre-Recession Peaks

FRB-SF

2.0%

3.8%

2.4%

2.7%

2.8%

0.3%

0.5%

1.8%

-0.4%

1.8%

1.4%

0.6%

0.9%

2.0%

2.4%

-0.7% 3.0%

2.1%

1.6%

-2% 0% 2% 4% 6% 8% 10% 12% 14%

NationLarge Banks

($50B+)

12th Dist.Mid-Sized

($10B-$50B)

12th Dist.Small Banks

(<$10B)

Nonfarm Nonresidential Commercial & Industrial Multifamily1-4 Family First Lien Construction & Land Dev OtherHome Equity + Jr Lien Consumer Ag + Farmland Secured

28Based on a panel of commercial banks; excludes banks with significant mergers, loan sales, or loan purchases over the period; preliminary 12/31/14 data

Percentage Point Contribution to Aggregate Year-Over-Year Loan Growth

Nonfarm Nonresidential, C&I, and Residential Were BigPercentage Point Contributors to Overall Growth Rate . . .

FRB-SF

13.2%

12.5%

6.9%

13%

4%

9%

10%

10%

13%

14%

16%

29%

0% 5% 10% 15% 20% 25% 30%

All Loans

Home Equity + Jr Lien

Ag + Farmland Secured

Nonfarm Nonresid

1-4 Family First Lien

Consumer

Commercial & Industrial

Multifamily

Construction & Land Dev

Including Wells: 8%

29Based on a panel of commercial banks with assets <$200B; excludes banks with significant mergers, loan sales, or loan purchases over the period; preliminary 12/31/14 data

Aggregate Year-Over-Year Loan & Lease Growth by Category

. . . But at the Segment Level, Growth Rates Among Relatively Small C&LD Portfolios Outpaced Other Categories

FRB-SF

Other Revolving: + 56%Other Consumer + 20%Credit Card: + 11%Auto: + 3%

Nonowner-occupied: + 11%Owner-occupied: + 7%

Other C&LD: + 30% Residential Constr.: + 29%

*Based on a panel of 346 District commercial banks without significant mergers, loan sales, or loan purchases over the period. Includes only banks with at least 4% of loans in the particular loan type; preliminary 12/31/14 data

16%

19%

24%

25%

25%

34%

34%

48%

0% 10% 20% 30% 40% 50%

Nonfarm Nonresid.

Home Equity + Jr Lien

1-4 Family First Lien

Ag + Farmland Secured

Commercial & Industrial

Multifamily

Consumer

Construction & Land Dev

Percent of Banks Making Loans in Category* With > 25% YoY Growth

# of high growth banks

88

21

58

79

19572550

30

Segment Growth Exceeded 25% Among a Large Share of Active C&LD, Consumer, and Multifamily Lenders

Nearly half of active C&LD lenders expanded the segment by 25%+ year-over-year.

FRB-SF

HOTT O P I C

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Jan-

15

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Jan-

15

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Jan-

15

Jan-

14A

pr-1

4Ju

l-14

Oct

-14

Jan-

15

Comm'l. &Indust.

CommercialReal Estate (CRE)

1-4 FamilyMortgages*

Consumer

Small Borrowers

Non-Traditional/Non QM-Jumbo*

Nonfarm-Nonresid.

Multifamily

C&LDLarge Borrowers Credit CardPrime/GSE

Eligible*

Auto

Net Percentage Reporting Tightening (Loosening) Standards During Quarter

31

On Net, More Lenders Eased Than TightenedStandards, but by a Declining Margin

FRB-SF

HOTT O P I C

Based on a sample of loan officers at 70+/- domestic banks (number varies by period and loan type); *in the latest survey, two categories were replaced with six based on GSE eligibility, qualifying mortgage (QM) status, and size (making comparisons imperfect); Source: Federal Reserve Senior Loan Officer Opinion Survey (http://www.federalreserve.gov/BoardDocs/snloansurvey/)

-60%

-45%

-30%

-15%

0%

15%

30%

45%

60%

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

District

Nation

32

Unfunded Commercial Line of Credit Growth*, Year-Over-Year

Unfunded Growth in C&I and Construction LinesDecelerated but Continued to Outpace the Nation

FRB-SF

-60%

-45%

-30%

-15%

0%

15%

30%

45%

60%

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

District

Nation

Unfunded Construction and CRE Line of Credit Growth, Year-Over-Year

Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 12/31/14 data; *includes unfunded loan commitments not secured by residential or commercial real estate (CRE) or for CRE purposes or for credit cards (i.e., mostly commercial and industrial lines)

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data

129%

29% 18% 27%

126% 111% 131% 130%

452%

327%

0%

100%

200%

300%

400%

500%

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Construction& Land Dev.

Multifamily Nonfarm-Nonres.Owner-Occup.

Nonfarm-Nonres.Nonowner-Occup.

Total CRE

District Nation

CRE Mortgage Loans / Total Risk-Based Capital

33

Growth in Construction and Multifamily Pushed Overall Commercial Mortgage Concentrations Higher on Average

FRB-SF

34Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; Noncurrent = 90+ days past due or on nonaccrual

0.85% 0.88%

4.66%

0.91%

0.0%

1.0%

2.0%

3.0%

4.0%

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

District

Nation

Credit Quality: Year-End Noncurrent Rates Continued toRecede, Approaching Levels Not Seen Since 2007

Average Noncurrent Rate (%)

Bank Size 2013 2014

District Small(<$10B) 1.49% 0.91%

District Mid-Sized

($10B-$50B)1.11% 0.92%

Nation Large(>$50B) 1.49% 1.14%

FRB-SF

Noncurrent loan rates improved the most among smaller banks.

Noncurrent Loans and Leases / Total Loans and Leases

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data

16.1%

0.9%

3.2%

0.7% 1.0%2.4%

0.7%

2.9%

0.7%0%

2%

4%

6%

8%

10%

12%

14%

16%

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Construction& Land Dev.

Nonfarm-Nonresidential

Multifamily Commercial &Industrial

1-4 Family

District Nation

Noncurrent Loans by Type (%)

35

Noncurrent Rates Continued to Ebb Across Loan Categories

FRB-SF

Improved credit conditions led the trend; lack of seasoning among rapidly-growing loan portfolios also provided “denominator effect” on ratios.

36

1.0% 1.0% 0.9% 0.9% 0.9% 0.9% 0.8% 0.8% 0.4%0.9% 1.0%

0%

2%

4%

6%

8%

10%

AZ ID UT NV* CA WA OR AK HI 12thDist.

Nation

201420132001-14 Peak2001-14 Trough

Range of Noncurrent Loans/Total Loans by State, Year-End 2001 - 2014

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; *NV: excludes credit card and zero-loan banks

Most State-Level Noncurrent Loan Rates Continued toRevert Toward Pre-Crisis Troughs

FRB-SF

Based on all 12th District commercial banks; trimmed means; preliminary 12/31/14 data 37

Foreclosure Volumes Continued to WaneAnd Were In Line with National Levels

FRB-SF

0.52%

0.11%0.21%

0.07%0.02%

0.99%

0.31%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Construction& Land Dev.

Nonfarm-Nonresid. 1-4 Family Total

District Nation

Foreclosed Other Real Estate Owned / Total Assets by Type

FRB-SF

38

0.06%

2.15%

0.18%0.06%

0.72%

0.0%

0.4%

0.8%

1.2%

1.6%

2.0%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

District Nation

Net Charge-Offs / Average Loans and Leases

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data

Average District Net Charge-off Rate Sank toPre-Crisis Levels

FRB-SF

Based on all 12th District commercial banks; trimmed means; preliminary 12/31/14 data 39

Net Losses Declined Across Major Loan Types;C&LD and 1-4 Family Categories Registered Net Recoveries

FRB-SF

5.64

(0.12)

2.48

0.08 0.66

0.00

1.24

(0.01)

0.57 0.02

-1%

0%

1%

2%

3%

4%

5%

6%

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Construction& Land Dev.

Commercial& Indust.

Home EquityLines

1-4 FamilyClosed End

Nonfarm-Nonresid.

District Nation

Net Charge-offs (Recoveries) / Average Loans by Type

FRB-SF

66%

76%

67% 67%

61%

67%

62%

50%

55%

60%

65%

70%

75%

80%

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

District Nation

FRB-SF

40

Net Loans and Leases / Assets

Liquidity: On-Balance Sheet Liquidity Back to 2010Level, Down From 2012 Peak

7%

11%

13%

11%

8%8%

0%

2%

4%

6%

8%

10%

12%

14%

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

District Nation

Short-Term Investments / Assets

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; Short-Term Investments: interest-bearing bank balances, Federal funds sold & securities purchased under agreements to resell, <1-year debt securities

0.4%-8.1%

4.7%9.2%

-60%

-30%

0%

30%

60%

90%

120%

150%

180%

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Total Dep.

CDs>$100KCDs<$100K

Brokered Dep

41Based on commercial banks, excluding De Novos; trimmed means (not merger adjusted); preliminary 12/31/14 data

Year-Over-Year Deposit Growth – 12th District Deposit growth was fastest among mid-sized banks, in part because of mergers

Jumbo CD Growth Gained Modest Momentum;Brokered Deposit Growth Cooled

FRB-SF

Average AnnualDeposit Growth

Bank Size 2013 2014

District Small(<$10B) 5.1% 9.0%

District Mid-Sized

($10B-$50B)7.9% 15.0%

Nation Large(>$50B) 3.0% 6.8%

18%

34%

18%16%

9%

0%

5%

10%

15%

20%

25%

30%

35%

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

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

42

On average, half of traditional noncore funding derived from CDs $100K -

$250K

Noncore* Liabilities / Assets

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; *Noncore includes borrowed funds, foreign and brokered deposits, large CDs (previously defined as > $100K—green area, now defined as > $250K—blue bars)

Average Noncore* Liabilities / Assets

by Bank Size (Using CDs > $100K)

Bank Size Dec-08 Dec-14

District Small(<$10B) 33% 18%

District Mid-Sized

($10B-$50B)45% 20%

Nation Large(>$50B) 39% 24%

Reliance on Noncore Funding, Which SwelledAs the Crisis Unfolded, Continued to Recede

FRB-SF

Interest Rate Risk: Longer-Term Assets InchedHigher at All But Mid-Sized Bank Group

HOTT O P I C

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data 43

FRB-SF

27%

44%

41%

30%

20%

25%

30%

35%

40%

45%

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

District Small (<$10B)

District Mid-Sized ($10-$50B)

Nation Large (>$50B)

Loans and Securities Maturing or Re-Pricing > 3 Years / Assets

Earning assets will be slower to re-price upward as rates rise.

FRB-SF

Non-Maturity Deposits Increased As Rates Remained Low, but the Trend Could Reverse

HOTT O P I C

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; non-maturity includes demand, money market and savings; Constant Maturity (CM) Treasury Rate from Federal Reserve, Haver Analytics 44

0.93%

5.12%

0.02%0%

1%

2%

3%

4%

5%

6%

35%

40%

45%

50%

55%

60%

65%

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Non-maturity Deposits / Assets (Left Axis) 3-Mo. U.S. CM Treasury Rate (Right Axis)

56%

42%

63%

Non-Maturity Deposits / Total Assets12th District Banks

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

FRB-SF

A Flight to Safety in Late 2014 Boosted Bonds, butValues Could Slip Again Should Interest Rates Rise

HOTT O P I C

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; available for sale (AFS) securities only; Constant Maturity (CM) Treasury Rate from Federal Reserve, Haver Analytics

0.13%

-0.08%

0.03%

5.07%

1.64%

2.28%

1%

2%

3%

4%

5%

6%

-0.10%

-0.05%

0.00%

0.05%

0.10%

0.15%

Dec

-03

Jun-

04D

ec-0

4Ju

n-05

Dec

-05

Jun-

06D

ec-0

6Ju

n-07

Dec

-07

Jun-

08D

ec-0

8Ju

n-09

Dec

-09

Jun-

10D

ec-1

0Ju

n-11

Dec

-11

Jun-

12D

ec-1

2Ju

n-13

Dec

-13

Jun-

14D

ec-1

4

Net Unrealized Gains (Losses) (Left Axis)

10-Yr. U.S. CM Treasury Rate (Right Axis)

Net Unrealized Gains (Losses) on AFS Securities / Tier 1 Cap. – 12th District

Qtly. Avg. 10-Year U.S. CM Treasury Rate

45

FRB-SF

Based on commercial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data 46

9.7%

11.3%

10.1% 10.2%

7.2%

9.9%

4%

6%

8%

10%

12%

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

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

Tier 1 Leverage Ratio

Capital: Risk-Based Capital Ratios Moderated More Than Leverage Measure as Assets Shifted Into Higher Risk Weights

FRB-SF

13.4%

16.6%

14.4%

15.0%

11.7%

14.6%

8%

10%

12%

14%

16%

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

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

Total Risk-Based Capital Ratio

Based on commercial banks organized as C-Corps (S-Corps omitted as these typically have high payout rates to cover shareholder tax obligations), excluding De Novos; preliminary 12/31/14 data

53%

30% 30% 32%

71%

64%65% 67%

87%78% 79% 80%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2007

2012

2013

2014

2007

2012

2013

2014

2007

2012

2013

2014

Under $1 Billion $1 - $10 Billion Over $10 Billion

District

Nation

Share of Banks Paying Dividends by Size (excluding S-Corps)

47

Dividend Payout Activity Trailed Pre-Crisis Levelsbut Increased Modestly Year-Over-Year

FRB-SF

Mergers: Merger Activity Persisted in the District;Average Valuation Multiples Drifted Higher

Assisted purchase and assumption (P&A) data by failure year and excludes liquidations and deposit transfers; unassisted merger and acquisition (M&A) data by announcement year and includes whole/minority/thrift merger conversion deals completed or with a pending definitive agreement; price multiple data includes unassisted transactions only and was not available for all transactions; Source: SNL Financial (1/29/2015) 48

11 821 26 28 31 268

31

3312

15

2

86%

113%123%

138%

0

25

50

75

100

125

150

0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014

Assisted P&A Transactions of Failed 12th District Banks (Left Axis) Unassisted M&A Involving 12th District Buyers/Targets (Left Axis) Average Price / Tangible Book Value, % (Right Axis)

12th District M&A Deal Counts

FRB-SF

Average Price / Tangible Book Value (%)

49

Section 3 – Regulatory Ratings and Trends

Focusing on trends in examination (CAMELS) ratings

assigned by regulatory agencies among commercial

banks headquartered within the 12th Federal Reserve

District.

27%

13%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

% Upgrades

% Downgrades

50

Percent 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); recent data are preliminary; data updated through 2/11/15

Regulatory Ratings: Pace of CAMELS Upgrades Moderated but Continued to Outpaced Downgrades

FRB-SF

60%

5%

21%

31%

13%

0%

10%

20%

30%

40%

50%

60%

Dec

-90

Dec

-91

Dec

-92

Dec

-93

Dec

-94

Dec

-95

Dec

-96

Dec

-97

Dec

-98

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

12th Dist. - Composite "3"

12th Dist. - Composite "4"

12th Dist. - Composite "5"

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

60%

22%

39%

Share of Banks Rated Composite 3, 4, or 5

51Trends for all commercial banks based on examination completion dates (mail dates); data updated through 2/11/15

FRB-SF

Percentage of Banks with CAMELS Composite Ratings of3, 4, or 5 Continued to Fall

2.7

2.1

3.2

2.2

3.4

2.5

2.4

2.1

2.5

1.9

2.9

2.3

1.5

2.0

2.5

3.0

3.5

Dec

-06

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

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

Recession

Earnings

Asset QualityCapitalSensitivity*Liquidity

Earnings and Management ratings remained the weakest; sensitivity ratings remained pressured by interest rate risk concerns.

52Trends for all commercial banks based on examination completion dates (mail dates); recent data are preliminary; data updated through 2/11/15; *Sensitivity to Market Risk

Earnings and Management Better but Weakest; Asset Quality Rating Upgrades Continued; Sensitivity Ratings Somewhat Flat

FRB-SF

Management

53Trends for all commercial banks based on examination completion dates (mail dates); CRA = Community Reinvestment Act; recent data are preliminary; updated 2/11/15

27%

13%

4%

14%

3%0%

5%

10%

15%

20%

25%

Dec

-90

Dec

-92

Dec

-94

Dec

-96

Dec

-98

Dec

-00

Dec

-02

Dec

-04

Dec

-06

Dec

-08

Dec

-10

Dec

-12

Dec

-14

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

ConsumerCRA

Consumer Compliance Ratings Continued Improving;CRA Ratings Have Plateaued

FRB-SF

54

Focusing on trends among savings institutions and industrial banks headquartered within the 12th Federal Reserve District.

The savings institutions represent a combined population of District savings & loan associations plus savings banks

Section 4 - Savings Institution and Industrial Bank Performance

Commercial Banks (352)

Savings Institutions (40)

Industrial Banks (27)$2.4 trillion

(Wells Fargo accounts for $1.5 trillion)

1.38%

-1.00%

0.86%

2.79%

0.88%

3.88%

1.16%-0.32%

0.89%

-2%

-1%

0%

1%

2%

3%

4%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

55

Return on Average Assets

Based on District commercial banks, savings institutions, and industrial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data

Industrials typically conduct nationwide consumer or C&I lending (contributing to strong loan yields) from one office (limiting overhead expenses).

Savings Commercial

Industrial

High Yield Lending and Limited Branching Enabled Industrial Banks to Out-Earn Commercial and Savings Institutions

FRB-SF

4.76%

0.91%

3.54%

1.03%

3.57%

0.84%

0.0%

1.0%

2.0%

3.0%

4.0%

Dec

-07

Jun-

08

Dec

-08

Jun-

09

Dec

-09

Jun-

10

Dec

-10

Jun-

11

Dec

-11

Jun-

12

Dec

-12

Jun-

13

Dec

-13

Jun-

14

Dec

-14

56

Noncurrent Loans and Leases /Total Loans and Leases Noncurrent rates at commercial banks were more severe than at industrial banks or savings institutions during the crisis

Based on District commercial banks, savings institutions, and industrial banks excluding De Novos; trimmed means; preliminary 12/31/14 data; Noncurrent = 90+ days past due or on nonaccrual.

CommercialIndustrial

Noncurrent Loan Ratios Continued to EbbAcross Charter Types

Savings

FRB-SF

57

10.4%

11.7%11.0%

12.7%12.5%

16.4%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

GAAP Equity / Assets

Savings

Commercial

Industrial

Based on District commercial banks, savings institutions, and industrial banks, excluding De Novos; trimmed means; preliminary 12/31/14 data; Equity = equity capital per generally accepted accounting principles (GAAP)

Total Risk-Based Capital Ratios 12/31/14 (Average)Industrial 22.1%Savings 22.3%Commercial 16.5%

Industrial Banks’ Capital Still High on a GAAP Basis; Margin Relative to Savings Institutions Disappears When Risk-Based

FRB-SF

58

6%

61%

22%

8%

41%

13%

0%

10%

20%

30%

40%

50%

60%

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Share of District Institutions Rated CAMELS Composite 3, 4, or 5

Trends for all institutions based on examination completion dates (mail dates); recent data are preliminary; data updated through 2/11/15; note: there are too few Industrials to disclose specifics.

Savings

Commercial

Similar to Banks, Share of Savings Institutions Rated Composite 3, 4, or 5 Drifted Downward

FRB-SF

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.

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.

Industrial banks and savings institutions: The main focus of this report is on commercial banks. Industrial banks and savings institutions have different operating characteristics so are highlighted separately in Section 4. There, the savings institution data include institutions that file the bank Call Report plus those that, up until March 2012, filed the thrift Call Report.

1. Banks Covered in this Report

2. Technical Information

3. Regulatory Hot Topics

Appendices

59

Appendix 1: Institutions Covered in this Report Appendix 2: Technical Information

Geography Commercial Banks(De Novos)

Industrial Banks(De Novos)

Savings Institutions (De Novos)

Dec-13 Dec-14 Dec-13 Dec-14 Dec-13 Dec-14

Alaska 4 (0) 4 (0) - - 2 (0) 1 (0)

Arizona 23 (0) 21 (0) - - 1 (0) 1 (0)

California 200 (2) 193 (1) 6 (0) 4 (0) 17 (1) 13 (0)

Guam 2 (0) 2 (0) - - 1 (0) 1 (0)

Hawaii 6 (0) 6 (0) 1 (0) 1 (0) 2 (0) 2 (0)

Idaho 15 (0) 11 (0) - - 1 (0) 1 (0)

Nevada 13 (0) 12 (0) 4 (0) 4 (0) 2 (0) 2 (0)

Oregon 25 (0) 25 (0) - - 3 (0) 3 (0)

Utah 32 (0) 31 (0) 18 (0) 18 (0) 4 (0) 4 (0)

Washington 50 (1) 47 (0) - - 12 (0) 12 (0)

12th District 370 (3) 352 (1) 29 (0) 27 (0) 45 (1) 40 (0)

Nation 5,815 (33) 5,571 (13) 31 (0) 29 (0) 964 (4) 904 (2)

Based on preliminary 12/31/14 data.

FRB-SF

LEVE

LOF

CON

CERN

BSA/AML - Internal Control Environment

Credit - Quality of Loan Growth

Market - Lengthening Asset Maturities

Other - Capital Plans & Stress Testing

Operational - Info./Cyber Security

Operat'l. - Business Continuity PlanningOperat'l. - Service Provider Risk ManagementOperat'l. - Internal Audit Oversight & ProgramOperat'l. - Model Risk Management

Compliance - New/Complex Prod. & ServicesCompliance - Keeping Pace with Reg. Change

Credit - Loan Concentrations

Liquidity - Non-Maturity Deposit Sensitivity

BSA/AML - Board and Mgmt. Oversight

60

High - Represents a current or future (next 1-2 years) problem area that if realized would likely lead District institutions to unprofitability, downgrade, or failure (note: High concern cannot have an Increasing outlook because High is already the highest concern level).

Elevated - Represents a lower likelihood than High of becoming a problem area and/or the problem area has a somewhat lower impact on District institutions’ profitability, supervisory ratings, or ongoing concern.

Moderate - Represents a concern that is notable, but has low likelihood of realization or low impact to District institutions. Typically, these issues are of an emerging nature.

Concern Outlook – based on outlook within 1-2 years.

Appendix 3: Regulatory Hot TopicsModerate-to-High Concern Areas to Watch

FRB-SF

IncreasingDecreasing Stable

Evolving competitive, economic, regulatory, and technological challenges have heightened risks in many areas, especially BSA/AML, information technology,

interest rate risk/liquidity, operations, and consumer compliance.

Prevention and detection of rapidly evolving IT vulnerabilities and threats is challenging. The stakes are very high in the event of a breach.

BSA/AML policies, processes, and procedures have not always kept pace with the District’s vulnerability to trade-based money laundering, bulk cash smuggling, marijuana related businesses, and virtual currencies.

HOTT O P I C

DIRECTION OF CONCERN

Mode

rate

High

Elev

ated