Minority Depository Institutions Program
Preservation and Promotion of Minority Depository Institutions
The Federal Deposit Insurance Corporation Report to Congress for 2016

Summary Profile of Minority Depository Institutions

The FDIC maintains a list and tracks insured MDIs it supervises, i.e. state chartered institutions which are not members of the Federal Reserve System, as well as MDIs that are supervised by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve System. ¹ The FDIC takes this broad approach given its role in considering applications for deposit insurance and in resolving institutions in the event an MDI were to fail.

Structure

As of December 31, 2016, FDIC-insured MDIs totaled 157 institutions with combined total assets of over $208 billion. (See Attachment 2, List of Minority Depository Institutions as of December 31, 2016.)

At the beginning of 2016, there were 164 FDIC-insured MDIs with combined total assets of approximately $197 billion. During the year, five MDIs merged into or were acquired by other institutions; one no longer qualified as an MDI after a recapitalization; and one MDI failed, was closed by its state chartering authority, and entered into FDIC receivership. With respect to the five mergers or acquisitions, four MDIs merged with, or were acquired by, other MDIs which preserved their minority character. One of these transactions was with a non-MDI. Three of the MDIs merged or acquired in 2016 were Asian American MDIs and two were Hispanic American MDIs.

The failed institution was an African American MDI with $67 million in assets. It was acquired by a non-MDI through a purchase and assumption transaction at failure, following FDIC efforts to market the institution to other MDIs (see page 6 of this report).

Of the total assets of institutions involved in 2016 MDI acquisitions, mergers or failures, 98 percent ($14.1 billion of $14.4 billion in assets) remained in MDI institutions after the transactions.

Performance

As of December 31, 2016, the overall financial performance of FDIC-insured MDIs was mixed. The number of profitable MDIs increased to its highest level since before the crisis, at more than 85 percent of MDIs. The number of unprofitable MDIs, 14.65 percent, is significantly higher than the percentage of community banks and all banks that are unprofitable, at 4.34 and 4.19 percent, respectively. The unprofitable institutions are mostly smaller institutions, many of which are located in urban areas that experienced significant economic distress during the recent financial crisis.

MDI full-year net income of $1.8 billion fell $512 million (22.6 percent) from the previous year as three large institutions reported sharp declines in earnings. If these three institutions are excluded, annual earnings increased 20.4 percent. At more than 60 percent of MDIs, annual net income rose year-over-year from 2015 to 2016. Increased net interest income and lower provision expense were the primary contributors to the increase in aggregate net income among these banks.

Higher net interest income partially results from growth in loans and other earning assets. Total earning assets increased $16.6 billion (9.5 percent) from 2015 as loan balances rose by $12.1 billion (9 percent). Loan growth at MDIs surpassed the loan growth rate at all community banks by 68 basis points. Most of this growth was in commercial real estate.

Total noncurrent balances decreased $650 million (14.2 percent) from 2015 to 2016, as 1-to-4 family and nonfarm residential portfolios continue to improve. Total equity capital increased from 2015 by $2 billion (8 percent) to $27.1 billion. The Tier 1 leverage ratio increased 2 basis points to 11.64 percent, 93 basis points above the ratio of community banks. All but two institutions were considered well capitalized or adequately capitalized.

Within the MDI sector, performance has been uneven. Generally, smaller MDIs and those serving low- and moderate-income communities continue to face significant challenges, in part reflecting the continuing economic challenges faced by many of the communities they serve.