STATEMENT OF
MARTIN J. GRUENBERG
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
on
DE NOVO BANKS AND INDUSTRIAL LOAN COMPANIES
before the
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES
July 13, 2016
2157 Rayburn House Office Building
MARTIN J. GRUENBERG
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
on
DE NOVO BANKS AND INDUSTRIAL LOAN COMPANIES
before the
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES
July 13, 2016
2157 Rayburn House Office Building
Chairman Chaffetz, Ranking Member Cummings and members of the Committee, thank
you for the opportunity to testify today on de novo banks and industrial loan companies (ILCs).
My written testimony will begin with an overview of recent banking industry performance and
condition. Next I will address trends in de novo and ILC formation and the process by which the
FDIC reviews applications for deposit insurance. Finally, I will discuss the supervisory process
for de novo institutions and steps the FDIC is taking to support de novo formations.
Banking Industry Performance
The post-crisis period has been marked by a gradual, consistent improvement in banking
industry performance, even in the face of some significant headwinds. FDIC-insured institutions
posted record earnings of nearly $164 billion in 2015. Almost two-thirds of all institutions
reported higher earnings for the year than they did in 2014. Many banks have worked off
significant volumes of noncurrent loans during the post-crisis period, and for most banks, this
process is largely complete. Only eight institutions failed last year—the lowest number since
2007. By the end of the first quarter of 2016, the number of problem institutions declined to 165,
the lowest level since mid-2008.
This recovery in their financial condition has put FDIC-insured institutions in a better
position to support economic activity by extending credit to creditworthy borrowers. Loan
balances at FDIC-insured institutions at the end of the first quarter were 6.9 percent higher than a
year earlier, marking their highest 12-month growth rate since mid-2008.
Community banks have also posted a strong recovery in the post-crisis period that has, in
several respects, outpaced the recovery at larger institutions. Loan balances at community banks
grew by 8.9 percent in March from a year ago, exceeding the industry average by more than a
you for the opportunity to testify today on de novo banks and industrial loan companies (ILCs).
My written testimony will begin with an overview of recent banking industry performance and
condition. Next I will address trends in de novo and ILC formation and the process by which the
FDIC reviews applications for deposit insurance. Finally, I will discuss the supervisory process
for de novo institutions and steps the FDIC is taking to support de novo formations.
Banking Industry Performance
The post-crisis period has been marked by a gradual, consistent improvement in banking
industry performance, even in the face of some significant headwinds. FDIC-insured institutions
posted record earnings of nearly $164 billion in 2015. Almost two-thirds of all institutions
reported higher earnings for the year than they did in 2014. Many banks have worked off
significant volumes of noncurrent loans during the post-crisis period, and for most banks, this
process is largely complete. Only eight institutions failed last year—the lowest number since
2007. By the end of the first quarter of 2016, the number of problem institutions declined to 165,
the lowest level since mid-2008.
This recovery in their financial condition has put FDIC-insured institutions in a better
position to support economic activity by extending credit to creditworthy borrowers. Loan
balances at FDIC-insured institutions at the end of the first quarter were 6.9 percent higher than a
year earlier, marking their highest 12-month growth rate since mid-2008.
Community banks have also posted a strong recovery in the post-crisis period that has, in
several respects, outpaced the recovery at larger institutions. Loan balances at community banks
grew by 8.9 percent in March from a year ago, exceeding the industry average by more than a