FDIC Reports Positive Third Quarter with Noticeable Growth in Consumer, Real Estate Lending
Iowa banks continue to drive community and economic development with $63.7 billion in total loans to Iowa businesses, farmers and consumers
JOHNSTON, IOWA (Nov. 26, 2019) — Iowa-chartered banks continue to drive the state’s economic development with $63.7 billion in active loans on their books as of Sept. 30, 2019, up 4.5% from the prior year’s third quarter, according to results released today by the Federal Deposit Insurance Corp.
Loan quality at Iowa banks remained strong in the third quarter. Net loan charge-offs were at 0.10%, compared to 0.09% last quarter. At 0.73%, the noncurrent loan percentage of total loans is up from the year prior percentage of 0.70%.
“Iowans can be thankful they are served by a diverse banking system dedicated to growing healthy communities,” said John Sorensen, president and CEO of the Iowa Bankers Association. “Iowa’s banks remain key drivers of our economy with nearly $3 billion in new loans generated over the past 12 months alone.”
On Tuesday, the FDIC said the banking industry reported positive results overall and the annual rate of loan growth for community banks outpaced the overall industry.
While non-recurring events at three of the nation’s largest financial institutions resulted in a modest decline in aggregate quarterly net income, the FDIC said the industry still reported loan growth and the number of problem banks remained low.
The record-long economic expansion is continuing in the U.S. However, the FDIC reported that with two reductions in short-term rates and a flat yield curve in the third quarter, banks will continue to face challenges in lending and funding.
Low commodity prices and farm incomes persisted in the third quarter, resulting in modest deterioration in the agriculture sector, according to the FDIC. While the net charge-off rate for agriculture loans remained low, some farm banks are reporting asset quality deterioration in farmland and production loans. “The noncurrent rate for agriculture loans at community banks rose by 11 basis points from a year ago to 1.27%, but is below levels reached during previous downturns,” the FDIC report stated.
Nationally, all major loan categories reported quarterly increases — led by commercial and industrial loans, consumer loans and residential mortgages, the FDIC reported. Noticeable growth in consumer and real estate lending helped offset uncertainty that slowed growth nationally in business loan demand. However, commercial and industrial loan growth at community banks remained strong, increasing by 6% from a year ago.
In addition to providing access to quality credit, banks provide consumers with a safe place to store deposits. Total deposits at Iowa banks were $74.2 billion at the end of third quarter this year, up 6.58% from the year prior.
The number of banks across the nation on the FDIC problem list declined by one to 55 during the third quarter. This is the lowest number of problem banks since first quarter 2007. Four new banks opened for a total of 10 new banks thus far in 2019, and no banks failed in the third quarter.
The FDIC Deposit Insurance Fund, supported by bank premiums, rose by $1.5 billion from the end of last quarter to $108.9 billion. The increase in the fund was mainly driven by assessment income followed by interest earned on investment securities held by the DIF and a reduction in losses from past failures, the FDIC reported. Estimated insured deposits were $7.7 trillion at the end of September, an increase of 0.6% from last quarter.
Year-to-date net income for the Iowa banking industry was $883 million as of Sept. 30, 2019, and total assets were $90.4 billion. Return on assets (ROA), another indicator of overall bank performance, increased slightly to 1.34%, compared to 1.31% at the end of third quarter 2018.
