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FDIC Data: First Quarter Iowa Banking Results Show Loan and Deposit Growth

JOHNSTON, IOWA (May 29, 2024) — The banking industry began the year showing strength and resiliency despite tightened margins and highly competitive rate pressure. According to data released Wednesday by the Federal Deposit Insurance Corp. (FDIC), Iowa banks reported both loan and deposit growth in the first quarter.

“Our nation’s banking industry continued to show resilience as first-quarter earnings bounced back from the prior quarter, which was heavily influenced by a one-time deposit insurance special assessment,” said John Sorensen, president and CEO of the Iowa Bankers Association. “It’s a reminder to consumers that our nation’s banks stand behind our deposit insurance system, providing the funds necessary to insure deposits while meeting the credit and investment needs of our communities.”

Iowa Banking Results

Iowa-domiciled banks had $85.1 billion in active loans as of March 31, an increase of 1.2% from the prior quarter. Deposit growth slightly outpaced loan growth, up 1.9% from year-end. Total deposits for the first quarter were $104.2 billion, compared to $102.2 billion the year prior. Both total loans and deposits increased slightly from first quarter 2023.

The quality of these loans remains exceptional with average net loan charge-offs at just 0.03%, a slight decrease from year-end and no change from first quarter 2023. The financial health of Iowa borrowers remains strong with the non-current percentage of total loans at 0.52%, up slightly from 0.48% in 2023.

Iowa banks also saw an increase in total assets to begin the year. First-quarter total assets were $125.4 billion, a 3.2% increase compared to the same period in 2023.

Iowa banks had $287 million in net income in the first quarter, a 10.9% decrease from first quarter 2023. The decline is a result of lower net interest margins due to the competitive rate environment. Iowa has more banks per capital than most states, creating a competitive interest rate environment for consumers and businesses. This contributes to a lower average net interest margin. The average return on assets (ROA), an overall indicator of bank performance, at Iowa banks decreased to 0.92% in the first quarter from 0.97% the year prior.

National Banking Results

Overall, the FDIC reported Wednesday that the banking industry has proven to be resilient despite inflation, interest rate volatility, and economic and geopolitical uncertainty. The FDIC will continue to closely monitor credit quality, earnings, liquidity and loan portfolio deterioration as all pose significant risks to the banking sector.

Total deposits rose again this quarter to $19 trillion, a slight increase from both year-end and first quarter 2023. Domestic deposits increased for the second straight quarter, this quarter by $190.7 billion. The first quarter saw a decline in savings account balances, but the decline was offset by transaction account growth. Brokered deposits declined by $10.2 billion – the first decline in seven quarters. The FDIC reported a continued shift away from noninterest-bearing deposits toward interest-bearing deposits with a 1.7% increase in interest-bearing deposits quarter-over-quarter and a steady decline in noninterest-bearing deposits. Community banks saw a 1% increase in domestic deposits this quarter with more than half of community banks reporting an increase in deposit account balances.

Total loans fell by 0.3% from the previous quarter to $12.4 trillion but were still slightly above first quarter 2023. Credit card loans had the greatest impact on loan balance fluctuations. Community banks reported broad-based loan growth again this quarter with the strongest growth continuing to be in residential mortgage loan balances and nonfarm, nonresidential commercial real estate.

Asset quality metrics remain favorable, but the industry continues to see deterioration due to commercial real estate loans and credit card portfolios. Total assets were $24 trillion in the first quarter, a slight increase from the year prior. Higher trading account balances led the increase. Community banks also saw a slight increase in assets quarter-over-quarter to $20.8 billion.

Total net income increased 79.5% from the previous quarter to $64.2 billion in the first quarter, largely due to a significant decline in noninterest expense. The FDIC reported the decline in expense was “mainly due to lower expense related to the FDIC special assessment and lower goodwill write-downs.” The decrease in special assessment expense accounted for more than half of the noninterest expense decline. Community banks also reported an increase in net income by 6.1% from the previous quarter to $6.3 billion; however, the FDIC reported, “half (49.9%) of all community banks reported a quarter-over-quarter decline in net income.”

The number of banks on the FDIC’s “problem bank list” increased by 11 to 63 banks from the previous quarter. Total assets held by problem banks were $82.1 billion, an increase of $15.8 billion from the year prior. Only 1.4% of total banks are considered “problem banks” which is within the normal range. There were no bank failures in the first quarter.

The Deposit Insurance Fund (DIF) balance was $125.3 billion on March 31, an increase of $3.5 billion from year-end. The DIF reserve ratio — the fund balance relative to insured deposits — increased again by 2 basis points to 1.17%. The FDIC noted that based on projections, “the reserve ratio remains on track to reach 1.35% by the statutory deadline.”

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