JOHNSTON, IOWA (Sept. 3, 2013) – The Federal Deposit Insurance Corp. (FDIC) released its second quarter performance report last week showing that Iowa banks continue to increase earnings, decrease losses and improve asset quality. “The latest bank performance results reflect a healthy industry that continues to improve,” said Iowa Bankers Association President and CEO John Sorensen. Iowa banks have been a source of responsible lending and sound financial advice which has served the state well in keeping our economy and asset values stable. At the same time, institutions face challenges as they recover from a one-two punch of rising regulatory costs and continued slow loan demand that makes it difficult to grow top-line revenue.
Loans and leases at Iowa banks continue to expand despite modest economic growth that makes borrowers hesitant to take on more debt. “Many of our bankers report that small business owners find the economic environment too uncertain to consider significant expansion plans,” said Sorensen.
It will also be important for banks to carefully manage their interest rate risk going forward. “Banks are keenly aware of the risks posed by acceleration in medium and long-term interest rates and every institution is working to put measurers in place to ensure they can effectively manage that risk,” said Sorensen.
Total assets of banks chartered in Iowa grew by four percent compared to second quarter of 2012 and total deposits increased just over one percent from same date last year. “Our state is largely influenced by traditional, community banks, which rely on the margin between deposit and loan rates for earnings so growth in these statistics is important,” said Sorensen. In spite of increasing margin pressures and regulatory changes, Iowa banks’ average return on assets (ROA), a bench mark of performance, remains strong at 1.10 percent.
Nationally, the FDIC reports a 22.6 percent increase in profits from a year ago. It is the 16th consecutive quarter that earnings have registered a year-over-year increase. According to FDIC Chairman Martin J. Grundberg, “The trends we have seen in recent quarters continued in the second quarter. Asset quality continues to recover, loan balances are trending up, fewer institutions are unprofitable, the number of problem banks is down, and the number of failures is significantly below levels of a year ago.”
Sorensen added, “A strong, profitable banking sector means more jobs and greater access to credit, both of which are essential for our nation’s $16 trillion economy. The resilience of American’s banking industry comes from having a diverse line of products that allows institutions to ride out periods of tepid growth and low interest rates. Controlling costs will remain critical for many institutions until the economic recover gains steam.”
About the Iowa Bankers Association
The Iowa Bankers Association represents 341 Iowa banks and savings institutions. Iowa bankers are committed to the Iowa values of honesty, hard work and community service, and have been a trusted resource for Iowans for more than 100 years. Iowa banks offer FDIC insurance and lend more than $43 billion to help individuals, business owners and agriculture. Nearly 15,000 Iowans work at an Iowa bank, and Iowa banks donate more than $35 million and 874,000 volunteer hours to support local communities each year. To learn more about Iowa banks, visit MyIowaBank.com.