Iowa banking sector remained strong in 1Q

By CBJ News Staff

Iowa’s banking sector remained healthy in the first quarter of 2020, with active loans up 4.3% from a year ago, according to new FDIC data released this week.

Iowa banks had $65.2 billion in active loans on their books as of March 31, up 4.3%, while net loan charge-offs were a relatively low 0.08%. Loan charge-offs were down from 0.12% in the fourth quarter of 2019.

Noncurrent loans (in which payments are behind schedule) were 0.85% for the quarter, up from 0.72% in the fourth quarter of 2019.

The Iowa Bankers Association (IBA) said the banking sector has been a source of strength for the state’s economy during the challenging period, continuing to support businesses and individuals with needed loans and other services.

“The first priority for Iowa banks is to care for their communities,” IBA President and CEO John Sorensen said in a news release. “It’s why we delivered over 55,000 Paycheck Protection Program loans to Iowa small businesses, hospitals and farms — helping to preserve 750,000 jobs during the past two months alone. We entered the pandemic in a position of strength, and we have the capacity necessary to drive the economic renewal that lies ahead.”

Community banks across the nation reported lower profits than a year earlier, primarily due to higher provisions for loan losses. However, net operating revenue increased, annual loan growth was strong and asset quality metrics were stable, according to the FDIC

The Federal Reserve cut the Fed Funds rate to nearly zero in March, and the low interest rate environment, combined with the economic downturn will present challenges to the banking industry over the near- to mid-term, the FDIC reported.

“Community banks are particularly vulnerable to fluctuating interest rates, as nearly half of their assets mature or reprice in three or more years,” the FDIC said in a news release. It noted that community banks saw further deterioration in their agriculture loan portfolios in the first quarter.

While net charge-off rates for ag loans remained low, the rate of noncurrent farmland loans rose 24 basis points year-over-year to 1.75% and the rate of noncurrent ag production loans rose 25 basis points to 1.19%.

The number of banks across the nation on the FDIC problem list increased from 51 to 54 during the first quarter, the first quarterly increase since 2011. However, the number of problem banks remains near historic lows, the FDIC said. Changes to the number of insured institutions include two new banks that opened during the first quarter, 57 banks absorbed by mergers and one bank failed. CBJ