FDIC report shows Iowa’s banking industry continues to gain strength

According to the FDIC report, the first quarter earnings of banks chartered in Iowa increased by 14 percent from the same period in 2010, growing to $167 million.  In addition, the average after-tax return on assets (ROA) reached 1 percent – a standard industry benchmark – for the first time since March of 2008.  This performance is 13 basis points better than the national average. The total assets of Iowa banks grew modestly to $67 billion.

“Asset quality continues to show improvement with non-current loans to total loans declining to 1.83 percent. This is significantly better than the national average of 4.71 percent,” Sorensen said. “Non-performing assets to total assets also recorded a significant decline to 1.75 percent, compared to nearly 3 percent nationally.”

Sorensen said that despite a struggling economy and slower demand for loans, Iowa banks have continued to meet the credit needs of consumer, agricultural and commercial customers by funding $42.1 billion in loans.  Iowa bank lending peaked in December of 2008 at $44.8 billion.

The continued low interest rate environment has squeezed interest rate margins to 3.55 percent.  This is lower than the national average of 3.66 percent. 

Sorensen noted that deposits grew by 4 percent during the first quarter of 2011, reaching $54.7 billion as consumers continued to appreciate the value of federal deposit insurance and the community benefits of doing business with their local bank.  Each depositor is fully insured up to $250,000, and there is full protection for non-interest bearing transaction accounts through 2012.  In the 78-year history of the FDIC, no depositor has ever lost a penny of insured deposits.

Equity capital continues to show improvement, growing to $6.5 billion.  Iowa banks core capital to average assets (leverage ratio) continues to be strong at 9.32 percent, slightly better than the national average.