JOHNSTON, Iowa (Dec. 12, 2024) — Data released Thursday by the Federal Deposit Insurance Corp. (FDIC) showed continued strength for the banking industry. The data reported loan, deposit and asset growth in the third quarter.
“Iowa’s competitive banking environment continues to drive benefits for consumers and businesses alike,” said John Sorensen, president and CEO of the Iowa Bankers Association. “Although Iowa banks are experiencing modestly increasing loan balances, average net interest margins remain well below pre-pandemic levels. We expect further improvement in these metrics in 2025 as banks adjust to changes in the economy and monetary policy.”
Iowa Banking Results
The 236 Iowa-domiciled banks continued to see loan growth this quarter, with an increase of 1% from the previous quarter to $86.6 billion, and an increase of 4.3% from a year ago. Deposits also increased from the second quarter to $105.1 billion, a 3.3% increase from the same period in 2023.
Loan quality remained strong in the third quarter with average net loan charge-offs at just 0.09%, a slight increase from second quarter 2024, but still favorable credit quality. The noncurrent percentage of total loans was 0.55% this quarter, which is a slight increase from 0.52% at the end of the prior quarter and of the same period 2023. This percentage indicates that Iowa continues to show financial stability.
Iowa banks reported a 1.5% increase in total assets this quarter over last to $127.1 billion, a 3.8% increase from the same period in 2023.
Net income for Iowa banks year-to-date was $805 million – below the prior year’s third quarter year-to-date net income of $949 million. Net interest margins continue to be impacted by the competitive interest rate environment, with the third quarter net interest margin for Iowa banks at 2.79%. This net interest margin is 44 basis points below the national number, signifying the benefit of Iowa’s competitive banking sector to consumers and businesses. The average return on assets (ROA) for Iowa banks was 0.86% in the third quarter. This overall indicator of bank performance is down from the prior quarter and year.
National Banking Results
The FDIC reported Thursday that the banking industry continues to show ongoing resilience despite interest rate volatility, and economic and geopolitical uncertainty. FDIC Chairman Martin J. Gruenberg said, “Asset quality metrics remained generally favorable despite continued weakness in several loan portfolios, which we are monitoring closely.”
The banking industry continued to report loan growth this quarter. Total loans grew by 0.6% from the previous quarter and 2.2% from the prior year to $12.6 trillion. The FDIC again reported quarterly loan growth was mostly attributed to loans to non-depository financial institutions and consumer loans. Most banks reported loan growth in all categories aside from construction and development. Community banks had broad-based loan growth with an increase of 1.1% from the previous quarter and 5.5% from the prior year.
Total deposits grew this quarter to $19.1 trillion. Deposit growth was 1.4% from the prior quarter and 2.7% from third quarter 2023. Brokered deposits continued to decline for the third straight quarter. Community banks saw a 2.4% increase in deposits this quarter to $2.3 trillion, with over half reporting an increase in deposit balances.
Asset quality metrics remain favorable, still well below pre-pandemic averages, but the industry continues to see deterioration due to commercial real estate loans, credit card loan portfolios, and commercial and industrial loan portfolios. Total assets grew to $24.2 trillion in the third quarter, a slight increase of 1.3% from the second quarter, and a 3.3% increase from the prior year. Community banks saw growth in total assets from the previous year and prior quarter.
In the third quarter, net interest margins increased for the first time this year. The rise in net interest margins drove net income to $201.1 billion, which falls short of $218.6 billion in third quarter 2023. The third quarter net interest margin of 3.23% continues to be below the pre-pandemic average of 3.25%. Community banks also reported a 6.7% increase in net income from the previous quarter to $6.9 billion. Higher net interest income was the primary driver of a 3.9% net income increase from third quarter 2023.
The FDIC’s “Problem Bank List” increased this quarter by two from 66 to 68 banks. Total assets held by “problem banks” were $87.3 billion, an increase of $3.9 billion from the prior quarter. Only 1.5% of total banks are considered “problem banks” which is within the normal range. There were no bank failures in the third quarter.
The Deposit Insurance Fund (DIF) balance increased to $133.1 billion in the third quarter. The DIF reserve ratio — the fund balance relative to insured deposits — increased again by 4 basis points to 1.25%. The FDIC noted that based on projections, “the reserve ratio remains on track to reach 1.35% by the statutory deadline.”
About the Iowa Bankers Association
The Iowa Bankers Association represents Iowa banks and savings institutions. Iowa bankers are committed to the values of honesty, hard work and community service, and have been a trusted resource for Iowans for more than 135 years. Iowa banks offer FDIC insurance and lend nearly $87 billion to help individuals, business owners and agriculture. Nearly 40,000 Iowans work at an Iowa bank, and bank employees volunteer more than 300,000 hours to support local communities each year. To learn more, visit www.iowabankers.com.