The Link

2/27/2013
IOWA NEWSPAPER ASSOCIATION

FOURTH QUARTER BANKING RESULTS SHOW POSITIVE RETURN TO PRE-CRISIS LEVELS

JOHNSTON, IOWA (Feb. 26, 2013) – The Federal Deposit Insurance Corp. (FDIC) has released its Bank Performance Report (BPR) for the final quarter of 2012, which clearly shows Iowa banks have grown healthier over the past year.

“Iowa’s banks are performing at pre-crisis levels,” said IBA President & CEO John Sorensen. “It is encouraging to see loan growth of over one billion dollars during 2012. And, thanks to strong growth in capital and liquidity levels, our banks are well positioned to serve the financial needs of their communities.”

Ninety-five percent of Iowa banks finished 2012 profitably, with an after-tax return on average assets (ROA) of 1.16 percent. This performance is better than the national average ROA of 1 percent. Iowa’s performance has been bolstered by a strong agricultural economy, relatively stable housing values and a responsible lending environment.

Totals assets of banks chartered in Iowa grew 6 percent to $72.6 billion. More than $1 billion of this growth came from increasing loan balances, a reflection of a slowly improving national economy. Total loans and leases for Iowa banks grew to $43.9 billion in the fourth quarter of 2012, compared to $42.7 billion the year before. Maintaining or accelerating this growth may hinge on the ability of public leaders to navigate our fiscal challenges.

Nationally, business lending posted strong year-over-year growth at 12 percent. It marks the tenth consecutive quarter of business lending growth. Even more promising is the broad-based increase in most loan categories, with real estate and auto loans continuing to rise as consumers become more confident in their finances. Iowa bankers have made improving customer financial literacy a top priority since the financial crisis.

Despite the primarily good news in the FDIC report, a prolonged low interest rate environment has compressed margins for most banks. Iowa banks have seen their net interest margin decline by nearly thirty basis points over the last three years. This tends to impact smaller community banks that rely more heavily on net interest income. This circumstance is only exasperated by the volume of rulemakings coming from the Dodd-Frank Act.

“It is not a coincidence that we’ve experienced a pick-up in bank merger activity,” Sorensen said. “The scale required to both compete and comply has grown. Policymakers should pay attention to this trend and act to preserve our vital community institutions.”

Deposits increased 5.7 percent to $65.1 billion, reflecting continued confidence on the part of consumers and businesses in the safety and soundness of Iowa banks. The Deposit Insurance Fund (DIF) increased its net worth to $33 billion at year end. Banks, not taxpayers, are solely responsible for all of the FDIC’s expenses, paying nearly $12.4 billion in premiums over the last year.

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About the Iowa Bankers Association

The Iowa Bankers Association represents 343 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.

(CONTACT: John Sorensen, President and CEO (515) 286-4313 jsorensen@iowabankers.com)