Iowa-chartered banks recorded a healthy increase in net income in the second quarter, according to bank performance data released last week by the Federal Deposit Insurance Corp. Iowa’s 266 FDIC-insured banks reported net income of $759 million for the quarter ending June 30, which was an increase of $204 million, or 36.8%, from second quarter 2020. Although bank net interest margins remain compressed, fee income from SBA loan programs and higher home mortgage activity contributed to improved earnings.  

Nationally, the 4,951 commercial banks and savings institutions insured by the FDIC reported aggregate net income of $70.4 billion in the second quarter, an increase of $51.9 billion, or 281%, from a year ago. A key driver to the quarterly earnings spike was the recapture of loan loss reserves as banks adjusted their expectations for potential future credit losses by reducing reserves. The increase was also driven by further economic growth and improved credit conditions.

Active loans as of June 30 at Iowa-chartered banks totaled $67.7 billion, a decrease of 1.3% from the prior year. The quality of these loans remained strong, as net loan charge-offs decreased to 0.05% of total loans, compared to 0.08% from the prior year. At 0.67%, the noncurrent percentage of total loans is down from the second quarter 2020 percentage of 0.86%.

Continued below-normal consumer spending and government stimulus payments helped increase the savings rate for Iowans, resulting in deposit growth industrywide. Total deposits at Iowa banks were $92.7 billion as of June 30, up 12.2% from second quarter 2020, when deposits totaled $82.7 billion.

“Iowa banks were truly the economic first-responders for their communities during the pandemic,” said John Sorensen, president and CEO of the Iowa Bankers Association. “Government stimulus payments flooded into bank accounts early on, improving consumer and business balance sheets, but also dampening demand for credit. As economic growth accelerates, we expect loan balances to mirror that growth.”  

Return on assets for Iowa banks, another indicator of overall bank performance, increased to 1.40% from 1.17% at the end of second quarter 2020. Iowa-chartered banks’ total assets amounted to $109.6 billion at the end of second quarter 2021.