The third-quarter financial results for Iowa banks from the Federal Deposit Insurance Corp. reflect a continued trajectory out of the COVID-19 pandemic, according to the Iowa Bankers Association.

Iowa banks reported aggregate net income of $1.1 billion for the nine months ending Sept. 30, an increase of 36.8%, or $307 million, from the same period in 2020. 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.

Return on assets, another indicator of overall bank performance, increased to 1.39% from 1.15% at the end of third quarter 2020. Iowa-chartered banks’ total assets amounted to $112.3 billion at the end of third quarter 2021.

“The FDIC’s third quarter bank performance report shows Iowa banks remain strong and well positioned to serve the financial needs of Iowans,” said John Sorensen, president and CEO of the Iowa Bankers Association. “Total lending actually declined slightly compared to the prior year due to Paycheck Protection Program loan forgiveness and repayment. Iowa banks made 93% of all PPP loans provided to small businesses and farms in Iowa.”

Continued payoff and forgiveness of PPP loans resulted in total loan balances at Iowa-chartered banks declining in the third quarter. Iowa banks reported $68.1 billion in active loans on their books as of Sept. 30, a decrease of nearly 2% from the prior year. The quality of these loans remained strong, as net loan charge-offs decreased to 0.03% of total loans, compared to 0.10% from the prior year. At 0.61%, the noncurrent percentage of total loans is down from the third quarter 2020 percentage of 0.93%.

Nationally, reports from the 4,914 commercial banks and savings institutions insured by the FDIC reflect aggregate net income of $69.5 billion, an increase of $18.4 billion, or 35.9%, from a year ago. This increase was driven by further economic growth and improved credit conditions, which led to a third consecutive quarter of aggregate negative provision expense. Two-thirds of all banks (66.5%) reported annual improvements in quarterly net income, and the share of profitable institutions increased slightly year over year to 95.9%.