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FDIC: Iowa banks’ net income down 8.3% in first quarter

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First-quarter net income for the Iowa banking industry was $243 million on March 31 — down 8.3% from the previous year’s first quarter — as bank earnings nationally slid to their lowest level in a decade in the first reporting period during the COVID-19 pandemic. 

Nationally, the 5,116 FDIC-insured institutions reported aggregate net income of $18.5 billion in first-quarter 2020, a decline of $42.2 billion — 69.6% — from a year ago. The decline was broad-based, with nearly 56% of all FDIC-insured institutions reporting year-over-year declines in net income, according to a quarterly Federal Deposit Insurance Corp. report released Tuesday. 

“The FDIC was born out of a crisis, and we now find ourselves in the midst of another unprecedented period,” FDIC Chairman Jelena McWilliams said in a news release. 

“During the last month of the first quarter, the COVID-19 pandemic led governments across the world to take emergency actions, including widespread stay-at-home orders that temporarily shut down large portions of the global economy,” McWilliams said. “Notwithstanding these disruptions, at the end of the first quarter, bank capital and liquidity levels remain strong, asset quality metrics are stable and the number of ‘problem banks’ remains near historic lows.”

In Iowa, though bank earnings were negatively affected by increases in loan loss provisions, bank capital and liquidity levels remained strong, the Iowa Bankers Association said. 

Iowa-chartered banks reported $65.2 billion in active loans on their books as of March 31, up 4.3% from the prior year. And in the first quarter, net loan charge-offs were down to 0.08%, compared with 0.12% last quarter. At 0.85%, the noncurrent loan percentage of total loans is up from the first quarter 2019 percentage of 0.72%.

“The first priority for Iowa banks is to care for their communities,” IBA President and CEO John Sorensen said in a statement. “It’s why we delivered over 55,000 Paycheck Protection Program loans to Iowa small businesses, hospitals and farms — helping to preserve 750,000 jobs during the past two months alone. We entered the pandemic in a position of strength, and we have the capacity necessary to drive the economic renewal that lies ahead.”

Nearly 55% of Iowa banks reported earnings gains in the first quarter, down from 57% a year ago and 69% two years ago. 

Total assets for the 271 Iowa institutions reporting were $93.3 billion as of March 31, up 6% from the end of first-quarter 2019. Return on assets, another indicator of overall bank performance, declined to 1.05%, compared with 1.21% at the end of first-quarter 2019.