OCC Reports Community Banks and Thrifts in Iowa, Nebraska and South Dakota Recover to Pre-Downturn Performance Levels; Agricultural Banks Positive

DENVER —  The Office of the Comptroller of the Currency (OCC) today reported that community national banks and federal savings associations in Iowa, Nebraska and South Dakota have recovered from the effects of the financial crisis and economic downturn, with the vast majority of the 87 OCC-supervised institutions in those states receiving the agency’s highest ratings.

“Ninety-seven percent of national banks and federal savings associations located in Iowa, Nebraska and South Dakota have a composite rating of 1 or 2 in 2013, up from the low of 82 percent in 2011,” said Kay Kowitt, District Deputy Comptroller for the OCC’s Western District where the three states are located.  The composite ratings are a major indication of financial health of a bank and run on a scale of 1-to-5 with 1 being the healthiest.

“Most financial performance metrics improved over the past several years, and national banks and thrifts in these states have nearly returned to pre-crisis performance levels,” said Ms. Kowitt.  “Earnings have improved to a median return on assets of .90 percent and capital levels are satisfactory overall.  Asset quality has improved and median classified assets represent 15 percent of capital, in line with pre-crisis levels.”

The OCC also notes that bank performance in the agricultural sector has been favorable for the past several years, the result of a healthy agricultural sector.  “The agricultural producers in this area have good equity positions and good liquidity overall,” Ms. Kowitt said.

The OCC also reported that most national banks and federal savings associations in the three states experienced modest loan growth over the past year.  Moreover, while many institutions continued to deal with compressed net interest margins, the OCC reported that earnings improved last year.  OCC-supervised institutions in the three-state area continue to have ample sources of liquidity and moderate interest rate risk.  

The OCC noted that national banks and federal savings associations located in the three states face a number of ongoing strategic challenges.  For instance, protracted low interest rates and slow economic growth continue to pressure earnings.  Competition for good quality loans is strong in most markets and is expected to continue.  “Competition will impact pricing and put pressure on underwriting,” said Ms. Kowitt.

Another challenge facing national banks and federal savings associations in the region involves changes to consumer regulations, in particular those related to mortgage lending.

“Many community banks and thrifts are finding it challenging to prepare for and implement these changes,” said Ms. Kowitt.

Related Link

•  Fact Sheets (PDF)