First Glance 12L provides a quarterly look at banking and economic conditions within the 12th District. The first quarter report notes that wider net interest margins and lower tax expenses led a year-over-year upswing in bank profits, but also that quarterly margin gains have dissipated in recent periods. Improved earnings, combined with moderating asset growth lifted regulatory capital ratios. Overall, low loan delinquency and loss rates persisted, with some uptick noted among certain types of consumer credit and agricultural loans. Nonmaturity deposits, in particular accounts above $250,000, remained a significant source of funding, but their growth slowed as interest rates edged higher. Commercial real estate remained a favored lending area and a topic of regulatory focus given elevated property values and underwriting trends. Higher interest rates have not yet had a material impact on commercial real estate capitalization rates or values. Still, they have increased debt service burdens for variable-rate mortgages and other loans. Favorably, job gains notched higher (even besting significant upward revisions to 2017 growth). But housing demand continued to outstrip supply, lifting home prices, crimping affordability, and increasingly prompting outmigration in some markets. The report briefly discusses international trade and several other “Hot Topics.”
