Second Quarter 2017: Bank Credit Quality Remained Solid, But For How Long?

August 25, 2017

First Glance 12L provides a quarterly look at economic and banking conditions within the 12th District. The report, “Bank Credit Quality Remained Solid, But For How Long?,” notes that overall District bank and real estate market performance remained solid in 2Q17, but also that some metrics might be at or near turning points. The pace of increase in District jobs and loans, while still above the nation, continued to cool. Meanwhile, year-over-year growth in personal bankruptcy filings turned positive nationally and approached an inflection point within the District. Overall bank past due loan volumes increased year-over-year for the first time since 2010, but trailed increases in gross loans. Commercial property prices marched higher in most sectors but transaction volumes remained down from earlier peaks and third-party forecasters noted the potential for property fundamentals to soften. Home prices also increased, especially in markets with limited for-sale inventory levels and strong job growth. Favorably, bank earnings improved in response to rising interest rates and continued cost controls, helping to stabilize regulatory capital ratios. Banks’ on-balance sheet liquidity moderated slightly year-over-year and District banks became more reliant on large nonmaturity and brokered deposits to support growth. The report also discusses several other “Hot Topics.”

Average Year-Over-Year Growth in $ Volume