Third Quarter 2017: Bank Margins Made Headway Amid Slackening Job and Loan Growth

November 22, 2017

First Glance 12L provides a quarterly look at economic and banking conditions within the 12th District. The report, “Bank Margins Made Headway Amid Slackening Job and Loan Growth,” notes that rising asset yields and sticky deposit pricing helped lift the District’s average return on average assets ratio above 1 percent for the first time since 2007. On average, strong earnings lifted regulatory capital ratios, reversing an earlier trend. Meanwhile, job and loan growth remained above average but slowed further. Tight housing inventories fueled accelerating home price appreciation in most District states, further crimping affordability. Among commercial buildings, vacancy rates remained low and rent growth was positive, but investor surveys suggested commercial real estate prices may be nearing a peak. Further, third-party forecasters noted the potential for property fundamentals to soften. Commercial property markets will be important to watch as related mortgages have driven bank loan growth and accounted for a large share of most District bank loan portfolios. The report also discusses several other “Hot Topics.”