First Quarter 2017: Solid Bank Performance Continued Despite Uncertainty

May 25, 2017

First Glance 12L provides a quarterly look at economic and banking conditions within the 12th District. Overall District bank performance remained sound in 1Q17. The report, “Solid Bank Performance Continued Despite Uncertainty,” notes that District job and loan growth outpaced the nation, but continued to cool from cyclical peaks. Lingering monetary and government policy uncertainty appear to have tempered hiring and borrowing trends despite recent improvements in business optimism. Uncertainty, combined with rising interest rates, also contributed to weaker commercial real estate (CRE) transaction volumes and a downshift in CRE price indices. Notwithstanding slower loan growth, bank earnings and asset quality metrics improved. Average liquidity and capital-related ratios remained above pre-crisis levels, but slipped modestly because of ongoing shifts in balance sheet and funding mix. Regulators remained concerned about continued growth in CRE loan concentrations, especially as collateral values transition from a period of rapid price gains to one of slower appreciation. In addition to discussing several “Hot Topics,” the report reviews some of the factors influencing the level and trend of District bank noninterest expense ratios.

Credit Quality Metrics Improved Further, While Loan Growth Remained Strong but Slowed