ViewPoint: National Banking Trends

Introduction | National Banking Trends | State of the District | Spotlight: Commercial Real Estate | Spotlight: Interest Rate Yields

National Banking Trends

In the second quarter of 2011, U.S. commercial bank performance, as measured by aggregate return on average assets (ROAA), dipped slightly (see chart 1) but remained higher than the same quarter last year (see chart 2).

Midsized community banks—those with assets between $1 billion and $10 billion—experienced their strongest quarter since banks started recovering back in the first quarter of 2010. Loan-loss provision expense continued to decline, as did net interest margin, falling once again as deposits have fully repriced. The good news for both banks and the overall economy is that annualized loan growth turned positive during the second quarter and was up nearly 5 percent on an annualized basis. Banks are actively seeking more commercial lending opportunities and are reviewing their current lending standards. At the same time, nonaccrual loan levels have steadily declined over the past three quarters. Unfortunately, economic conditions remain largely uncertain with continued high unemployment and market volatility, which ultimately puts banks' gains in jeopardy.