ViewPoint: National Banking Trends

Introduction | National Banking Trends | State of the District | Spotlight: Non-CRE Lending | Spotlight: Small Business Lending

National Banking Trends

After a slight dip in the second quarter of 2011, U.S. commercial bank performance, as measured by aggregate return on average assets (ROAA) (see chart 1), improved to its highest level in four years (see chart 2).

Large and midsized community banks have led the improvement, though smaller community banks are also posting improved earnings. The increase in earnings continues to be more a function of cost control than an improvement in net interest margin or increased lending. The net interest margin dipped by 9 basis points from the second quarter, declining from 3.70 percent in the second quarter to 3.61 percent in the third quarter. Loans grew slightly from the previous quarter, up 0.3 percent but declined compared with the previous year. At the same time, loan-loss provision expense continued to decline, falling to 1.04 percent of average loans. At the height of the crisis, provisions represented 4.24 percent of average loans. The efficiency ratio also declined from the previous quarter but has increased compared with the previous year, as banks continue to strengthen their efforts to work out existing loans.