ViewPoint: Spotlight: National Banking Trends

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National Banking Trends

Aggregate return on average assets (ROAA) for community banks was mixed in the second quarter, compared with the first quarter of 2012, depending on the size of the bank (see the chart).

ROAA at mid-tier community banks, with assets sizes between $1 billion and $10 billion, increased significantly from the prior quarter while the return for larger community banks was down. However, the sharp increase for mid-tier banks came from nonrecurring items such as a reduction in provision expense and gains on the sale of loans and fees from mortgage originations. Nationally, mortgage originations increased by nearly 50 percent in the second quarter from a year ago. Noninterest expense also edged up slightly from the prior year, with the efficiency ratio climbing by 82 basis points. Net interest margin for the mid-tier community banks was stable.

Loan growth improved sharply in the second quarter (see the chart). Banks of all sizes reported loan growth, the first time since 2008 that all reported growth. Annualized loan growth for all commercial banks was 5.7 percent. Loan growth was centered primarily in the commercial and industrial (C&I) portfolio. Growth also occurred in the residential portfolio.