Iowa bank profits fall 11% in 1st quarter, buck national trend

Iowa aggregate bank profits fell 11 percent to $196 million in the first quarter from $220 million in the same period of 2012, bucking a national gain of 16 percent during the same period.

The Federal Deposit Insurance Corp. reported that the nation's 7,019 financial institutions posted a net profit of $40.3 billion, up from $34.8 billion in the quarter that ended on March 31, 2012.

The number of Iowa banks also slipped to 337 in the most recent period from 343 in the first quarter of 2012. Assets rose to $72.5 billion in the quarter that ended on March 31 from $70.2 billion in the first quarter of 2012.

Deposits edged up to $59.98 billion in the first quarter from $57.6 billion in the period that ended on March 31, 2012. Net interest margin, the difference between interest generated on loans and paid out to depositors, fell to 3.23 percent in the first quarter from 3.47 percent a year earlier.

Low interest rates are making it easier for consumers to buy cars, trucks and houses. But they have become a significant drag on community bank earnings.

Iowa has 350 community banks in more than 1,000 communities that employ more than 5,000 Iowans. An FDIC study released in December found that community banks have almost always sustained lower credit losses than non-community banks.

Major changes in the U.S. financial sector in recent decades have made community banks a smaller part of the nation's financial system, according to the FDIC. Between 1984 and 2011, the share of U.S. banking assets held by community banks declined by more than half, from 38 percent to 14 percent.

FDIC Chairman Martin Gruenberg on Wednesday said banks at the national level are facing similar challenges.

"Tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention," Gruenberg warned.