The U.S. banking industry reflected improving economic activity in the third quarter, as quarterly net income rebounded to $51.2 billion, still 11% less than a year ago but an improvement from the 70% annual decline reported in the first and second quarters. 

In its Third Quarter 2020 Quarterly Banking Profile, the Federal Deposit Insurance Corp. reported that more than half of all banks — 52.7% — showed improvements in quarterly net income from the second quarter. The improvement was largely because of lower provisions for credit losses and an increase in noninterest income compared with the first two quarters of 2020, the FDIC said. 

Net income for Iowa banks was also still down year-over-year, but by a lower percentage than the national rate. Third-quarter year-to-date net income for the Iowa banking industry was $836 million on Sept. 30, down 5.3%, or $47 million, from the previous year’s third quarter. 

Return on assets, another indicator of overall bank performance, declined to 1.15% from 1.34% at the end of third quarter 2019. Iowa-chartered banks’ total assets amounted to $102.3 billion at the end of the third quarter.

Iowa-chartered banks continued to support the state’s economy with $69.4 billion in active loans on their books as of Sept. 30, an increase of 9.1% from the prior year. 

“The performance of Iowa banks rises and falls with the economic health of the communities we serve,” said John Sorensen, president and CEO of the Iowa Bankers Association. “Like our small business customers, Iowa banks have shown resilience despite the pandemic-induced challenges and uncertainty we’ve all experienced. With hopeful vaccine news of late, we look forward to supporting the economic renewal 2021 may bring.”

Despite the pandemic-induced economic challenges, Iowa bank credit quality ratios recorded only modest increases. In the third quarter, net loan charge-offs were up slightly to 0.10%, compared with 0.08% last quarter. At 0.93%, the noncurrent percentage of total loans is up from the third quarter 2019 percentage of 0.73%.

In addition to seeking access to credit, Iowans continued to turn to their banks to safeguard their money. Total deposits at Iowa banks were $84.6 billion at the end of third quarter this year, up 14.1% from the year prior when deposits totaled $74.2 billion.

Overall, the FDIC reported Tuesday that the decline in net income has slowed from the first half of the year and deposits have continued to grow, demonstrating the confidence that consumers and businesses have in the safety of the banking system. However, FDIC officials said, the low interest rate environment, credit quality deterioration, and declining loan growth continue to challenge the industry.