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News Link • Federal Reserve

Kansas City Federal Reserve District banking conditions weaken

• KC Business Journal
The Federal Reserve said Friday that second-quarter banking conditions in the 10th Federal Reserve District, which includes Kansas City, exhibited similar deteriorating conditions as those found nationwide, though not as severe. The Fed said in a report that overall bank earnings in the district continue to fall but remain in the positive range at 0.58 percent. Nationwide, the average is 0.15 percent, down from 0.24 percent in 2008. Banks are faced with declining interest margins and the need for increases in provisions for loan and lease losses. Average net interest margin for banks nationwide remains on a decline that started in 2006, reaching 2.94 percent in June. Average loan-loss provisions reached 1.94 percent of assets nationwide, up from 1.31 percent in 2008 and 0.54 percent in 2007. Noncurrent assets at 10th Federal Reserve District banks have quadrupled since 2006, reaching 3.6 percent of total assets, but are still well below the national average of 4.8 percent. Construction and land development loans (CLDs) are the main culprit for asset-quality deterioration in the district. Kansas banks had the highest percentage of noncurrent CLDs in the district, now exceeding 15 percent. Missouri banks had a roughly 11 percent rate for noncurrent CLDs. Nationwide, the rate is 13.6 percent, up from 8.7 percent at the end of 2008 and 3.11 percent at the end of 2007.

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