U.S. Regional Banking and Economic Performance Remained Strong into Early 2006
FDIC analysts identify flat yield curve and slowing housing markets
as possible sources of concern for the remainder of year
FOR IMMEDIATE RELEASE
April 4, 2006
Despite regional disparities in job growth and a high degree of reliance
on real estate, the economy and the banking industry both continue to perform
well across most areas of the nation, FDIC analysts reported in the spring
2006 editions of FDIC Regional Profile and FDIC
State Profiles released today.
"Moderate to strong job growth across much of the nation is helping to
support loan growth and credit quality at federally insured banks and
FDIC Chief Economist Richard A. Brown. "However, heavy dependence on
mortgage and construction lending is making some banks more vulnerable
to regional downturns in real estate activity."
In today's report, FDIC analysts noted that while average U.S. home prices
increased at a double-digit rate for the second consecutive year, rising inventories
and slowing sales point to possible moderation in housing activity for the
remainder of 2006. Analysts also noted rapid growth in commercial real estate
(CRE) and construction and development (C&D) lending and higher concentrations
of these loan types as a percent of capital.
FDIC-insured institutions posted a fifth consecutive year of record earnings
in 2005. However, the report indicates that a flat yield curve spread (the
difference between long-term and short-term interest rates) is beginning to
take a toll on net interest margins, which could slow growth in bank earnings.
Analysts in the FDIC's Dallas Region cautioned that long-term prospects
remain uncertain for institutions headquartered in the areas hardest
hit by Hurricane Katrina. While all of the net jobs lost in Mississippi after
hurricane were regained by February, only about 17 percent of jobs lost
in Louisiana have been recovered.
FDIC State Profiles and FDIC
Regional Profile are quarterly state-by-state
and regional snapshots of economic and banking trends. The current editions
of these publications highlight trends through the fourth quarter of 2005
- analyses of recent job growth trends by Census region
- an overview of activity in regional housing markets
- examination of the effects of a flat yield curve on certain types of
- assessment of insured institution credit quality and loan growth across
Congress created the Federal Deposit Insurance Corporation in 1933
to restore public confidence in the nation's banking system. The FDIC insures deposits
at the nation's 8,833 banks and savings associations and it promotes
the safety and soundness of these institutions by identifying, monitoring
and addressing risks to which they are exposed. The FDIC receives no federal
tax dollars – insured financial institutions fund its operations.
FDIC press releases and other information are available on the Internet at
www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html)
and may also be obtained through the FDIC's Public Information Center
(877-275-3342 or 703-562-2200). PR-36-2006