Te loan loss provision reductions masked continued weakness in net interest margins. Although steady between the third and fourth quarters of 2021, the average net interest margin at all U.S. banks has declined steadily from its last peak in early 2019. Nationally, the average net interest margin fell 26 basis points to 2.49% in 2021. Te average NIM at Missouri banks declined by a similar amount. Higher loan demand and interest rates will likely lead to improvements in margins in coming quarters.
ASSET QUALITY, CAPITAL AND LIQUIDITY Loan quality, as measured by the percentage of loans 90 days or more past due or in nonaccrual status, also continued to improve throughout 2021. Te nonperforming loan ratio for all U.S. banks declined 6 basis points during the last quarter of the year to 0.89% and was down 30 basis points from its year-ago level. Te same pattern is observed in Missouri, where the nonperforming loan ratio declined 14 basis points in 2021, remaining well below the national average. Despite the economic hardship brought about by the pandemic, nonperforming loan ratios stayed well below those of the last several recessions and near historic lows.
Banks, including those in Missouri, remain well capitalized.1 Te average tier 1 leverage ratio at year-end 2021 stood at 8.71% for U.S. banks overall and 8.95% in Missouri.
Liquidity levels remain strong and continue to be elevated. Average loan-to-deposit ratios nationally and in Missouri are still well below pre-pandemic levels, indicating ample room to support increased loan demand.
WHAT’S NEXT U.S. banks, including those in Missouri, are healthy and well-positioned to finance increases in loan demand. Tey
weathered the pandemic, receiving assistance from government programs that financed loans to strapped customers and provided payments to consumers that helped boost deposit balances.
1 Banks are subject to four regulatory capital requirements. Te minimum
tier 1 leverage ratio requirement is 5%. Community banks — those with average assets of less than $10 billion — have the option of complying with one standard rather than four. Tat standard is called the Community Bank Leverage Ratio. Provided they meet other requirements, community banks that maintain a CBLR in excess of 9% are considered adequately capitalized for regulatory purposes. During the pandemic, the standard was temporarily reduced to 8%. Te vast majority of the nation’s banks are community banks.
within safety and soundness, beginning his career as an examiner. Visit
stlouisfed.org to learn more.
THE MISSOURI BANKER 21
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