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As trucking companies struggle to overcome sluggish conditions, the market continues to look to loan repayments and carriers’ ability to survive.
The failure of Citizens Bank, Sac City, Iowa; last month and the credit risks with some banks’ transport portfolios showed what was at stake.
As for whether other banks in Iowa could face a similar fate, Iowa Department of Banking Director of Banking Jeff Plag said the state has not seen other institutions with such a high concentration of truck loans.
“This shouldn’t be seen as an indictment of the trucking industry,” Plagge told Trucking Dive in an interview Friday, adding that the case was an isolated one from what Iowa regulators have seen.
The bank’s failure included intervention by the Federal Deposit Insurance Corp. and taking over the local institution founded in 1929 by the Iowa Trust & Savings Bank, after the FDIC pursued bank commercial truck loan repair portfolio.
Citizens Bank, Sac City, had a concentration of out-of-state and out-of-state loans, some of which caused large losses, the Iowa Department of Banking said in November.
An Iowa Bankers Association review of the third quarter showed deterioration in banks’ commercial properties portfolios, but did not mention the transport sector.
“Despite the challenging interest rate environment resulting from the Federal Reserve’s war on inflation, Iowa banks are increasing loans and maintaining deposit levels,” John Sorensen, president and CEO of the Iowa Bankers Association, said in a summary .
Reports from other banks this year highlighted the trucking industry’s overall reliance — sometimes to the detriment of carriers — on credit in a tough freight environment.
On December 1, based in Canada BMO Bank said that its fourth-quarter gross impaired loans and receivables in transportation rose to C$170 million, up 50% from the third quarter and up nearly 133% year-over-year.
As a major LTL exited the market due to bankruptcy, Amerant Bancorp reported in April that the Florida-based bank they repossessed trucks and trailers transportation industry customer in the 1st quarter.
The full extent of the industry’s impact remains to be seen.
“Truck contacts reported a decline in consumer-driven freight and called the 2023 peak period ‘non-existent’ for parcel carriers,” the Federal Reserve Bank of Atlanta said in a November 29 Beige Book Fair for the central banking system.
“Insurance and regulatory costs, along with the current geopolitical environment, were cited as significant long-term risks.”