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US community banks see slowdown in Q3 loan growth sequentially

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According to Market Intelligence, December 2022


US community banks see slowdown in Q3 loan growth sequentially

Most U.S. banks with under $10 billion in total assets posted growth in their overall loan portfolios quarter over quarter for the three months ended Sept. 30, with a median 3.5% increase from the second quarter, when excluding Paycheck Protection Program, or PPP, loans.

Including PPP, gross loans and leases stood at roughly $2.060 trillion, an increase of 3.4% from the linked quarter, according to S&P Global Market Intelligence data. However, compared to the second quarter, the sequential loan growth rate was slow in the third quarter.

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Loan growth highest at largest community banks

Sequential growth in gross loans and leases, excluding PPP, clocked in at 3.8% for banks with total assets between $3 billion and $10 billion, the highest among the different bank asset sizes for that category. The large community banks also posted a 4% increase in closed-end 1st lien one- to four-family loans, whereas consumer loan growth remained at 1.5%.

The pickup in the commercial and industrial loan segment seen in the previous quarter did not carry, with only 0.5% and 0.7% growth recorded in the smaller community banks with assets below $100 million, and those with assets between $100 million and $3 billion, respectively. Banks with less than $100 million in assets also recorded declines in loan growth for the quarter in commercial real estate, multifamily and home equity loans.

Meanwhile, banks with assets between $100 million and $3 billion, recorded the highest growth in home equity loans at 4.4%, but posted a 0.6% decline in multifamily loans.

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Southeast continues to lead

The Southeast region continued to be the best-performing region in terms of overall quarterly loan growth, with a 3.9% quarter-over-quarter increase in gross loans and leases, excluding PPP, followed by the Midwest, Northeast and Southwest, each recording a growth of 3.4%.

The West recorded the lowest loan growth in most of the categories.

Commercial and industrial loans declined in the Mid-Atlantic, Northeast and West by 0.8%, 0.9% and 0.5% respectively.

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Most of the top 20 banks post loan growth

Out of the 20 largest community banks, 17 banks posted an increase in gross loans and leases quarter over quarter.

The three banks which reported a quarterly decline were Santa Ana, Calif.-based Banc of California Inc., Fort Lee, N.J.-based Cross River Bank and Texas-based Woodforest National Bank.

Cross River Bank also had $2.62 billion in PPP loans as of Sept. 30, the highest in the group. The bank was a partner of the small-business lending platform Kabbage Inc., doing business as KServicing, which was set up to process PPP loans through online applications and distributions. Kabbage and Cross River are in a dispute over the former not adhering to certain PPP guidelines in loan servicing. Kabbage filed for bankruptcy in October.