Financial performance among minority depository institutions has significantly improved in the last five years, particularly in terms of loan performance, according to new research from the FDIC. In a study that focused on the period between 2001 and 2018, the FDIC found that credit quality has improved at MDIs since the crisis years; at the end of 2018, the median non-current loan ratio fell to a low of 0.56%, as did the net charge off rate, which was at 0.02%. MDIs also tended to outperform non-MDI community banks in revenue generation, including net interest income and noninterest income, the study noted.
In line with broader industry trends, MDIs have also experienced consolidation in recent years; the total number of MDIs declined by 9.1%, while the overall number of community banks fell by 42.2% during the study period. Despite ongoing industry consolidation, however, the study found that among MDIs, more than three-fourths of the assets of the merged institutions and 86% of the assets from the institutions that failed remained with MDI institutions.
MDIs represent just under 3% of FDIC-insured institutions, and the majority are headquartered in metropolitan areas and tend to serve communities that are largely within low- to moderate-income census tracts. The study found that MDIs originated a greater share of their mortgages for properties in LMI census tracts, as well as a greater share of SBA 7(a) loans than non-MDIs.
