FDIC Report: MDI Financial Performance Improved in Last Five Years

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.