The 157 FDIC-insured minority depository institutions tend to lag community banks overall in terms of profitability, but the sector is seeing higher loan growth driven by commercial real estate, according to an FDIC report. Just under 15% of MDIs were unprofitable in 2016, compared with 4.3% of community banks overall. The report noted that unprofitable MDIs tended to be smaller institutions mostly located in urban areas hard-hit by the financial crisis.
MDIs’ net income of $1.8 billion was 22.6% lower than in 2015, mostly driven by losses at three larger MDIs. The sector’s profits grew by more than 20% if these three banks are excluded. MDIs saw loan balance growth of 9%, 0.68% higher than community banks overall.
MDIs are banks with minority ownership of at least 51% of the bank or where a majority of the board and a majority of the bank’s market area is of a minority background. In 2016, five MDIs were merged into other banks, four of which were also MDIs. One bank lost its MDI status after a recapitalization, and one MDI failed and the FDIC could not find an MDI acquirer.
Read the report.