As trucking firms seek to move past sluggish conditions, the market continues to claw at loan repayments and carriers’ ability to survive.
The failure of Citizens Bank of Sac City, in Iowa, last month and credit risks with some banks’ portfolios in the transportation sector have shown what’s at stake.
As far as whether other banks in Iowa could face similar fates, Iowa Division of Banking Superintendent Jeff Plagge said the state hasn’t seen other institutions with as high a concentration of trucking loans.
“This should not be taken as an indictment against the trucking industry,” Plagge told Trucking Dive in an interview Friday, adding the case was isolated, from what Iowa regulators have seen.
The bank failure involved the Federal Deposit Insurance Corp. stepping in, and the Iowa Trust & Savings Bank taking over the institution after the FDIC sought to fix the bank’s commercial trucking loan portfolio.
The Sac City bank had a concentration of out-of-territory and out-of-state loans, some of which generated heavy losses, the Iowa Division of Banking said in November.
An Iowa Bankers Association review of Q3 pointed toward deterioration in banks’ commercial real estate portfolios, but it didn’t mention the transportation sector.
“Despite a challenging interest rate environment resulting from the Federal Reserve’s war on inflation, Iowa banks are growing loans and maintaining deposit levels,” John Sorensen, CEO of the Iowa Bankers Association, said in a summary.
Reports from other banks this year have illustrated the trucking industry’s overall reliance — sometimes to carriers’ detriment — on credit in a tough freight environment.
On Dec. 1, BMO reported that its Q4 gross impaired loans and acceptances in transportation rose to C$170 million, a 50% increase from Q3 and nearly 133% increase year over year.
The full extent of the industry’s fallout remains to be seen.
“Trucking contacts reported a drop in consumer-driven freight and characterized the 2023 peak season as ‘non-existent’ for parcel carriers,” the Federal Reserve Bank of Atlanta said in a Nov. 29 Beige Book report. “Insurance and regulation costs, along with the current geopolitical environment, were cited as significant longer-term risks.”