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  • In September 2022, loan delinquencies at community bank organizations (CBOs) reached their lowest level in over 30 years. Since bottoming, delinquencies have been slowly but steadily rising. As of March 31, 2025, 0.78 percent of loan balances at CBOs were noncurrent, up from 0.54 percent two years ago.
  • While the trend in delinquencies indicates some degree of credit weakening, the share of noncurrent loans remains below the 30-year median of 0.97 percent.
  • For the past several years, quarterly provisions for loan losses at CBOs have outpaced net credit losses, resulting in a growing allowance for credit losses (ACL). While the ACL has remained stable relative to total loans, growth in the ACL has not kept pace with the increase in noncurrent loans, resulting in a decline in ACL coverage of noncurrent loans from 2.49 times to 1.68 times over the past two years.
  • While ACL coverage of noncurrent loans has declined from its 2023 peak, indicating a relatively lower ability to absorb potential credit losses, it remains higher than 57 percent of the quarterly levels over the past 30 years.

Questions or comments? Please contact KC.SRM.SRA.CommunityBankingBulletin@kc.frb.org

Endnotes

  1. 1

    Community banking organizations are defined as banks with less than $10 billion in total assets.

  2. 2

    Noncurrent loans are loans that are 90 days or more past due or on nonaccrual status.