Free Trial

Banking and trucking: Is the economy rolling toward troubles?

economy and banks

Key Points

  • Regional banks closed lower after a privately held regional bank in Iowa was closed by the Iowa Division of Banking.
  • Bad loans to the beleaguered trucking industry appear to be the culprit behind the closure. 
  • Regional banks have been reporting an increase in bad loans in the third quarter, many tied to commercial real estate. 
  • Five stocks to consider instead of Bank of America.

The SPDR S&P Regional Banking ETF NYSEARCA: KRE closed 1.08% lower on November 6, after a privately held regional bank was closed by the Iowa Division of Banking.

It’s a story of two industries, banking and trucking, that may be indicating where the broader economy is headed. 

Some of the largest regional banks and their November 6 returns include:

Regional banks weren’t the only bank stocks to fall. The Invesco KBW Bank ETF NASDAQ: KBWB, which tracks large banks, including Wells Fargo & Co. NYSE: WFC, Goldman Sachs Group Inc. NYSE: GS, Bank of America NYSE: BAC and JPMorgan Chase & Co. NYSE: JPM, finished the session down 0.78%. 

Broader financial sector trading lower

Meanwhile, S&P financial stocks as a whole, tracked by the Financial Select Sector SPDR Fund NYSEARCA: XLF, were down 0.30%. 

The reason for the Iowa bank’s closure was different from Silicon Valley Bank’s March seizure by regulators, but ultimately the effect was the same. 

However, the Iowa bank’s insolvency raises questions about the trucking industry. That industry also fell on November 6.

While Americans keep buying stuff, the trucking industry is hitting the brakes. Large and small trucking companies are going out of business or declaring bankruptcy, as the industry finds itself with a glut of trucks. Industry analysts say rates are now back to, or below, 2019 levels, before people began furiously hitting the “buy” button to order goods while working from home. 

Freight brokerages are also getting hit. These are intermediaries in the logistics industry that connect shippers with carriers to facilitate the transportation of goods. They handle negotiations, paperwork, and logistics coordination. 

Consent order focused on trucking loan portfolio

Enter Citizens Bank, not to be confused with other, publicly traded institutions with similar names. When seizing the bank’s assets on November 3, regulators didn’t identify the trucking industry as the culprit behind bad loans, but the bank had previously entered into a consent order with Iowa regulators and the Federal Deposit Insurance Commission. 

That order was centered on the bank’s commercial trucking loan portfolio. 

The pieces add up: A small bank, overextended by loans to an industry that’s in a cyclical decline, is seized by regulators. According to the FDIC, all Citizens Bank deposits were transferred to the Iowa Trust & Savings Bank, thereby protecting depositors.

Regional banks have a year-to-date loss of 23.74%, although they rallied 9.24%, outpacing the gain of the SPDR S&P 500 ETF Trust NYSEARCA: SPY

While the Silicon Valley Bank crisis may seem like it’s far in the rearview mirror, danger still lurks for regional banks, as the Citizens Bank situation illustrates. 

Office buildings behind other banks' bad loans

You can be sure it wasn’t the only bank with exposure to the trucking industry, but transportation stocks aren’t the only area of the economy showing cracks. Problems for regional banks have been caused by bad loans for office buildings. 

Bank analysts say regional banks are especially at risk of defaults from commercial real estate loans, as interest rates remain high. In fact, in their third-quarter reports, several regional banks reported year-over-year earnings declines, meaning the tough times don’t appear to be over just yet. 

For example, Zions Bancorp transferred $64 million worth of Southern California office property loans to “nonperforming” status in the most recent quarter. New York Community Bancorp Inc. NYSE: NYCB also cited commercial real estate problems, saying its portfolio of bad loans had grown in the quarter. 

M&T Bank wrote off $96 million in bad office building loans, in addition to a loan to a healthcare company. 

Federal Reserve chief Jerome Powell addressed the problem of regional banks at a talk in October, saying, “All of the bank regulators are working with banks that have, you know, concentrations of troubled real estate to work it out.” 

Should You Invest $1,000 in Bank of America Right Now?

Before you consider Bank of America, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Bank of America wasn't on the list.

While Bank of America currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

7 Stocks to Ride The A.I. Megaboom Cover


We are about to experience the greatest A.I. boom in stock market history...

Thanks to a pivotal economic catalyst, specific tech stocks will skyrocket just like they did during the "dot com" boom in the 1990s.

That’s why, we’ve hand-selected 7 tiny tech disruptor stocks positioned to surge.

  1. The first pick is a tiny under-the-radar A.I. stock that's trading for just $3.00. This company already has 98 registered patents for cutting-edge voice and sound recognition technology... And has lined up major partnerships with some of the biggest names in the auto, tech, and music industry... plus many more.
  2. The second pick presents an affordable avenue to bolster EVs and AI development…. Analysts are calling this stock a “buy” right now and predict a high price target of $19.20, substantially more than its current $6 trading price.
  3. Our final and favorite pick is generating a brand-new kind of AI. It's believed this tech will be bigger than the current well-known leader in this industry… Analysts predict this innovative tech is gearing up to create a tidal wave of new wealth, fueling a $15.7 TRILLION market boom.

Right now, we’re staring down the barrel of a true once-in-a-lifetime moment. As an investment opportunity, this kind of breakthrough doesn't come along every day.

And the window to get in on the ground-floor — maximizing profit potential from this expected market surge — is closing quickly...

Simply enter your email below to get the names and tickers of the 7 small stocks with potential to make investors very, very happy.

Get This Free Report
Kate Stalter
About The Author

Kate Stalter

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Bank of America (BAC)
4.8428 of 5 stars
$50.760.5%2.05%14.84Moderate Buy$50.13
Financial Select Sector SPDR Fund (XLF)N/A$53.990.3%1.33%18.25Moderate Buy$53.99
Invesco KBW Bank ETF (KBWB)N/A$77.670.1%2.06%13.35Moderate Buy$77.67
JPMorgan Chase & Co. (JPM)
4.6895 of 5 stars
$301.460.1%1.86%15.47Moderate Buy$288.68
New York Community Bancorp (NYCB)
2.1295 of 5 stars
$0.00-100.0%-2.42Hold$13.25
The Goldman Sachs Group (GS)
4.6925 of 5 stars
$745.48-0.8%2.15%16.43Hold$660.00
Wells Fargo & Company (WFC)
4.5757 of 5 stars
$82.150.2%2.19%14.07Moderate Buy$81.58
Western Alliance Bancorporation (WAL)
4.9286 of 5 stars
$89.640.7%1.70%11.78Moderate Buy$97.79
Zions Bancorporation, N.A. (ZION)
4.6489 of 5 stars
$58.010.3%3.10%10.61Hold$60.78
SPDR S&P Regional Banking ETF (KRE)N/A$65.510.0%2.38%12.39Moderate Buy$65.51
M&T Bank (MTB)
4.5688 of 5 stars
$201.880.5%2.67%13.08Moderate Buy$212.88
First Horizon (FHN)
4.7783 of 5 stars
$22.59-0.5%2.66%14.57Moderate Buy$23.34
Truist Financial (TFC)
4.5043 of 5 stars
$46.890.2%4.44%12.78Moderate Buy$48.47
New York Community Bancorp (NYCB)
2.1295 of 5 stars
$0.00-100.0%-2.42Hold$13.25
Compare These Stocks  Add These Stocks to My Watchlist 

Featured Articles and Offers

Recent Videos

5 Hot Stocks to Buy Now: September’s Top Picks With Major Momentum
$15 Billion for Cybersecurity: The Government’s Next Big Push
Tesla’s Future Unleashed: Elon’s Robotics Move Changes Everything

Stock Lists

All Stock Lists

Investing Tools

Calendars and Tools

Search Headlines