Loans to trucking companies have been one of the troubled parts of bank portfolios the past two years, but the worst may just be over.
Shipping volumes on trucks fell at a lower pace in the second quarter of the year, according to a new U.S. Bank report on trucking conditions, a sign that the industry's fortunes could be turning. Trucking companies boomed during COVID as home-bound consumers splurged on goods and deliveries, but the industry's financial results had
The Western, Northeastern and Southeastern regions of the country even saw small increases in shipping volumes from the start of the year, the quarterly U.S. Bank Freight Payment Index found.
"Things are still heading downward," said Bobby Holland, director of freight business analytics, U.S. Bank, but the extent of the pain is "starting to stabilize."
The early signs of a rebound would be good news for banks, which have reported severe troubles among their trucking borrowers as the bloodbath makes it harder for shippers to pay back their loans. Several trucking companies
One small bank in Iowa that had an extreme exposure to trucking companies
"That industry continues to be under incredible pressure," Tim Laney, the CEO of the nearly $10 billion-asset National Bank Holdings Corporation in Denver, told analysts last month.
Trucking clients continue to struggle as fewer goods being shipped means they're fetching far lower rates from retailers for their deliveries, Laney said. But he noted the industry only makes up 2.5% of his bank's loan portfolio.
The story was similar at MidWest One Financial Group, where the only areas of loan stress has been in commercial real estate and trucking.
"We don't have a big trucking portfolio, but we did downgrade some credits in that portfolio" this year, said Gary Sims, the $6.6 billion-asset Iowa-based bank's chief credit officer.
Columbia Banking System's Financial Pacific Leasing business, which it picked up after its merger with Umpqua Bank, saw some trouble last year among its trucking customers. But the "losses have peaked," Chief Credit Officer Frank Namdar said in April, providing some evidence that a turnaround is at hand.
The U.S. Bank freight index, which is based off the $42 billion in freight payments the bank processes for clients, found nationwide shipping volumes fell 2.2% from the first quarter. That marked a far more modest decline from the prior 7.8% drop.
The Southwest region, which had outperformed others in 2022 and 2023, is continuing to slow and saw a 13.6% decline in shipments. The Midwest saw a smaller decline of 2.7%, which the report said aligns with the region's sluggish economic indicators.
Continued goods spending in the Northeast helped drive a 2.7% rise there, while higher seaport volumes helped drive a 1.5% increase in the West and 1.8% bump in the Southeast. The latter region also benefited from home construction activity.
One Southeast bank, South Carolina-based United Community Banks, charged off loans to trucking companies in its Navitas equipment finance division. But Chief Risk Officer Robert Edwards said charge-offs at Navitas, which includes truck and trailer leases, have since declined.
"We do expect charge-offs to continue to come down," Edwards said.
