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Bigger looks better for Mississippi’s banks

Bank-graphic_rgbMississippi’s banks netted profits of $369 million in the second quarter, but the state’s small banks with less than $100 in assets continued a two-year decline in profits, the Federal Deposit Insurance Corp. reports.

While banks above $100 million in assets earned nearly $100 million more over the same quarter last year, going from $266 million to $365 million, small community banks earned $1 million less in the second quarter compared to 2013’s second quarter. That followed a $1 million drop from $6 million to $5 in net income from the second quarter of 2013 to Q2 2013.

Asset declines continued for the small banks, as well. Mississippi banks of $100 in assets or less ended the second quarter of 2012 with assets of $1,4 billion. Asset totals dropped to $1.077 billion in Q2 the following year to $1.101 billion in the most recent quarter.

» READ MORE: Fed’s Beige Book notes moderate economic growth in Mississippi’s 2 districts

The declines bear out predictions from the state’s bankers in recent years that the smallest banks would struggle in the post-Dodd-Frank regulatory environment, with some either closing or being acquired by larger banks. Mississippi had 87 banks at the close of 2012’s second quarter. It ended this year’s second quarter with 84 banks. Banks below $100 million accounted for the three institutions that disappeared from the ledger.

Nationally, community banks continue to show improved performance, according to the FDIC.  “The rate of loan growth at community banks outpaced the industry, and net interest margins at community banks are trending up in contrast to the industry as a whole,” FDIC Chairman Martin J. Gruenberg said in releasing the second banking numbers at the end of August.

Mississippi’s larger banks showed a brighter picture at the quarter’s close, with year-to-date net income totaling $365 million, up more than a quarter from 2013’s $266 million, the FDIC report showed.  The $100-plus banks had net income of $257 million at the end of the second quarter 2012.

Gruenberg reported a healthy overall outlook for banks nationally. “Net income was up, asset quality improved, and loan balances grew at their fastest pace since before the crisis,” he said.

“The number of problem banks is now 60 percent below the peak in 2011, and the number of bank failures continues to trend down,” he said, but noted revenue continues to be held back by narrow interest margins and lower mortgage-related income.

“And the interest rate environment has led institutions to reach for yield, thereby raising concerns about interest rate risk,” he said.

The Federal Reserve’s Beige Book, a periodic survey of business and overall economic activity, said in a Sept. 4 report that bankers in the Fed’s Atlanta district reported they were “very well capitalized and had plenty of money to lend.”

Lender competition for commercial loans continued to be fierce in the Atlanta district, which takes in Central and Southern Mississippi, the Atlanta Fed reported.

The St. Louis Fed, whose district takes in Northern Mississippi, said overall banking activity remained unchanged since the last Beige Book on July 16. For commercial and industrial loans, credit standards eased slightly over the new reporting period. “Creditworthiness of applicants improved modestly, demand was stronger and delinquencies were largely unchanged,” the St. Louis district reported.


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