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VOL. 127 | NO. 34 | Monday, February 20, 2012

Local Banks See Smaller Profits

By Andy Meek

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Setting aside the performance of the largest local bank, Memphis-area banks as a whole didn’t report as much profit at the end of 2011 as they did at the end 2010.

The two dozen banks in the Memphis market reported almost $192 million in year-to-date net income at the end of 2011, according to the Federal Reserve Bank of St. Louis.

That’s a nearly 70 percent improvement over the $114 million those same banks reported at the end of 2010.

But most of that figure is attributable to First Tennessee Bank, which has almost $25 billion in assets and is a division of Memphis-based First Horizon National Corp. Of the collective $192 million in profits for Q4, for example, $175 million of that belonged to First Tennessee.

Over the previous two Q4 periods, First Tennessee’s year-to-date net income almost doubled, going from almost $91 million at the end of 2010 to $175 million once 2011 came to a close.

If First Tennessee’s results are set aside, though, Memphis-area banks actually saw their profits shrink from Q4 2010 to Q4 (going from about $23 million to $16.6 million).

“A common complaint on the part of some community bankers is that very low interest rates hurt their profitability by squeezing net interest margins,” said Federal Reserve Chairman Ben Bernanke at a recent conference on community banking, referring to the difference between what banks can earn by collecting interest on loans and what they have to pay to depositors and other sources for the money to make those loans.

Bernanke, who is scheduled to give pre-taped remarks next month for the Independent Community Bankers Association convention in Nashville, also said the profits at smaller banks have been rising for the past several quarters. However, he noted that although the quality of loans on the books has stopped deteriorating, the proportion of bad loans remains elevated.

Bank of Bartlett was one of four banks in Shelby County reporting a loss in the year-to-date net income column at the end of 2011, according to numbers from the Fed. The other three were First Alliance Bank, Tri-State Bank of Memphis and First State Bank.

At the end of January, the Fed sent Bank of Bartlett a notice of “Prompt Corrective Action” that suggests the bank is undercapitalized and requires the bank to raise capital within 90 days.

The notice is dated Monday, Jan. 30. But Bank of Bartlett President Harold Byrd said it’s based on outdated information – specifically, on second quarter numbers that were current at the time of the bank’s last examination in the summer.

“We’ve made a lot of progress since then,” Byrd said. “With their deliberative process, they just sent this to us. And we certainly plan to adhere to its requirements.”

To his first point, the bank recently posted a fourth quarter profit, as well as a profit for the second half of 2011.

The bank reported Q4 net income of a little more than $712,500, compared to a more than $1.5 million loss during the year-ago period.

The bank reported a decline in non-performing assets, a 39 percent drop from more than $46.5 million in Q4 2010 to $28.2 million in Q4 2011. Non-accrual loans dropped 70 percent to $8 million from $27 million during the same quarter in 2010, and total delinquencies dropped to 7.5 percent.

The Associated Press contributed to this report.

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