Bank Profits Shrink in Third Quarter

By Andy Meek

Memphis-area banks on the whole were a lot less profitable at the end of the third quarter than they were during the same period in 2011.

The two dozen or so banks in the Memphis market reported a little more than $12 million in year-to-date net income at the end of the third quarter, according to data from the Federal Reserve Bank of St. Louis. That’s a big drop from the $136.3 million in year-to-date net income the same banks collectively reported in the third quarter of 2011.

Part of that drop-off can be attributed to the banking arm of Memphis-based First Horizon National Corp. Its First Tennessee Bank unit is the largest bank based in Tennessee, and according to the Federal Reserve data First Tennessee’s third-quarter profit dropped from almost $128 million in 2011 to a loss of $32 million this year.

The industry from a macro perspective still faces a challenging road ahead, both locally and on a broader level.

Borrowers still are either skittish about debt or don’t qualify for new debt. And national lawmakers still are tinkering with new banking regulations.

Locally, the Memphis market presents its own set of challenges.

“This is a difficult market,” said Magna Bank chairman, president and CEO Kirk Bailey. “We’re all pretty lean right now. We can’t cut our operating expenses in too many other areas to compensate for increasing compliance costs. So at the end of the day, if you’ve got banks that aren’t growing their balance sheet, compliance costs are escalating and they can’t cut any more out of their expense structure, they’re in a kind of no man’s land.

“A lot of times when you’re in a no man’s land, you seek out a partner to spread some of those costs over a larger organization, if you can.”

Local bankers increasingly are making their voices heard. Will Chase, president and CEO of Memphis-based Triumph Bank, for example, has been chosen to serve on the Community Bankers Council.

It’s a division of the American Bankers Association in Washington. The council’s mission is to advise the American Bankers Association on issues affecting the nation’s community banks and their customers.

The council consists of 85 bankers from across the country and meets twice yearly, and its members represent financial institutions generally with assets of less than $1 billion.

During its most recent session last month in Washington, council members discussed trends in the payments industry, issues surrounding policy compliance and financial services-related patent wars.

“We will work together to continue to improve the image of community banking, which took a hit along with the banking industry as a whole since the financial crisis,” Chase said.

While in Washington, council members met with congressional leaders to share the banking industry’s positions on current policies. The bankers also met with representatives from regulatory agencies including the Federal Deposit Insurance Corp., Federal Reserve Board and Office of the Comptroller of the Currency.

“These meetings provided council members with a chance to share industry concerns, which could help guide the banking community into a strong economic future,” Chase said. “The council is positioned to influence policy decisions made in Washington and also gather information that can help us meet the challenges we face locally.”