Memphis Banks Show Broad Improvement

By Andy Meek

Banking in Memphis is in the midst of a rebound, judging by the latest numbers from the Federal Reserve Bank of St. Louis.

The St. Louis Fed’s research shows “slow, steady improvement” in the Memphis market, in the words of one regulator. That improvement includes an upswing in bank asset quality. Problem assets in Memphis are down, in aggregate, below the national average, and bank earnings likewise are improving.

What’s more, lending also was up in several categories in the second quarter compared to the second quarter in 2012.

Some of the improvement behind those trends is attributable to banks taking their lumps and moving to get those problems behind them, rather than drag them out.


“Most of the reduction in problem loans had been due to charge-offs,” said Julie Stackhouse, a senior vice president with the St. Louis Fed. “Banks wrote off the balance of loans. Now, we’re starting to see some actual liquidation. It might be a little at a time. A typical scenario is when you have residential land and that land has not moved. We’re seeing more instances where builders are coming in, taking one or two lots, building a home that’s been pre-sold, and the real estate is liquidated through that means.

“We’re also seeing in some cases investors come in and buy parcels of real estate from banking organizations. Both of those are signs we hit bottom at some point in the past and that conditions are returning to what I’d call a more normal level.”

The 26 banks the St. Louis Fed includes in the Memphis-area market, all based here, saw a big collective jump in net income in the second quarter compared with the same period in 2012 – from a loss of $44 million to $134.2 million.

The collective asset size of those 26 institutions didn’t really move, staying flat at essentially $31 billion. The biggest chunk of that pie belongs to First Tennessee Bank, which shrunk its asset size slightly from $25.2 billion as of June 30, 2012, to $24.9 billion at the end of the second quarter this year.

First Tennessee’s year-to-date net income grew over the two second-quarter periods, however, climbing to $107.7 million from a loss of almost $70 million at the end of the second quarter in 2012.

“We’re also seeing banks start to lend more in Memphis,” Stackhouse said. “You’ve probably heard the story – businesses will say banks aren’t lending. Banks will say, ‘I want to lend, but I can’t find a borrower out there who I can give credit to and have them repay that.’

“Well, somehow things are lining up, because we have seen year over year some loan growth in the Memphis area. Not in every category. We’ve seen consumer loans go down a little bit. But if we look at things like commercial and industrial loans and commercial real estate loans, we’re seeing year over year increases there. And that’s without First Tennessee. We’re hearing bankers say they’re seeing more signs of loan demand from mid-market customers.”

Setting aside First Tennessee, because its size tends to skew the aggregate picture, loan growth was up among Memphis banks in the St. Louis Fed’s research almost 3 percent, from $4.19 billion to $4.3 billion over the two second-quarter periods.

Commercial real estate loans were up a little more than 8 percent, from $936 million to a little more than $1 billion. However, consumer loans were down about 4 percent, from almost $675 million to almost $646 million.

Also, loan loss reserves were down 4.5 percent, from $70.3 million to $67 million.