Fed: Memphis Banks Improved in 2013

By Andy Meek

Memphis banks ended 2013 in somewhat better shape collectively than they stood at the end of 2012, based on new numbers from the Federal Reserve Bank of St. Louis.


Bank earnings appear to be improving, less of a cushion is being needed to safeguard against souring loans, and lending is up in some categories. The biggest banking company in the area by far is Memphis-based First Horizon National Corp., which announced last month a fourth-quarter profit of $49 million, up from a little more than $40 million during the same period in 2012.

That same trend was evident when looking at the 26 banks as a whole the St. Louis Fed includes in the Memphis-area market, all based here. They saw a nearly 70 percent jump in collective net income in the fourth quarter – $130.7 million – compared with $78.2 million for the same period in 2012.

The total asset size of those institutions fell slightly to around $30 billion from $31.4 billion a year ago. First Tennessee, the regional banking unit of First Horizon, represents the biggest chunk of that asset pie, and during 2013 the company shrunk its asset size slightly from $25.2 billion at the end of 2012 to $23.5 billion at the end of 2013.

First Tennessee’s year-to-date net income grew over the two year-end periods, however, climbing to $76.2 million from $20.6 million at the end of 2012.

The loan picture locally also seems to be improving somewhat. Setting aside First Tennessee, because its size tends to skew the aggregate picture, total loans among Memphis banks in the St. Louis Fed’s research were up 6.35 percent at year-end, from $4.29 billion to $4.56 billion over the two fourth-quarter periods.

“I think banks actually have money to lend,” said Michael Patton, a shareholder in the Memphis office of Baker, Donelson, Bearman, Caldwell & Berkowitz PC. “The issue is qualified borrowers. I think there is a real tension between protecting the consumer from unfair practices and driving providers out of the market with draconian regulations, which make the cost of compliance prohibitive.”

To that end, consumer loans were down 3.3 percent at year-end, from $665.6 million at the end of 2012 to almost $643.3 million at the end of 2013. During that same period, commercial real estate loans were up almost 18 percent to almost $1.2 billion, from $990.1 million a year earlier.

As a whole, Memphis banks appear to be less worried about loans turning bad down the line. Loan loss reserves were down 2.5 percent to $66.4 million, compared with $68.1 million a year earlier.

“In general, bank performance including the Memphis-area banks (was) somewhat better in 2013 than in prior years – but their performance was not stellar,” said Otto Thomas, a director in the Memphis office of Corporate Finance Associates. “Some of the banks reduced their provision for loan losses when, in my opinion, they should not have done so.”

At week’s end, First Horizon disclosed that a settlement with Freddie Mac and other legal developments will mean a small increase for the company’s profit for 2013.

The company said Thursday, Feb. 27, it had reached an agreement with government-backed Freddie Mac, though First Horizon didn’t disclose the amount it would pay to settle a disagreement with Freddie Mac over home loans sold to it by First Horizon.