VOL. 131 | NO. 164 | Wednesday, August 17, 2016
Fed Numbers Show Memphis-Based Banks Getting Bigger, More Profitable
By Andy Meek
A lingering story among banks based in Memphis is that the biggest banks keep getting bigger. And new figures from the Federal Reserve Bank of St. Louis show that trend continued uninterrupted in the second quarter.
Banks based in Memphis, including First Tennessee, are getting bigger and more profitable and are making more loans, according to the latest numbers from the Federal Reserve Bank of St. Louis that cover the second quarter. Shown is First Tennessee senior teller Donna Knapp.
(Photo courtesy of First Tennessee Bank)
Those latest Fed numbers also show improvement largely across the board in categories from net income to assets to total loans for the 22 banks the central bank records as based in the Memphis market.
Thanks to a reversal of a $2.3 million loss at First Tennessee during the year-ago quarter, profitability saw a big jump on a collective basis during the quarter. That’s because First Tennessee represents such an outsized share of the Memphis banking market, responsible for $25 billion of the $31 billion in assets owned by locally based banks.
In the year-ago quarter, the Memphis area’s 22 banks posted a collective $55.4 million in net income. During the second quarter that grew to a collective profit of $323.9 million.
Metropolitan Bank, which is co-headquartered in Memphis and Ridgeland, Miss., saw total revenue grow 32 percent annualized to $10.6 million for the quarter ended June 30, compared to the same quarter in 2015. The bank’s president and CEO Curt Gabardi attributed the performance and favorable banking climate to a few basic truths working in the favor of banks like his.
“There’s such a thirst for simple banking, with an informed banker who can make a decision,” he said. “It’s also talent. Talent connecting to a client. Simple is just that. Simple is about the experience of being multi-channel. Customers don’t want to have to call a call center three states away, they call us. It is in that, that I think makes ours a very simple strategy – being basic in how we deliver products and services through talent.”
During his bank’s second quarter earnings presentation to analysts, meanwhile, Bryan Jordan – chairman and CEO of First Tennessee parent First Horizon National Corp. – presented a similarly simple game plan his bank is working to execute.
During the second quarter, First Tennessee’s parent saw gains in everything from profit to earnings per share, loans and deposits. Jordan attributed it to “controlling costs, and at the same time building and investing for the future.”
The five largest banks based in Memphis during the second quarter were essentially the same institutions as a year ago, with the exception that Magna Bank – acquired last year by Nashville-based Pinnacle Financial Partners – is no longer on the local list. Rounding out the top five this year, as a result of that, is Financial Federal Bank.
Among other areas of improvement for Memphis-based banks in the second quarter was in amounts set aside toward loan loss reserves. On a collective basis, banks have set aside less of those reserves to cover forecasted losses in their loan portfolios.
Memphis-area banks reserved a little more than $286 million against loan losses in the second quarter of 2015, which they lowered to about $262 million during the second quarter of this year.
Total loans are also up over that same period. Memphis-based banks recorded $23.8 billion in loans during the second quarter, up from $22.1 billion in the year-ago quarter.