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VOL. 131 | NO. 105 | Thursday, May 26, 2016

Big Memphis Banks Getting Bigger

By Andy Meek

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The biggest banks based in Memphis keep getting bigger. New figures from the Federal Reserve Bank of St. Louis through the first quarter show broad-based improvement among banks in the Memphis-area market, from growth in net income to loans to total asset size.

Regarding the latter, the Fed’s figures show the five largest Memphis-area banks have all grown their asset bases over where they stood in the year-ago quarter.

Taking the nearly two dozen banks the Fed includes in Memphis – a few are outside the city, in places like West Memphis and suburbs like Millington and Germantown – profitability also saw a big improvement during the first quarter.

That improvement is attributable in large part to a reversal of the loss First Tennessee Bank reported a year ago. Its performance always skews the overall totals, since First Tennessee represents $26.7 billion of the Memphis market’s $33.4 billion in bank assets.

In the year-ago quarter, First Tennessee reported a loss of almost $65 million, according to the Fed numbers. For the first three months of 2016, though, the bank posted a quarterly profit of a little more than $60 million.

Total net income among the area’s banks in the first quarter was a little more than $73 million, up from a loss in the year-ago period.

ROBERT SHAW

Looking ahead, Paragon Bank CEO Robert Shaw said he’s expecting interest rates to rise soon, thus boosting his institution’s overall interest income. Small business loan volume, he said, also continues to increase.

Bank of Bartlett CFO Justin Byrd, meanwhile, said his institution is “bullish” on the Memphis-area banking market.

“Non-interest income continues to be strong due to an active mortgage market,” Byrd said. “Despite healthy competition for good loans, improving consumer and commercial loan demand, along with any potential rate increases by the Federal Reserve, should spur higher interest income levels for most banks.”

Looking at other metrics for the first quarter, Memphis-area banks have also collectively lowered their loan loss reserves. That metric reflects the amount that banks reserve to cover losses they forecast in their loan portfolios.

JUSTIN BYRD

One implication when banks decrease their loan loss reserves is that lenders are confident about market conditions and borrowers’ ability to repay.

Memphis-area banks reserved a little more than $266.7 million against loan losses in the first quarter, down from almost $294.7 million in the year-ago quarter.

Meanwhile, total loans in Memphis also are up. They topped $22.6 billion in the first quarter, up from $21.9 billion in the year-ago quarter.

St. Louis Fed senior vice president Julie Stackhouse said Memphis-area banks overall remain “relatively stable.”

“We have seen at least the lion’s share of asset quality issues – they’re now behind us, with a few banks still struggling,” she said. “And other banks continue to experience much of the same challenges as banks nationwide, which is not unexpected in this extended low interest-rate environment.”

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 85 205 21,165
MORTGAGES 76 206 24,338
FORECLOSURE NOTICES 27 34 3,135
BUILDING PERMITS 183 321 43,755
BANKRUPTCIES 48 92 13,560
BUSINESS LICENSES 31 44 6,756
UTILITY CONNECTIONS 25 32 7,931
MARRIAGE LICENSES 22 41 4,775