Kansas banks and thrifts’ profits expanded while their loan portfolios contracted in the third quarter, according to the Federal Deposit Insurance Corp.’s State Banking Performance Summary released Tuesday.
The report said the combined earnings of the 320 banks and thrifts it insures in the state climbed to $379 million, the largest amount in three years.
The state’s banks and thrifts earned $184 million in third-quarter 2010 and $120 million in third-quarter 2009, the report said.
Nationally, banks and thrifts reported an aggregate net income of $35.3 billion in the quarter, an $11.5 billion increase from the $23.8 billion in earnings they reported in third-quarter 2010.
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The report showed, too, that their loans are shrinking. In the quarter, combined loan and leases were $34.2 billion, compared with $36 billion in third-quarter 2010 and $39.4 billion in the same quarter in 2009. It’s a trend shared between banks large and small: The report showed a similar pattern of declining loans and leases balances for banks with more than $100 million or more in assets and banks with less than $100 million in assets.
At the same time, banks and thrifts’ equity capital has been climbing. Combined equity capital was $7.5 billion compared with $6.3 billion in third-quarter 2010.
Chuck Stones, CEO of the industry’s largest trade group in the state, the Kansas Bankers Association, said there’s a correlation between higher equity capital and lower loan balances.
“That all kind of makes sense,” Stones said. “One way to increase capital is to decrease loans.”
Bank regulators have been “hammering” banks to increase their equity capital, he said. The other method of raising capital, through additional private investment, is a little tougher to do under current economic conditions, he said. So it’s not a surprise to him that loan balances are lower.
Overall, Stones said, the report shows signs of an industry on the rebound.
Although “I always hesitate to look at mid-year numbers as an island … I think things are starting to turn around,” he said.
“I think the number of problem banks in Kansas are going down. I think conditions are improving.”