The 10 biggest Kansas-based banks doing business in the Wichita area turned a profit in the first quarter of 2014, but only half of them improved their profitability from a year ago.
That’s according to The Eagle’s analysis of data released Wednesday by the Federal Deposit Insurance Corp.
Intrust Bank, Emprise Bank, Capitol Federal Savings, Southwest National Bank and Midland National Bank made more money in the first quarter of 2014 compared with the same quarter a year ago.
But the amount of additional profit varied significantly. Topeka-based Capitol Federal made $1.92 million more than in the first quarter of 2013, and Emprise saw a $329,000 increase in profitability during the period, the second-highest profit increase. Intrust saw the lowest profit increase among the five banks, about $5,000.
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Total net income for the nation’s 6,730 commercial and savings banks was $37.2 billion in the first quarter of 2014, a 7.6 percent decrease from a year ago, the FDIC said.
“We saw further improvement in the condition of the banking industry in the first quarter,” said FDIC Chairman Martin Gruenberg in a news release. “Asset quality continues to improve, loan balances are trending up, fewer institutions are unprofitable, and the number of problem banks continues to decline. However, industry revenue has been affected by narrow margins, modest loan growth, and a decline in noninterest income as higher interest rates have reduced mortgage-related activity and trading income fell.”
The FDIC noted that despite the overall earnings decline, 54 percent of the nation’s commercial and savings bank reported an increase in profitability between the first quarters of 2013 and 2014.
The challenge of increasing profitability has become the norm, bankers said.
The two pieces that are affecting bank profitability, they said, is the Federal Reserve holding the Federal Funds Rate between zero and 0.25 percent, which it has since December 2008, and loan demand.
Loan demand has been improving at Intrust Bank, for example, but not enough to increase profits, executives said.
“Overall, we’re doing a little bit better,” said Jay Smith, Intrust president and chief operating officer. “We’re doing better than we had projected to be at this time, this year. We’ve had a little over $90 million in loan growth at the end of the first quarter, and that has helped to offset some of the continued compression on interest margin.”
Brian Heinrichs, Intrust’s chief financial officer, said there are only two ways to increase bank earnings: increase interest rates on loans or increase the volume of loans.
If Intrust wants to compete with other banks on loans it really can’t do the first, executives said, and it’s trying hard to do the latter.
“This has been an anemic recovery, given the depth of the recession we’ve had,” Smith said. “(Our) year-over-year increase in loan growth is positive, and that has continued into the second quarter as well. I do think we are seeing improvement here, it’s just been a slow process, and we’ll continue to see compression on interest margin.”
Brad Elliott, president and CEO of Equity Bank, said loans are growing at his bank, too, even though earnings were about $40,000 lower than last year’s first quarter. But, he added, “it’s not robust and we need more – and higher interest rates.”