FDIC: Income, profitability higher for Kansas banks, thrifts in second quarter

Kansas bank and thrift earnings were higher – and more of them were profitable – in the second quarter of 2012, according to a report released Tuesday by the Federal Deposit Insurance Corp.

The FDIC’s State Banking Performance Summary for Kansas shows that the institutions’ combined net income was $281 million in the three-month period, compared with $234 million in the same period a year ago.

And the percent of unprofitable institutions fell to 6.69 percent, the lowest in three years.

The report shows that the percentage of past due loans at the institutions was also at its lowest level in three years, down to 1.97 percent, compared with 3.18 percent and 3.26 percent in the second quarters of 2011 and 2010, respectively.

Total loans and leases were $33.6 billion among the 314 banks and thrifts doing business in Kansas. In the same period a year ago, they were $34.6 billion. And in the second quarter of 2010 they were $37.4 billion. That’s counter to what happened nationally in the second quarter of 2012, when total loans and leases climbed to $7.5 trillion from $7.3 trillion in the same quarter in 2011.

Richard Cofer Jr., regional manager for the FDIC’s Kansas City office for the division of insurance and research, said in an interview Tuesday that the year-over-year changes in total loans doesn’t reflect only banks’ attempts to make new loans. Lower total loans also reflect banks taking some bad ones off their books.

“That really ties into the fact that we’ve seen credit quality at our institutions improve over the last couple of years,” he said. “They’ve had four or five years to work through their problem credits. Past due ratios, non-current ratios are declining quite a bit from where they were a few years ago.”

He said he thinks banks want to increase their loan volume, but demand for new loans just isn’t there.

From what we hear from examiners and the bankers is that loan demand is low, very light,” he said. “We just haven’t seen a lot of new lending activity in our Kansas institutions.”

Cofer said the higher earnings and improving profitability for Kansas banks and thrifts can be tied in part to them eliminating bad loans and having fewer past due ones. That means they can lower their loan loss provision and put more of that money toward earnings.

“That’s one of the hurdles banks face going forward: How are they going to grow their revenues” once they’ve moved over as much money as they can from loan loss provisions to earnings, Cofer said.

“That’s the real challenge for banks right now.”