The whole world knows that the two biggest U.S. banks by assets posted sharply different earnings trends in the first quarter. Bank of America Corp. was down more than 35 percent versus the year-ago quarter, while JPMorgan Chase & Co. was up 60 percent. Likewise, the third-largest bank, Citigroup Inc., was down 30 percent and the fourth largest, Wells Fargo & Co., was up nearly 50 percent. Getting to be the biggest, obviously, does not guarantee consistency in profits, especially in this post-crisis, post-recession environment.
There was, however, a more consistent — and positive — trend among smaller publicly traded companies. Of 166 banks nationwide whose earnings reports are posted on our website, www.BankNews.com, 116 (70 percent) improved earnings in the 2011 first quarter compared with a year ago. A dozen more (7 percent) had flat earnings, and just eight (5 percent) of the group suffered losses in this year’s first period. Of the companies reporting losses, two had smaller losses than a year ago; three swung from a profit to a loss; two had bigger losses in 2010; and one had nearly equal losses for both quarters.
With nearly 80 percent of these banks being profitable, and only 5 percent with losses, the numbers look better than those the FDIC reported for the quarter. More than half (56 percent) had a better quarter in 2011 than in 2010, while 15 percent experienced losses.
After the trillion-dollar giants, the companies represented dropped in asset size to those around $300 billion, such as PNC Financial Services Group Inc.; to $100-plus billion, including Fifth Third Bancorp in Ohio; to $50-plus billion, such as Texas-based Comerica; $6 billion, including PacWest Bancorp in California; and $1-plus billion, like MidWestOne Financial Group Inc. in Iowa. Geographically, 59 companies call the East home, 66 are in the central states and 41 are in the West.
There was nothing surprising in the factors most often cited for improved earnings: higher net interest income, fewer non-performing assets and less provisioning for loan losses, and lower deposit costs. Signature Bank in New York, which set a first-quarter earnings record, reported a higher net interest margin along with strong loan and core deposit growth.
Banks in all three regions had impressive gains. In California, Pacific Premier Bancorp Inc., which improved its net interest margin to 4.21 percent from 3.56 percent, reported earnings of $4.8 million compared with $500,000 a year ago. Less spectacular but still commendable given its location in economically challenged Michigan, Chemical Financial Corp. increased profits four times, from $2.3 million to $9.2 million. “Credit quality stabilization” and the earnings impact of a 2010 acquisition were factors cited by management. In Maryland, Sandy Spring Bancorp boosted its earnings more than 14 times, from $500,000 in 2010 to $7.3 million for the recent quarter. President and CEO Daniel J. Schneider cited increasing commercial loan balances and solid core deposit growth as “indicators that we have, in fact, turned the corner.”
Not all banks, of course, have turned the corner. Failures continue at a discouraging although somewhat improving pace. Too many other financial institutions still struggle to dig out from unhealthy levels of nonperforming loans. However, the first-quarter data from most banks are encouraging. Barring another unforeseen crisis or double dip, the positive trend should be sustainable through 2011 and beyond.
Bill Poquette is editor-in-chief of BankNews.
Copyright © June 2011 BankNews Media