Feb. 21--With lending by St. Louis area retail banks sluggish, local mergers and acquisitions are poised to pick up in 2014 as a way for banks to boost earnings.
"There will be some mergers, and the end result will be improved earnings," said Julie Stackhouse, senior vice president of the Federal Reserve Bank of St. Louis.
The more than 80 locally chartered banks and thrifts had $21.59 billion in loans at the end of December, basically flat from $21.54 billion at the end of 2012, according to a summary of bank performance by the St. Louis Fed. The figures do not include brokerages such as Stifel Financial or banks headquartered outside of the St. Louis region, such as Bank of America.
Many banks are finding creditworthy borrowers scarce, or when the demand is there, fierce competition on terms from other banks for the loans.
"Lending in our St. Louis area banks is still very flat," Stackhouse said. "Community banks make their money by making loans, and they want to make loans."
Banks' profits improved in 2013, rising to nearly $460 million, compared with $240.6 million in 2012. More than half of the total profit last year came from one source, Clayton-based First Banks, whose profit was due to a fourth-quarter tax benefit. Without First Banks, the parent company of First Bank, the remaining local banks saw profits surge 22 percent last year.
Fewer problem loans and less foreclosed real estate on their books helped banks' performance. Only five local banks ended 2013 with a loss, compared with nine in 2012.
Construction and land development loans by the region's locally chartered banks fell to $1.52 billion at the end of the year, down from $1.68 billion in 2012. Commercial and industrial loans grew to $3.9 billion in 2013, up from $3.7 billion a year earlier.
Continued declines in nonperforming loans is an encouraging sign of banks' overall health, Stackhouse said.
"St. Louis problem banks have continued to shed their problem assets and are performing for the most part at a satisfactory level," she said, pointing out no St. Louis chartered banks have failed since Truman Bank in September 2012. Nationally, bank failures are also on the decline.
Competition for commercial and industrial and other types of loans also could prompt banks to expand lending to other areas, such as Small Business Administration loans, Stackhouse said.
"I think some banks will re-evaluate if there are areas of specialty lending for which they have expertise that they can get into," she said.
First Bank, the largest locally chartered retail bank in the region, is seeking to grow its wealth management business and its small-business lending, according to Terrance McCarthy, president and chief executive of its parent company, First Banks.
The bank recently hired Gene Todd as managing director of its wealth management business, and the bank is seeking to expand its small-business lending, McCarthy said.
First Bank, which operates 130 branches in Missouri, Illinois, California and Florida, pared branches across the country in recent years, dropping from $10.9 billion in assets in 2007 to $5.92 billion at the end of 2013.
In 2012, First Banks posted its first annual profit after several years of losses.
"We've put our challenges behind us and are now focused on prudent growth throughout our footprint," McCarthy said.
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