YOUR BUSINESS AUTHORITY

Springfield, MO

Log in Subscribe

Q2 local bank income falls 11%

Posted online
In a midyear health check, the Federal Deposit Insurance Corp. found nationwide bank net income is on the rise. The Springfield metropolitan statistical area, however, didn’t receive a clean bill of health.

Net income at the 38 FDIC-insured banks and savings institutions across the Ozarks tracked by Springfield Business Journal fell 11 percent in the second quarter. Area banks posted $6.4 billion in total net income for the quarter ended June 30, down from $7.2 billion in second-quarter 2015.

It’s a divergence from FDIC institutions nationwide, which recorded aggregate second-quarter net income of $43.6 billion, a 1.4 percent increase compared with $43 billion a year earlier.

The rise in nationwide quarterly earnings was attributable to a $5.2 billion increase in net interest income and a $981 million drop in litigation reserve expenses at a few large banks, according to an FDIC news release.

Of the 38 area banks tracked, 17 reported less income for the quarter. Those include national institutions such as Bank of America (NYSE: BAC) – which has two branches in the Springfield area – with an 18.1 percent decrease, dropping $975 million in the second quarter, and smaller local institutions, such as Systematic Savings Bank, which fell deeper into the negative, dropping 67.5 percent to a $139,000 loss from an $83,000 loss a year earlier.

Mountain Grove-based First Bancshares Inc. – which operates one Springfield branch of First Home Bank – fell 92.2 percent, reporting a loss of $2.1 million.

“That was due to a one-time income tax benefit of $2.3 million,” said Joe James, Springfield executive vice president and senior loan officer. “That money stems from recession losses and went back into our capital position.”

With net income attributable to the bank of $179,000 for second-quarter 2015, James contends a better comparison for the bank is second-quarter 2014 net income of $159,000.

“The bank has exhibited solid earnings and really hit a great stride in the last 12 months,” James said. “Classified loans, those less than stellar loans, are below $800,000. They were at $1.4 million a year ago.”

Just outside the bottom five, The Bank of Missouri dropped 18.3 percent and $596,000 from second-quarter 2015, bringing in $2.6 million. Community Bank President Mick Nitsch attributes the loss to an additional $3 million in noninterest expenses.

“We just went through a conversion of our core software system,” he said, noting the new system went live Aug. 15. “We moved from the Jack Henry 20/20 system to their Silverlake system, so that was part of the expense.”

Leading Springfield-area institutions is Bank of Billings with a 646.5 percent increase over second-quarter 2015, taking the bank to $82,000 in the black from $15,000 in the red.

President Mark Jenkins said the main contributor is the recovery of the bank’s loan program.

“We had a lot of bad debt, but we are getting back on track,” he said.

Jenkins took the post four years ago after former President Matthew Spillman was suspended in April 2012. Spillman, who schemed to defraud and embezzle funds from the holding company, was sentenced in April 2014 to 30 months in federal prison without parole for the $413,000 in bank fraud and money laundering, according to SBJ archives.

Also in the top five, Springfield First Community Bank posted 57.7 percent second-quarter income growth to $1.62 million. While CEO Rob Fulp is pleased with the comparison, he’s more tickled with the bank’s year year-to-date net income, which has more than tripled to $3.5 million as of June 30 from $1.04 million.

“Over the last 12 months, we have grown loans 27 percent, deposits 30 percent and are keeping a close eye on our overhead efficiency ratio, which is 49 percent,” he said.

Fulp attributes the growth to assembling a team with a high level of experience and bringing on two new bankers in the past year.

Second-quarter income wasn’t as diverse for some banks. Wood & Huston Bank was nearly flat and First National Bank of Clinton gained 1 percent.

Other notables on the plus side include a handful that posted roughly 20 percent increases. Arvest Bank is up 19.2 percent to $16 million, Bank of Bolivar is up 21.6 percent to $405,000, and Old Missouri Bank is up 21.8 percent to $792,000.

The overall local total for 2015 does not include $519,000 in net income from Metropolitan National Bank, which was acquired by Little Rock, Ark.-based Bear State Bank in October. Local net income for Bear State is not yet available for second-quarter 2016 through the FDIC. Overall, Bear State Financial Inc. (NASDAQ: BSF) is up 72 percent compared with the same quarter of 2015.

Of the publicly traded, FDIC-insured banks based in Springfield, Guaranty Federal Bancshares Inc. (Nasdaq: GFED) and Great Southern Bancorp Inc. (Nasdaq: GSBC),  were down in the second quarter. Guaranty Bank posted net income of $1.5 million, a 10.5 percent decrease from second-quarter 2015, while Great Southern Bank slipped slightly further, edging profits down 12.3 percent to $10.8 million.

Given that of the 6,058 insured institutions reporting second-quarter financial results to the FDIC, 60 percent reported year-over-year growth in quarterly earnings, James was a bit surprised by the Springfield MSA’s decline.

“A prolonged period of low interest rates continue to put downward pressure on banks’ net interest margin,” he said. “A specific example involves a bank’s investment portfolio.

“Securities that banks may have purchased three to five years ago are now maturing. Current rates and yields for securities of the same type and maturity are significantly less, therefore, banks are making less money given the same level of securities in their portfolio.”

According to the FDIC, the proportion of banks nationwide that were unprofitable in the second quarter fell to 4.5 percent from 5.8 percent a year earlier – the lowest percentage since the first quarter of 1998. The number of banks in danger of failure also fell to 147 from 165 a year earlier, the smallest number of problem banks in seven years.

Comments

No comments on this story |
Please log in to add your comment
Editors' Pick
From the Ground Up: Republic Intermediate School

The Republic School District is on track to open its Intermediate School for fifth- and sixth-grade students for the 2025-26 academic year.

Most Read
Update cookies preferences