Locally, at least, first-quarter 2010 bank filings appear to back up Mark Twain’s claim that it’s not the size of the dog in the fight as much as it is the size of the fight in the dog.
While banks large and small found opportunities to increase profits and, in some cases, move from red to black, not all reported gains between the first quarters of 2009 and 2010.
Bank representatives, however, say the determining factor in improved results doesn’t appear to be size, but internal strategies that range from lending practices to diversification.
Federal Deposit Insurance Corp. filings for 13 southwest Missouri-based banks show that eight saw improvements in their net incomes between first-quarter 2009 and first-quarter 2010. Of the seven banks with net incomes in the red during 2009, four – Guaranty, Metropolitan National, OakStar and Springfield First Community posted positive net incomes for first-quarter 2010.
Hometown honing For smaller banks – even those that remained profitable between the first quarters of 2009 and 2010 – local roots can help mitigate market pressures.
At Ozark Bank, for example, total assets dropped to $189.3 million in the first quarter of this year, from $192.3 million in the same period last year. Given current economic conditions, that drop wasn’t unexpected, said CEO and Chairman Fred Hedgpeth. The bank’s net income, however, nearly doubled, jumping to $412,000 in first-quarter 2010, compared to $225,000 for the same quarter a year ago.
Hedgpeth believes the bank’s small size – it has four branches – is a benefit in the current economy.
“We are definitely a community bank,” he said. “Banking is built on relationship, and the owner-management is located here. We know our community. We know the businesses within our community, and we work at trying to capture our part of the market.”
Face-to-face interaction with customers also is a strength at State Bank of Southwest Missouri, said President Thomas Fowler, but a conservative lending strategy also helps.
“We’re very strong in service, and we have only one location, so we have to be very careful about what we do,” Fowler said. “We’re not big into development. We do lots of home loans, but in terms of speculative residential, we’re not involved in that at all.”
State Bank’s total assets dropped to $87.6 million in the first quarter of 2010, compared to first-quarter 2009 total assets of $91.3 million. Its net income for the first quarter dropped, too, down 11.5 percent to 199,000, from first-quarter 2009.
“We’re not looking for growth so much as other institutions have,” Fowler said. “That’s been very beneficial through the economic times.”
Around the regionWith expanded offerings, larger banks have additional resources for shoring up financial results.
Gil Trout, chairman and CEO of Kansas-City-based UMB Financial Corp.’s greater Missouri region, said the midsize regional bank – $10.7 billion in assets and 135 branches in seven states – puts UMB in an ideal position. The publicly traded bank (Nasdaq: UMBF) is small enough to know its customers personally, but big enough to boast a wide range of offerings.
“We have a really diversified financial services company – 53 percent of our revenue comes from fees or noninterest sources,” Trout said, noting that insurance, corporate trust services and asset management banking are all fee-based sources of income for the bank.
While UMB’s $75.8 million net interest income for the first quarter of 2010 was flat in comparison with the first quarter of 2009, its noninterest income jumped to $86.4 million, a 25.4 percent increase compared to the same quarter last year.
Trout attributes much of that gain to businesses UMB acquired last year, including Odgen, Utah-based J.D. Clark & Co. and Denver-based American National Bank’s corporate trust business.
Trout also points to the expansion of UMB’s asset and wealth management teams, highlighted locally in April 2009 when UMB hired five Bank of America U.S. Trust financial advisers after the Charlotte, N.C.-based company closed its Springfield wealth management office.
Still, not all midsize regional banks showed improvements between first quarter 2009 and 2010.
Birmingham, Ala.-based Regions showed a $255 million net income loss in the first quarter of 2010, compared to a $26 million gain a year earlier, according to its quarterly earnings report, which cited efforts to stabilize net charge-offs and build minimum reserves as the reasons for its losses.
Tupelo-Miss.-based BancorpSouth posted a net income of $8.4 million for the first quarter of 2010, compared to $29.5 million in the first quarter of last year, according to its quarterly earnings report. It, too, notes delinquent loans as a key reason for the decreasing numbers.
The big boysAt least two large national banks – U.S. Bancorp and Bank of America Corp. – posted multimillion-dollar gains between first-quarter 2009 and first-quarter 2010.
Bank of America (NYSE: BAC) showed $3.2 billion in net income for the first quarter of this year, compared to a loss of $194 million in first-quarter 2009.
Minneapolis-based U.S. Bank (NYSE: USB) posted a net income of $663 million in first-quarter 2010, compared to $545 million in first-quarter 2009.
Greater access to capital markets is a plus for U.S. Bank, said Clifford Wert, regional president who oversees 16 branches in southwest Missouri and one in Pittsburg, Kan.
But the bank also has to make sure there’s adequate leasing and limited exposure to speculation, which can be accomplished by working with established builders and developers who have solid business plans, appropriate levels of equity, leverage, liquidity and cash flow, he said.
Joplin Tri-State Business Journal Reporter Doug Graham contributed to this story.[[In-content Ad]]
