Monday, September 6, 2010

Hard-hit banks in Arizona show signs of stabilization

Arizona's hard-hit banking sector is showing signs of stabilization but still lags the national industry in several key measures with no strong upturn in sight.

New figures from the Federal Deposit Insurance Corp. portray a local industry that has shrunk over the past year because of failures, consolidations, loan write-offs and dwindling deposits and more - and an industry that remains relatively unhealthy.

Yet the surviving banks chartered or licensed here have stabilized in some performance measures such as return on assets and non-performing assets.

Nationally, the FDIC reported the banking industry made $21.6 billion in aggregate profits in the second quarter, reversing a $4.4 billion loss a year earlier and representing the best quarterly result in nearly three years.

About 20 percent of banks nationally were unprofitable, down from 29 percent a year earlier, and the industry's return on assets improved to 0.65 percent from a negative 0.13 percent a year earlier.

But the number of banks on the FDIC's "problem list" swelled to 829, a 17-year-high. The agency doesn't name the banks on that list.

Despite their woes, Arizona banks did show some profit improvements.

The 42 Arizona banks reporting financial results for the second quarter lost a combined $82 million, down from the $233 million in red ink posted by 57 Arizona banks in the second quarter of 2009.

Sixty-seven percent of Arizona banks were unprofitable, down from 81 percent a year earlier. Also, Arizona banks have improved their operations in several key measures. For instance, their combined return on assets was a negative 1.14 percent, better than the negative 2.85 percent a year earlier. Also, the proportion of loan charge-offs, non-current loans and non-performing assets all have improved. Plus, banks here earned a higher spread between what they pay on deposits and earn on loans.

But problem loans, difficulty in attracting depositors and investors, and regulatory scrutiny continue to cast a cloud.

"Nobody wants to invest in these banks," said Jim Miller of JPM Consulting LLC in Phoenix.

by Russ Wiles The Arizona Republic Sept. 2, 2010 12:00 AM

Hard-hit banks in Arizona show signs of stabilization

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