Georgia-based banks racked up profit growth of 9.3 percent in the first quarter over a year ago, thanks to relatively strong interest earnings and loan growth that helped beat national trends for the industry.
The state’s 194 banks reported total profit of $721 million in the first three months of 2016, up from a year earlier, the Federal Deposit Insurance Corp. said Wednesday.
SunTrust Banks, the largest Georgia-based institution, had earlier said its first-quarter profits rose to $430 million, nearly 5 percent higher than a year ago.
In another sign that consumers and Main Street businesses are borrowing and spending more, the FDIC said loan balances at the nation's 6,122 insured institutions grew by 6.9 percent over the past year, their highest annual growth since mid-2008.
The banking industry’s profits are a key bellwether of the economy. The financial institutions’ profits are driven not only by customers’ appetite for new loans to buy stuff or invest in businesses, but also by their ability to pay off old loans.
“Whenever the state’s banks grow loans, deposits and assets, it is a sign of good health for the industry and economy,” said Joe Brannen, president and CEO of the Georgia Bankers Association.
Both sides of the equation have been working in Georgia banks’ favor so far this year, and 92 percent of the institutions said they were profitable, compared to 87 percent a year ago.
In the Georgia banks’ case, swelling deposits and loans, which both increased by more than 5 percent compared to a year ago, helped push more banks into the profit column.
Likewise, the banks reported relatively healthy loans as well, with a lower percentage of past-due or troubled loans than the national average.
“Our banks performed better than the national average in many categories,” said Brannen, “including net interest margin and return on assets, and they had a lower percentage of past-due loans than banks across the country.”
On the other hand, the banking industry's footprint in Georgia continued shrinking, to 194 institutions, 11 fewer than a year ago. Industry employment likewise fell by more than 700 employees, to 42,722, according to FDIC figures.
In 2007, before the financial crisis led to a tsunami of bank crashes, Georgia had 350 banks.
At the national level, according to the FDIC, bank profits dropped 2 percent, to $39 billion, as some of the nation’s largest institutions struggled with troubled loans to the oil and natural gas industry.
Some large Wall Street banks also saw shrinking income due to the stock market dip in January and February.
Banks also continue to struggle with thin interest margins — the difference between their borrowing and lending costs — as a result of the Federal Reserve’s still-low benchmark interest rates. Those low interest rates are aimed at stimulating the economy by revving up borrowing, but they also tend to hold down the interest rates banks can charge for their loans, squeezing their net interest margins.
Still, banks that were mostly insulated from troubles in the oil patch and on Wall Street did well, according to the FDIC’s figures. The agency, which insures deposits against bank failures, said profits rose 7.4 percent, to $5 billion, at the nation’s smaller community banks.
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