Georgia banks’ profits improving

March 2013: 226

March 2014: 219

Total loans and leases

March 2007: $208.02 billion

March 2013: $184.25 billion

March 2014: $193.61 billion

Total deposits

March 2007: $207.97 billion

March 2013: $210.58 billion

March 2014: $217.56 billion

Foreclosed real estate on books (known as other real estate owned)

March 2007: $304 million

September 2011: $3.51 billion**

March 2013: $2.08 billion

March 2014: $1.47 billion

*Reduction the result of failures, mergers and consolidation of related bank charters.

**Peak other real estate owned reported in FDIC Georgia quarterly performance reports

Source: Federal Deposit Insurance Corp.

Bank profits are slowly climbing back after a recession in which Georgia led the nation in bank failures. This year has brought other good news to bankers. At www.MyAJC.com, find out what 2014 profits and making it through 12 months without a new bank failure means to our economy.

Georgia banks opened 2014 with the best collective first quarter since the days before the Great Recession.

Data released Wednesday showed profits, loans and deposits grew, compared to a year ago. Georgia institutions also collectively posted reductions in the value of bad loans and amount of foreclosed real estate on their books. The real-estate crash here ushered in a nation-leading cascade of failures that have dogged this industry that is vital to the state’s economic well-being.

Georgia’s nearly 220 banks reported $590 million in profit in the first quarter, according to the Federal Deposit Insurance Corp. The bulk of that — $405 million — came from the state’s biggest bank, SunTrust. It was the highest collective profit of any first quarter since the first 90 days of 2007, and is a sign of continued improvement in the overall Georgia economy.

All told, 86 percent of Georgia’s banks made money in the first quarter, FDIC data show.

“The year started off well for our state’s banks, and that’s such good news,” said Joe Brannen, president and CEO of the Georgia Bankers Association. “We like that loan growth was good and there was continued improvement in credit quality. The economy is clearly better than it was a year ago, and the results are even more encouraging when you consider the chilling effect severe winter weather had on business in many areas of Georgia during the first quarter.”

Georgia has led the nation in bank failures since mid-2008 with 87. But the state has gone more than a year since its last forced closure.

But not all is sunshine and rainbows. Though no Georgia bank has failed in just over a year, there are still banks in Georgia that are troubled. At the end of 2013, about 40 of them — nearly one in five — had Texas ratios over 100, according to a report by Banks Street Partners. The ratio compares the value of bad loans and foreclosed real estate versus a bank’s equity capital and cash set aside for loan losses. A score of more than 100 indicates financial pressure.

The housing collapse and financial crisis battered Georgia’s banking industry, as it had too many eggs in the real estate lending basket. The state’s banks big and small lent billions of dollars to developers and investors cashing in on the real estate gold rush. But when the collapse commenced, borrowers — developers, investors and home buyers — were unable to pay their loans. Loans became much harder to get.

The lending spigot has started to loosen again. Total loans were up 5 percent last quarter to $193.6 billion, and deposits increased 3.3 percent to $217.6 billion compared to the first 90 days of 2013, according to FDIC data.

Still, loan growth has been “muted” and banks are relying on lines of business like mortgage lending and servicing to try to drive revenue, said Joe Maloney, an analyst with Banks Street Partners.

Though home prices in metro Atlanta have improved since the worst of the downturn, the real estate recovery remains uneven statewide. Bad real estate loans and foreclosures continue to weigh down the industry's rebound. Foreclosed real estate held on Georgia banks' books totaled $1.47 billion, though that's roughly a third less than a year ago.

The ratio of nonperformingloans, or loans no longer earning interest, to total loans is also improving, and now stands at 1.96 percent compared to 2.6 percent a year ago.

Chris Marinac, a bank analyst with FIG Partners in Atlanta, said the state’s banks have accumulated lots of liquidity with the growth in deposits and have room to grow loans to businesses and consumers.

The industry also has been pressured by historically low interest rates. Though it’s true banks are paying less in interest to depositors, they’re also generally charging less interest to borrowers in a competitive market. The gap known as net interest margin — a key way banks make money — has narrowed, meaning they make less on traditional loans.

“The good news is we’re making money, the bad news is the return isn’t what we want,” Marinac said.

Banks will likely continue to slash costs — that could entail cutting jobs and closing branches — as they become leaner and as customers adopt mobile banking technologies. More mergers are also possible, Marinac and Maloney both said.

On a national level, the number of so-called “problem banks” declined for the 12th straight quarter to 411, down from a high of 888 during the darker days of the economy.

The nation’s banks earned a cumulative $37.2 billion in the first quarter, down 7.6 percent from the same period in 2013 as non-interest income declined, attributable to a dip in mortgage business and revenue from trading.