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Thursday, Mar 30, 2023

Banking Recovery Continues to Move in the Right Direction

The recovery may be happening slowly in some industries like construction, but most banks are feeling flush these days.

The industry’s aggregate net profit for 2013 was $154.7 billion, an increase of $13.6 billion or nearly 10 percent above the aggregate net profit for 2012, according to the recent report from the Federal Deposit Insurance Corp., the insurer for the nation’s nearly 7,000 banks and thrifts.

For the fourth quarter, the banks’ total profit came in at $40.3 billion, up $5.8 billion or 16.9 percent from the fourth quarter of 2012.

It’s the 17th time in the last 18 quarters that the banks have logged a year-over-year increase.

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The biggest reason for the improved profits was that many banks reduced the funds they put into reserves to cover for potential loan losses, the FDIC report said.

More than half of the banks showed improved higher earnings in the fourth quarter, and only 12 percent weren’t profitable, down from 15 percent in the like quarter of 2012.

“Asset quality improved, loan balances were up, and there were fewer troubled institutions,” FDIC Chairman Martin Gruenberg said.

Meanwhile, the number of banks on the FDIC’s problem bank list fell from 515 to 467 during the fourth quarter, the report noted. That’s down from 888 banks on that list at the end of 2011.

Even loan balances, which had been mainly flat for the past several years, showed increases. The report found a rise in every loan category except single-family mortgages. For the year, loan balances grew by $197.3 billion, or 2.6 percent.

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BofI has record net profit: BofI Holding Inc., parent of BofI Federal Bank, continued growing and racking up record profits.

For the bank’s fiscal 2014 second quarter ended Dec. 31, 2013, it reported record net income of $13.1 million, up nearly 35 percent from the like quarter in the prior fiscal year.

Already ranked as the area’s second-largest locally based bank, BofI reported that its total assets increased nearly $700 million, or 24 percent, over the year to $3.56 billion.

Loan originations during the second quarter were about $789 million, up 29 percent from the prior year’s second quarter. Total loans, net of allowance for losses, came in at $2.77 billion, compared with $2.15 billion in the like quarter of 2012.

The bank’s loan portfolio got bigger as the asset quality improved. Total nonperforming assets, including foreclosed real estate, made up 0.49 percent of total assets as of Dec. 31, compared with the like period of 2012 when it was a remarkable 0.79 percent.

“We continue to remain highly focused on credit quality at the bank and have not sacrificed credit quality to increase originations,” CEO Greg Garrabrants said.

Given what Garrabrants revealed on early third quarter results, it would appear BofI is on track for another year of double-digit asset gain this year.

In January, he said the loan pipeline included $497 million of jumbo mortgages, $151 million in commercial and industrial loans, and $92 million in apartment mortgages.

The bank also continues to demonstrate strong capital ratios, with total risk-based capital at 15.73 percent, compared with 14.6 percent in the like quarter of 2012. Banks need a minimum of 10 percent in that measure to be classified as well-capitalized.

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San Diego small businesses not thrilled with economy: While some extol an ongoing but slowly improving economy, local small businesses aren’t feeling it, based on the results of one recent survey.

Union Bank’s annual small business economic survey found 69 percent of San Diego based responders think the state economy is headed in the wrong direction, while 58 percent believe the national economy is headed in the wrong direction.

The survey’s statewide results found 51 percent believe the California economy is headed in the wrong direction, but 49 percent think it’s moving in the right direction, up 8 points from last year.

In terms of expansion, only 15 percent said they planned to increase staffing, about the same amount as last year.

The lending climate apparently is improving, the survey found. Of the 19 percent seeking credit, more were approved, 78 percent, than during the previous year when 62 percent were approved.

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Small Change: Nationwide Direct of Carlsbad, a mortgage bank with offices here and in Denver, recently joined Guaranteed Rate, a large retail mortgage company. … The Sixth Annual Microfinance Summit is scheduled for April 8 at the University of San Diego’s Joan Kroc Institute of Peace and Justice. Larry Reed, director of Microcredit Summit Campaign, is the keynote speaker.

Send any news about locally based financial institutions to Mike Allen via email at mallen@sdbj.com. He can be reached at 858-277-6359.


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