7 Takeaways from Q4 Results
January 30, 2014 7:30 AM
Community banks are still struggling to regain their financial footing following the drying up of mortgage refinancings. But quarterly results are providing some glimmers of hope. Here are the highs and lows from the nearly 200 community banks that have reported so far.
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Profitability: A Mixed Bag
Net income is off 10% from a year earlier when refinancing-related fees gave community banks a nice boost. Even so, results are 10% better than in the third quarter, showing that banks are scratching their way higher.
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Refi Withdrawal Still Painful
The end of the refinance boom is killing banks' fee income, which fell 3% from the third quarter and 12% from a year earlier.
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Limited Expense Progress
Community banks have been slow to cut costs. Noninterest expenses were up 5% from the third quarter and a year earlier. With compliance and restructuring costs as the key culprits, several banks outlined plans to close branches.
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Lending Looks Good
Community bank Loan portfolios increased 4% from the third quarter and 9% from a year earlier. Much of the activity involves commercial applicants, particularly small businesses.
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Loan-to-Deposit Balance Improves
Banks are also booking loans at a faster rate than they're gathering deposits. As a result, the loan-to-deposit ratio improved to 82.5% at Dec. 31 from 81% a year earlier.
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Margins Little Changed
A big concern has been net interest margin compression. Banks have been able to keep their margins in line with the third quarter's, but they're down slightly from a year earlier, at an average of 3.72%.
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Foreclosures Decline, Credit Improves
Bankers continue to hack away at problem loans. Nonperforming assets fell 23% from a year earlier, and net chargeoffs decreased 64%. That has allowed community banks to reduce provision expenses by 58% from a year earlier.
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