Missouri's community bankers are wondering what they're going to do for an earnings encore.
The state's 364 community banks earned a robust $99 million in the first quarter and are on track to grow a solid 12% for the full year over 1993.
"There is no reason why they should not be earning ROAs in the neighborhood of 1%" going forward, said William Keeton, senior economist with the Federal Reserve Bank of Kansas City. "At this point there are not any dark clouds on the horizon."
But while community bankers believe a 1% return on average assets is attainable, they say their banks have reached full earnings potential, and that it will be harder to make a buck going forward as interest rates rise and net interest margins shrink.
"I think we have probably peaked," said D.W. Johnson, executive vice president; of Stockton-based Sac River Valley Bank, which ranks as the most profitable community bank in the state with a return on average assets of 2.77% in the first quarter. "We are in a very slowgrowth area and the spreads are going to narrow some."
"It's pretty hard for us to go up from here," added Hubert Turnbull, president of Zook and Roecker State Bank, which posted a 2.77% ROA.
Nevertheless, the community bankers, who are meeting this week in Lake Ozark for the Missouri Independent Bankers Association Inc.'s convention, should be pleased with the way banking in the heartland is going.
They have recovered smartly from last year's floods, bad loans are down, and 98.8% of the banks in the state were profitable in the first quarter, according to Sheshunoff Information Services Inc., an Austin, Tex.-based bank and thrift ratings firm.
For the first three months of the year, the $33 billion-asset community banking industry returned 1.19% on assets and 14.03% on equity. Those figures are nothing to sniff at, but the state's four large banks returned 1.24% on assets and 17.50% on equity.
While earnings are solid, loans are expected to continue growing at a steady pace. The loan-to-deposit ratio for the group stood at 71.73% in the first quarter, up Trom 70.86% in 1993 and 67.42% in 1992.
Mr. Johnson said business and agriculture loans are picking up in Stockton, which is about 50 miles northwest of Springfield. He said people from California and .other states have moved in and are buying homes in the laidback community, which is away from bustling cities.
Darrell Spillers, president of Corner Stone Bank near the Oklahoma and Arkansas borders, said loan demand is being fueled by the expanding poultry industry. He said chicken farmers are buying breeding houses that cost $150,000 a pop and $70,000 broiler houses to raise chickens that end up in grocery stores.
He expects loans at Comer Stone to grow by as much a 10% this year.
"It all takes money," Mr. Spillers said. "That's where I come in."