Banks in Arizona lag in the industry's general recovery

Bankers around the country have more to be thankful for this year, but their counterparts in Arizona aren't as lucky.

The latest progress report from the Federal Deposit Insurance Corp. shows banks nationally are returning to health much faster than those in Arizona, offering the prospect that lending might pick up soon.

U.S. banks earned a combined $14.5 billion during the quarter ended Sept. 30. That was up from $2 billion in profits one year earlier and marked the fifth straight quarter of year-over-year gains. It also left just 19 percent of banks unprofitable.

"The industry continues making progress in recovering from the financial crisis," said FDIC Chairman Sheila C. Bair in a statement. "Lower provisions for loan losses are driving bank earnings by allowing a larger share of revenues to reach the bottom line."

By contrast, Arizona banks lost a combined $101 million during the quarter, although that was better than the $299 million shortfall for the third quarter of 2009. Some 64 percent of banks with Arizona charters or licenses remained unprofitable at last count, with local institutions suffering much more severely from real estate weakness.

"The economy has been more one-dimensional here," said Paul Hickman, the new president and chief executive officer of the Arizona Bankers Association. "But hopefully the bloodletting is over."

Hickman said he's encouraged by the decline in year-over-year losses for Arizona banks and said more local institutions appear ready to lend.

Roughly half the banks operating in Arizona, including most of the biggest players, are federally chartered and not included in the state report.

Nationally, banks reported progress in several other measures, including lower bad-loan chargeoffs and reduced provisions to cover loan losses. Banking-industry employment rose for the second straight quarter, after falling the 12 prior quarters.

Also, the proportion of overdue loans declined for a second straight quarter. Credit-card accounts that were 90 days or more overdue fell 11 percent, while past-due residential loans dipped 1 percent.

Bair voiced hope that bank lending would rise in coming quarters.

While the FDIC reported more banks on its "problem list" - 860 compared with 829 at midyear - the combined assets at problem banks fell 6 percent, a good sign. The FDIC doesn't disclose which firms are on the list.

The report shows significant shrinkage in Arizona's banking industry. The latest tally had just 42 institutions with $13.9 billion in assets, $11.6 billion in deposits and 3,700 employees. Those figures compared with 52 banks with $15.9 billion in assets, $12.9 billion in deposits and 4,100 employees as of Sept. 30, 2009.

Arizona has suffered 11 bank failures since August 2009, including two in the current quarter.

by Russ Wiles The Arizona Republic Nov. 23, 2010 05:35 PM




Banks in Arizona lag in the industry's general recovery