There are plenty of company-specific reasons why investors have been interested in Nashville's banks, led by Pinnacle Financial Partners and newly public Avenue Financial Holdings. Here's another you could add to the list: They're active in a state with high net interest margins that are holding their own. The researchers at SNL have tallied the number for the nation's 20 largest banks. There, the median net interest margin for the fourth quarter was 2.92 percent. It was not much higher for the top 50, where a big majority weren't able to put up the same number as the year before because of low interest rates and flat demand.
Nationally, the third-quarter net interest margin averaged 3.15 percent. But among all Tennessee banks, the FDIC says, the number was above 3.6 percent on Sept. 30 and has been at or near there for more than a year. It should be noted, though, that the average expense ratio at a Tennessee bank also is a good bit higher.
SNL Financial's Ken McCarthy and Robin Majumdar have tallied up the second-quarter loan growth numbers at the nation's community banks, and the news isn't great for the Southeast. The region ranks last for median commercial loan growth, where it lags the year-over-year national average by 1.7 percentage points, with only residential construction outperforming by a noticeable margin.
Over at research firm SNL, Maria Tor and Stephanie Deck have crunched the Q3 banking sector's earnings numbers and say the industry's growth pendulum swung further in the direction of mid-sized and smaller players this fall. That solidifies a trend that started late last year.
Banks closed more than 2,500 bank branches in the year ended June 30 and opened only 1,247 new ones, according to industry researcher SNL Financial. That shaved 1.3 percent off the industry's collective retail network, a trend many observers say will continue for a good while.
And, with heavily mounting compliance costs and intense competitive pressures, banks of all stripes are actively looking for ways to curb expenses. Given declines in activity in branches, scaling back on that front makes sense for an increasing number of banks, he said.
"There's almost nobody in the branches," Adkins said. "You could shoot water balloons all over the place and not hit anybody."
He said this will only become amplified as younger, tech-savvy generations become regular bank customers. "My son who is in college, I don't know if he's ever physically walked into a bank," Adkins said. "So I think this is just going to continue."
One thing we've consistently heard from bankers in recent years is that the expected wave of mergers and acquisitions hasn't materialized in part because of the often, ahem, ambitious pricing expectations from bank boards thinking about selling. The folks at SNL Financial have tallied third-quarter M&A data that offers little hope to those hoping that a market upswing will help them get better exit terms. Year to date, the average sale has been for less than 1.2 times tangible book value.
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