Area banks present cleaner bill of health

Look mom, no losses! Credit quality also improving despite some outliers

Middle Tennessee's community banks posted a combined profit of $33.8 million in the first quarter of 2012, an improvement of 53 percent from Q4 and more than double their year-ago number.

More important to note, though: Not a single institution ended March with a net loss, another anecdotal sign that banking in the Nashville area — and by extension, the economy as a whole — is returning to a steadier state. Also noteworthy is that credit quality trends continued their steady improvement in the first three months of 2012, with the total amount of bad loans falling by 3.4 percent.

Before breaking out the party poppers, though, some caveats are in order: Our data pool has in the past year shed Tennessee Commerce Bank and GreenBank, two struggling institutions that were bleeding red ink and now are part of larger regional organizations. And Columbia-based Community First Bank & Trust, the only area bank still under a formal regulatory order to boost its capital levels, posted a $2 million profit only after booking a gain of almost $1.5 million on the sale of its Murfreesboro branch and taking no loan loss provision for the quarter. A year ago, that provision totaled $1.8 million.

Still, there are clear signs many local lenders have definitively turned the corner:

• Even though No. 1 Pinnacle Financial trimmed its asset base by about $70 million during the quarter, the total assets held by the 25 institutions in our database rose 1.3 percent to $14.3 billion since the end of 2011 and is up 5 percent from a year ago.

• Five banks actually had negative net chargeoffs during the quarter, meaning their bad-loan recoveries were bigger than their new chargeoffs. Also, the median chargeoff ratio of 0.29 percent tied for the lowest in three years.

• Half of the institutions had fewer past-due loans on their books at March 31 than at Dec. 31. In all, the pile of noncurrent loans shrank to almost $209 million from $216 million at the end of 2011 — even though five institutions ended the quarter with noncurrent loan ratios above 5 percent.

Looking ahead, one key question to watch in the second quarter is whether banks can resume the collective loan growth they showed in Q4. First-quarter numbers were flat, suggesting the overall community banking pie isn't growing and that some institutions' gains will continue to come at others' expense.

Our full set of numbers is available here. To review past quarterly wrapups, click here.