Analysis: More headaches becoming history

Q4 area bank results show profit growth, another big drop in bad loans

If three makes a trend, consider these statistics on Middle Tennessee's community banking sector:

• Year-over-year loan growth at the 27 banks we cover has risen from 4.3 percent in the second quarter of last year to 6.0 percent in the third to 8.5 percent in the last three months of 2012.
• The total noncurrent loans on those lenders books has fallen from $270 million on June 30 to $255 million at the end of the third quarter to $224 million at year's end.
• Over that same time frame, the median ratio of bad loans to total loans has dropped from 2.10 percent to 1.55 percent to 1.18 percent.

And that is why we may end up looking at the second half of 2012 — and the fourth quarter in particular — as the time when most Nashville-area banks truly shifted modes from triage to growth. Quarterly profits at the 27 institutions came in at $41.4 million, 62 percent higher than the year prior's number, which included a big tax-related profit at Avenue Bank.

Click here for a full rundown of the numbers, which show that 20 out of the 27 banks grew their loan books in the fourth quarter. Nine of the 10 largest players grew, with only Community First Bank & Trust — still struggling to get its capital ratios in line — cutting back. That suggests overall demand is coming around and that growth is no longer a question only of who loses when you win.

"I think that's what we're seeing now," said Billy Atkins, chairman and CEO of Legends Bank, about the broader uptick in demand. "Just in the past week, we've been working with three or four people who have been sitting on ideas for five or six years and are now ready to move on them."

And these days, more bankers are ready to say yes when loan requests come in. A few ugly exceptions aside — Peoples State Bank of Commerce's noncurrent ratio spike to almost 13 percent — the improvement in credit quality has been consistent over the past few quarters, relieving both borrowers and bankers of a lot of headaches.

"If you're not having to work on problems, you can be a lot more successful," Atkins said.

To read our past quarterly snapshots of the local banking sector, click here.