Analysis: Large-small gap grows among area community banks

$1B lenders post double-digit loan growth as smallest stall; credit quality continues broad improvement

Nashville-area community banks posted a collective profit of $44.5 million in the second quarter of this year, an improvement of about 9 percent from the year before. Loan growth at the 27 institutions grew a little bit faster — 9.5 percent — and posted their biggest year-over-year gains since late 2011.

But as has increasingly been the case coming out of the Great Recession, most of the spoils of recovery are going to the biggest members of the pack. The region's top five institutions — which all have more than $1 billion in assets — are Pinnacle, FirstBank, Wilson Bank & Trust, First Farmers & Merchants and CapStar. Their combined loan book grew by more than 14 percent in the past 12 months. That of the 10 smallest banks inched up just 2.2 percent.

Similarly, the top five posted a Q2 2012 profit of $23.7 million. This past quarter, that number was $29.7 million. By comparison, the 10 smallest — all of which have less than $250 million in assets — saw their combined net income fall from $2.9 million to $2.1 million.

You can view the full Q2 numbers here. (Our past analyses of local banks' profits are available here.)

But if the growing large-small gap has been one steady trend in Middle Tennessee banking in the past two years, so has the steady improvement in collective credit quality. As of June 30, the 27 banks we track had a total of $192 million of noncurrent loans on their books. That's down 29 percent from a year earlier and 32 percent less than their late-2011 peak. And the 1.15 percent median noncurrent loan ratio among the lenders was the lowest since the fourth quarter of 2008, before the full weight of recession took its tool.