Area community bank profits up 13% from last year

But bottom-line gains are ever more concentrated at the top

The Nashville region's community banks earned a record $47.8 million in the first quarter, which was up 6 percent from the figure from late last year and 13 percent from the first three months of 2013.

But the local industry's bottom-line gains are becoming increasingly concentrated among its largest players, with Pinnacle Bank, FirstBank and Wilson Bank & Trust — the only area banks with loan books greater than $1 billion — now accounting for more than 61 percent of all area profits. That's up from 55 percent a year ago and 43 percent in early 2012. By comparison, the 10 smallest area community banks, which put together are the size of Wilson Bank & Trust, have over the past two years seen their combined profits sink to $1.3 million from $2.2 million.

Those statistics speak to two trends in community banking: The first is that smaller players are having to absorb higher regulatory costs across smaller organizations. The second is that growth is increasingly hard to come by as larger lenders ramp up — the three banks mentioned above account for 45 percent of loan growth over the past year — and overall demand isn't as robust as it should be at this point in the recovery. Both trends are feeding the search for strategic alternatives, be they mergers like the one planned between Commerce Union and Reliant or initiatives like local bank-owned side business BancAccess, which pools loan production services.

Only three of the 29 banks we track — Community Bank & Trust, Sumner Bank & Trust and Southern Bank of Tennessee — lost money early this year, while 11 institutions either grew profits by double digits or reversed year-ago losses. Nineteen banks grew their loan portfolios from Dec. 31, with overall year-over-year growth clocking in at 9.6 percent, about 1.5 points faster than the average since mid-2012.

On the whole, credit quality continued to improve. Outliers in that regard were CapStar Bank and First Farmers & Merchants Bank, which combined had to add more than $12 million to their noncurrent loan tally. As a group, the remaining 27 banks shrank their bad loan pile to $139 million from more than $145 million.

Check out the full set of Q1 results here and our past quarterly recaps here.