Arizona’s banking industry shrank dramatically during 2011, but the survivors ended the year on a much healthier note.
Some 48 percent of Arizona-based banks were unprofitable in last year’s fourth quarter, compared with 68 percent that lost money one year earlier and 84 percent in 2009, reported the Federal Deposit Insurance Corp. Local banks’ non-current loans and non-performing assets both declined, and average returns on equity and assets both improved.
But Arizona counted just 31 banks headquartered in the state with 3,200 employees at year end, compared with 40 banks and nearly 3,700 workers one year earlier. Failures, mergers and acquisitions trimmed the number of local institutions.
The statistics for Arizona banks exclude Wells Fargo, Chase, Bank of America and dozens of other banks that operate in the state but aren’t based here.
“Locally, things continue to get better,” said Dave Ralston, chief executive officer at Bank of Arizona. “Most banks are close to getting out of the woods, but they’re not out yet.”
Banks across the nation also have been on trend toward recovery. Banks and savings institutions insured by the FDIC reported an aggregate profit of $26.3 billion in the fourth quarter of 2011, up from $21.4 billion in the fourth quarter of 2010. The latest period marked the 10th straight quarter in which earnings registered a year-over-year increase. Lower provisions or charges for loan losses accounted for most of the improvement.
Last year “represented the second full year of improving performance by the banking system,” said the FDIC’s acting chairman, Martin Gruenberg, in a statement. “Banks reported higher positive aggregate earnings, the numbers of problem banks and failures declined, and loan balances increased in the final three quarters of the year.”
Nationally, 63 percent of all banks reported improving earnings, and the proportion of unprofitable institutions dropped to 19 percent from 27 percent one year earlier. During the latest quarter, banks charged nearly $20 billion in bad-loss provisions, well below the nearly $33 billion from one year earlier.
Lending rose modestly, with total loans and leases up by nearly 2 percent, or $130 billion. Lending has increased for three straight quarters. Also, banks had little trouble attracting customers, with domestic deposits rising nearly 3 percent during the quarter — mostly in accounts that don’t bear interest.
The FDIC said the number of banks on its “problem list” fell for a third straight quarter to 813 from 844. The agency doesn’t identify problem institutions. Some 18 banks failed during the fourth quarter and 92 for all of 2011. Some 157 banks went under in 2010.
With fewer failures, the net worth of the FDIC’s deposit-insurance fund improved to $9.2 billion at the end of December, from $7.8 billion as of Sept. 30.
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