La., Miss. Banks Outdoing U.S. Average
Forum brings community bankers to Atlanta Fed's New Orleans Branch
About 40 community bankers from Louisiana and Mississippi joined Federal Reserve Bank of Atlanta leaders at the Atlanta Fed's New Orleans Branch on July 9 to discuss regulation, consolidation, and other financial industry issues.
Part of an ongoing series of Banker Outreach Forums, the event featured presentations and conversations with Atlanta Fed President Dennis Lockhart, Research Director Dave Altig, Supervision and Regulation Vice President John Kolb, and Brian Branson, a managing director with the Birmingham, Alabama-based investment firm Sterne, Agee & Leach Inc.
The basic message about banking conditions: they have improved markedly since the financial crisis but remain challenging. Issues include industry consolidation, the slow economic recovery, cybersecurity concerns, and higher regulatory compliance costs, Lockhart said.
He emphasized that the Fed is tailoring its supervision according to the size of financial institutions. Thus, many stringent new rules apply only to large financial institutions and not to community banks, Lockhart noted.
Bank profits have rebounded to a degree
While the business environment remains challenging, banks in general have shifted from wondering whether they could make a profit at all to figuring out how to make a profit, Kolb commented. During 2010, a key measure of bank profitability—return on average assets—sank to a low of minus 0.75 percent for U.S. banks with assets under $1 billion, according to bank call report data that Kolb cited in his presentation, which you can view via a link to the right. In other words, the average bank in the United States was losing money in 2010.
Times are better. During the first quarter of 2014, the combined return on average assets for smaller banks rose to 0.91 percent, a substantial improvement from the trough but still below the 1 to 1.5 percent range banks enjoyed before the financial crisis and recession.
Banks in Mississippi and Louisiana on average are more profitable than banks across the country, Kolb pointed out. In the first quarter, the combined return on average assets for all banks in Louisiana and Mississippi was 1.10 percent and 0.88 percent, respectively, compared to 0.84 percent nationally.
Lockhart takes bankers to the FOMC
In addition to discussing the banking environment, Lockhart described how the Federal Open Market Committee works. Altig also gave a presentation on the economy. See the related links to view Altig's presentation and to watch a recent ECONversations webcast.
Events like the New Orleans forum are part of the Atlanta Fed's efforts to gain insight from bankers and to deepen bankers' understanding of the Fed's purpose and policies.