Mixed bag for state banking numbers

Assets, employment up, but interest rates hold down profits

By Gordon Oliver, Columbian business editor

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Washington's banks report a year-over-year rise in assets and employment during 2013, and more of them are earning a profit than in 2012, according to a recently-released report by the Federal Deposit Insurance Corp.

But the 62 banks operating in the state reported a collective drop in their return on assets, a key indicator of health. Banks in Washington and across the nation are still squeezed by low interest rates that reduce their profit levels from making loans.

All told, the banking industry that was in turmoil five years ago is moving along a steady course, said Kim Capeloto, executive vice-president of Vancouver-based Riverview Community Bank. "The general sense is that things are moving in the right direction," he said.

Banks across the board have struggled to remain profitable while offering low-rate loans and seeing its higher-interest, longer-term loans disappear through payoffs and refinancings, Capeloto said. Some large banks are cutting back their mortgage lending staffs as loan refinancing tapers off, but staffing cuts pose significant problems for community banks that emphasize customer service and would be damaged by cutting employees, Capeloto said.

The question becomes, "How do we reduce staff without cutting service levels?" he asked.

The FDIC's "State Banking Performance Survey," recently updated with fourth-quarter data for 2013, shows a decline in the number of banks in the state, from 71 at the end of 2012 to 62 at the end of last year. The number of small banks -- those with assets of less than $100 million — dropped from 19 to 15. Nearly half of those smaller banks were unprofitable.

The number of small banks is in steady decline as part of a long-running consolidation within the in

dustry to larger national and regional banks. New federal regulatory requirements have further squeezed small banks with added costs, accelerating the trend of bank mergers and acquisitions.

The state's banks reported 15,207 full-time equivalent employees, up from 14,026 in 2012 and 13,274 in 2011. Collectively, the banks recorded increases in earned assets, loans, and deposits.

Their real estate holdings declined, an indicator that banks continue to unload foreclosed properties as the real estate market improves. The banks reported that 1.49 percent of their loans are "non-performing," compared to 2.39 percent in 2012 and 3.54 percent in 2011.

Also noteworthy: Some 16 percent of the state's banks are unprofitable, a marked improvement from two years ago when 33 percent were unprofitable.

Washington banking performance summary (FDIC-insured institutions)

Source: Call Report and Thrift Financial Report prepared by the FDIC Division of Insurance and Research