Doug Marshall, CCIM
Market Assessment

Second quarter banking results show strong evidence that U.S. banks are beginning to dig themselves out of the big hole they’ve been wallowing in for the past three years.

Among some of the rosier statistics are:

  • The FDIC second quarter numbers showing 90-plus day delinquencies leveling off and eventually set to decline because 30-89 day delinquencies are declining. Also, net charge-offs are leveling off too.
  • The banking industry’s quarterly earnings of $21.6 billion are up dramatically from a year ago loss of -$4.4 billion and represent the highest quarterly earnings since the third quarter 2007.
  • Sixty-five percent of the banks are reporting higher year-over-year quarterly net income.
  • Loan loss reserves are showing improvement as insured institutions added $40.3 billion in provisions to their loan loss allowances in the second quarter. While still high by historic standards, this is the smallest total since the industry set aside $37.2 billion in the first quarter of 2008.

“Without question, the industry still faces challenges. Earnings remain low by historical standards, and the number of unprofitable institutions, problem banks and failures remains high,” says FDIC chairman Sheila C Bair.

“But the banking sector is gaining strength. Earnings have grown, and most asset quality indicators are moving in the right direction.”

Regionally, Sterling Savings Bank has been successful in raising the required funds to stay in business while Bank of the Cascades has asked for another extension.

Having both of these banks come back from their death beds would be encouraging to a Pacific Northwest economy that has been slow to recover.

From our perspective at Marshall Commercial Funding, we are witnessing a number of lenders coming back into the market in the last few months, some with very favorable rates and terms.

It’s too soon to say the banking crisis is over but it is encouraging to see the baby steps being taken in the right direction.

 

Sources:
U.S. Banks Report CRE Loan Troubles Subsiding Amid Strong Quarterly Earnings, CoStar Group, September 8, 2010;
Sterling Financial hits $730M investment goal, Portland Business Journal, August 28, 2010;
Bank of the Cascades gets another extension, Portland Business Journal, July 16, 2010.