With fewer problem loans to work out, St. Louis banks are boosting their profits and increasing lending.
"Asset quality for banks in general is getting better," said Julie Stackhouse, senior vice president at the Federal Reserve Bank of St. Louis.
Banks' nonperforming loans and real estate assets taken on through loan defaults both dropped in the second quarter of 2013, according to a summary of the more than 80 St. Louis-based banks and thrifts' performance released by the St. Louis Fed this week. The figures do not include brokerages such as Stifel Financial or banks headquartered outside of St. Louis, such as U.S. Bank.
Local banks' loans grew to $21.4 billion in the second quarter, up from $21.3 billion in the second quarter of 2012. That's not a big increase, but it signifies continued strengthening in the economy, Stackhouse said.
"That's definitely a positive sign," she said. "Typically, what that means is it's a sign of a healthier economy. More demand for loans means there is more optimism."
The increases in lending primarily came from commercial and industrial (C&I) loans to businesses and consumer lending, which includes auto loans, revolving credit and credit cards.
C&I loans grew to $3.8 billion in the second quarter compared $3.6 billion with a year ago, and consumer loans grew to $320 million, up from $318 million a year ago.
Banks' profitability levels also have been on the rebound as the economy improves. Combined, local banks brought in $155 million in profits year-to-date in 2013, up from $131 million for the first six months of 2012.
Creve Coeur-based Pulaski Bank is seeing an increase in loan demand for its two primary divisions, commercial and mortgage lending, said Gary Douglass, president and CEO.
"We were so focused until last year with trying to clean up (loans') asset quality problems," Douglass said. "We only began focusing on revenue growth a year ago.
For Pulaski, that's meant hiring four commercial loan officers and opening new mortgage production offices in several states in the Midwest.
Nearly 80 percent of Pulaski's mortgage business is from home purchases, with the remainder consisting of refinancings. As interest rates rise, re-fi's are dropping precipitously for most banks.
"We think the home purchase market is very strong and people are getting off the fence," Douglass said.
