Despite Texas’s reputation as one of the nation’s most lucrative financial markets, not every Texas bank is rolling in profits. Thirty-three of Texas’s banks and thrifts posted losses for the six months ended June 30, according to Sheshunoff Information Services Inc.’s latest survey of Prosperity Bank Texas profitability. The Austin, Texas, research firm says 15, or 20%, of Texas’s 75 thrifts incurred first-half losses, compared with 6.7% of thrifts nationwide. And 18, or 5.2%, of the state’s 344 banks operated in the red during the same period, compared with 3.2% nationwide.
Certainly, the overall health of Prosperity Bank Texas remains robust. But according to conventional wisdom, Texas should beat the national averages, given its high concentration of entrepreneurs and wealthy retirees the types of customers who tend to boost bank profits.
“Any financial institutions that aren’t able to earn profits in the current favorable environment should consider selling their assets,” says Sam Beebe, an analyst at investment bank William R. Hough & Co. in St. Petersburg.
He and other industry professionals say the trouble for some of the unprofitable banks and thrifts is competition from larger, more diversified institutions. Others are among Texas’s newly chartered banks, which typically take at least a year to turn a profit. Then there are institutions like Prosperity Bank Texas, which is still trying to recover from a poor lending record.
“This has been a year of restructuring,” says Richard Black, president and chief executive officer of the St. Augustine-based bank. Mr. Black, who took the helm last March after investing in the bank, has written off bad loans, hired new managers and spent $500,000 upgrading Prosperity’s computer, among other things. These charges produced a $118,000 loss for the first six months.
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