Region’s banks showed signs of strain

Banks in the region that includes Nebraska showed signs of financial strain during the first nine months of 2009 but not as severe as the nation overall, the Federal Reserve Bank of Kansas City, Mo., said in a report released Tuesday.

In the region, 4.12 percent of all loans fell in the “problem” category, meaning payments were late or there were other collection delays, the bank said. Nationally, the rate averaged 5.5 percent, but the regional rate of problem loans was four times the 2006 figure.

Bank earnings declined, but regional banks on average still were profitable in the first three quarters of 2009. The region also includes Wyoming, Colorado, Kansas and Oklahoma, western Missouri and northern New Mexico.

Of all the states in the region, only Nebraska banks had, on average, reserves to cover all problem loans, the report said. Nationally, banks held loan loss reserves that would cover 62 percent of their problem loans.

Banks in Colorado, Missouri and Wyoming showed “particular vulnerability” because of weak earnings and high concentrations of commercial land development loans.

Nationally, bank earnings seemed to have stabilized but at a low level. About 28 percent of U.S. banks reported losses through Sept. 30, including 43 percent of banks with $10 billion or more in assets. In 2006, the report said, 6 percent of banks had losses.

Problem loans topped 5 percent of all loans, compared with less than 1 percent in 2006. Through Sept. 30, the report said, 15 percent of commercial land development loans were behind in payments.

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