PROGRESS IN BANKING

Arizona-headquartered banks generally have rebounded from the financial crisis but still aren’t back to where they were five years ago, and the local industry is much smaller than it had been. Since 2008, 17 Arizona banks have failed, and several others were acquired by outside entities. Q1 2013

28

3,157

29%

2.1% $51 million $12.7 billion Q1 2012

31

3,189

32%

3% $42 million $12.4 billion Q1 2008

58

5,125

52%

4.1% ($126 million) $19.3 billion States like Arizona that don’t have many sizable locally owned firms are lagging in that sense.

One headwind being faced by banks of all sizes relates to tight spreads between what they pay in deposits and earn on loans. While depositors rightly gripe about low yields on certificates of deposit, the backdrop of low interest rates engineered by the Federal Reserve is hurting banks too. This “harsh reality” is likely to get worse as more high-yielding loans mature or get refinanced, said researcher SNL Financial in a recent report.

The past five years have made local banks less relevant. Most Arizonans don’t have much interaction with these small institutions anyway, since they mainly cater to small-business owners. The big three of Chase, Wells Fargo and Bank of America accounted for almost 71 percent of statewide deposits as of a 2012 report by the FDIC, with the share on a steady, multiyear rise. The top 10 banks, which included only one locally owned institution, Western Alliance, held nearly 88 percent of statewide deposits.

Many indicators point to an improving local economy — rising real-estate prices, declining bankruptcies, more job fairs and fewer Arizonans falling behind on their mortgages. These and other factors should help the state’s remaining banks continue along the road to recovery, bumpy as it has been.