Profits have fallen slightly at community banks in Illinois, the result of competing with larger institutions, said a report Thursday from the Federal Deposit Insurance Corp.
Non-interest expenses for the banks were low, but were outpaced by drops in income, the analysis found.
“The smaller institutions do tend to be more dependent upon the spread of their net interest margins–the difference between what they pay for their deposits and what they earn from their loans,” said Ross Waldrop, the FDIC’s chief of banking statistics.
When interest rates were dropping, it was harder for small banks to pass decreases on to customers since it still costs the bank to maintain the account.
“Once rates on money market deposit accounts and those types of instruments fall below a certain level, it’s hard to cut those rates further and still retain those deposits,” Waldrop said. “What we’ve seen over the past few years is short-term rates have hit historically low levels.”
During the second quarter, net income on average assets for community banks and thrifts in the state was 1.01 percent, down about 0.13 percentage points from the same period a year earlier.
Chicago-area financial institutions also face tough competition as banks from other regions move in, hoping to take advantage of the fractionalized market, said David Van Vickle, manager of the FDIC’s Chicago region.
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“The top four banks–Bank One, LaSalle, Harris and Citibank–capture only about 40 percent of the market share in Chicago if you look at it in terms of deposits,” he said. In comparable areas, the top banks control 60 percent or more, he said.
Overall there have not been any community bank failures and they appear to be healthy, Waldrop added.
Mesirow buys unit: Financial-services firm Mesirow Financial has acquired the domestic corporate recovery practice of KMPG LLP, an audit, tax and advisory firm. Terms of the deal were not disclosed.
The deal will allow Mesirow to “expand the depth and breadth of services we provide to our corporate clients,” said James C. Tyree, chairman of the Chicago-based company.
The unit will be renamed Mesirow Financial Consulting, and will employ more than 100.
Currency trading deal set: Chicago-based Rosenthal Collins Group LLC is now offering Denmark’s Saxo Bank foreign exchange trading and information system to online investors.
Three versions of the new platform are being offered–for the individual trader, those handling large volumes and an institutional version for traders such as money managers or hedge funds.
With the growth in electronic trading has come increased demand for access to foreign-exchange trading, said Scott Gordon, RCG chief executive officer.
“The bulk of our customers are comfortable trading electronically and are demanding additional asset classes,” he said. “It’s just a natural for them to trade online, and it’s natural for them to expand the breadth of products they’re trading. It’s all coming together at the same time.”