Back on track: North Carolina banks and credit unions are reporting big profit gains after working through most of their recession-era troubled loans.

• Author: Martin, Cathy
• Position: N.C. Banking

North Carolina's 100 largest banks and credit unions are in sunnier places these days with profits rising 64% last year to $970 million, marking the fifth consecutive annual increase. (The figure excludes Bank of America Corp. and BB&T Corp., which derive most of their profit outside of the state.) Only eight banks on the list reported a net loss for 2014, compared with 12 a year ago and 46 in 2010. In late 2010, 16 Tar Heel banks reported borrowers were not paying at least 9% of the institutions' total loans, according to SNL Financial Inc. Almost five years later, only two banks have a similar metric, while many have a ratio of bad loans to assets of less than 1%. Overall, the number of delinquent loans declined 30% last year, according to the N.C. Banking Commission's annual report.

Higher profits aren't sparking new entries--the last new bank charter was issued in 2009. Banking Commissioner Ray Grace blames a still-sluggish economy and Federal Reserve policies that have sliced the margin between interest paid on loans and received from deposits. Indeed, returns on equity and assets generally remain below levels achieved before the 2007-09 recession. But fewer startups means less access to capital, he says.

The largest bank to fall off the list this year is VantageSouth Bank, which bought Yadkin Financial last July in a $299 million transaction. VantageSouth's management runs the bank, though Yadkin's name was retained.

Six other banks were acquired during the year, including Raleigh-based CapStone Bank, one of the state's most profitable before its sale to Greensboro-based NewBridge Bancorp. At least three banks--Durham's Square 1 Financial, Raleigh's TrustAtlantic Bank and Mocksville's Bank of the Carolinas--likely won't appear next year because of pending acquisitions. Los Angeles-based PacWest Bancorp is paying about $850 million...