Given the busts in the residential and commercial real estate markets as well as the general awful state of it’s economy I always figured that Arizona’s banks were probably in rough shape. I didn’t realize how bad it has become.

No large banks call Arizona home. There are 55 small community type banks and the large nationals — BofA, Wells and Chase primarily. Of the 55 small banks, 75% were unprofitable in the first quarter. It gets worse.

From the Arizona Republic:

Among Arizona banks, 75 percent were unprofitable in the first quarter, with rising loan charge-offs, more non-performing assets, fewer assets, fewer loans, less capital and declining interest-rate spreads or margins.

However, Arizona’s banks lost less money in the most recent quarter compared with the first quarter of 2008: $66 million in red ink, down from $139 million.

Nationally, about 22 percent of banks were unprofitable in the first quarter. Banks nationally had a lower proportion of charge-offs, equal to 1.94 percent of loans, and a higher return on assets, at 0.22 percent.

In Arizona, those figures were 2.54 percent and minus 1.68 percent.

If you’re looking for something positive, here is the green shoot that one industry participant sees:

“But we’re seeing some encouraging signs,” said Tanya Wheeless, president and CEO of the Arizona Bankers Association.

For example, she cited rising deposits.

“That’s important because it shows the public has confidence,” she said.

I don’t think any comment is needed.

So far, only one Arizona bank has been closed by the FDIC. I suspect that there might be a couple more.