Loan Growth Accelerates Among Southern District Community Banks and Thrifts, OCC Reports

DALLAS - The Office of the Comptroller of the Currency (OCC) today reported improving conditions among national banks and federal savings associations (FSAs) in the nine states that make up the OCC’s Southern District.

As of June 30, 2014, 89 percent of the 468 banks and FSAs in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Tennessee, and Texas had a composite rating of 1 or 2—the top ratings in a five-point scale indicating an institution’s health. These strong overall ratings reflect higher loan growth and improved credit performance over the past several years, officials said during a call with regional reporters.

“The main story is that community institutions are experiencing organic loan growth, meaning that new loans are coming into their portfolios as a result of new originations rather than through purchased loans,” said Gil Barker, Deputy Comptroller for the OCC’s Southern District. “Organic loan growth, if done in a safe and sound manner, is good for the banks and the economy in these states.”

Loans by community national banks and FSAs in the district grew by 6 percent through June 2014 compared with 3 percent a year earlier. The growth rate in Houston hit 12 percent, and loan growth in Miami hit 10.5 percent. While growth in these two major cities outpaced the region as a whole, about 10 percent of the district’s institutions showed organic loan growth in excess of 20 percent in the past. The most significant growth occurred in Texas and Oklahoma where the oil and gas industry drives activity. In Florida, one of the high loan growth areas, retiree migration, good weather, a low-tax environment, and hospitality and retail industries fuel the growth and the economy.

In addition to loan growth, capital levels are also sound and asset quality indicators such as problem assets and net loan losses are declining for district institutions.

Another indicator of improving economic conditions within the district is the strong volume of mergers and acquisitions, which shows little signs of slowing. “We see valuations that we haven’t seen in a while in many parts of the district,” said Mr. Barker.

In 2012, 63 institutions merged, and in 2013, 49 institutions merged. Through June 30, 2014, 31 mergers have been finalized and 15 more are in process.

While conditions overall are improving, the OCC cautions the institutions it regulates about continuing strategic, credit, interest rate, and operational risks. The search for revenue and yield in the protracted low-rate environment presents significant strategic challenges. In response to these challenges, some banks may be assuming significant interest rate risk or seeking other efficiencies and cost-cutting measures that could weaken risk management controls at the same time cybersecurity and other fraud threats are increasing. Finally, competition continues to pressure credit underwriting standards.

Related Links

• OCC Southern District Fact Sheets (PDF)
• Deputy Comptroller Gilbert “Gil” Barker