Community National Banks and Federal Savings Associations in the South Show Improving Financial Performance and Accelerated Loan Growth

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

As of December 31, 2014, 91 percent of the 455 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 the five-point scale indicating an institution’s health. The strength of this banking sector stems from strong loan growth in each of the nine states.

“The rate of loan growth doubled across the district last year,” said Gil Barker, OCC Southern District Deputy Comptroller. “Growth accelerated significantly in Texas, Louisiana, Florida, Arkansas, Georgia, and Oklahoma. Community national banks and FSAs in Mississippi, Alabama, and Tennessee saw new overall loan growth for the first time in several years.”

During 2014, loans by community national banks and FSAs in the district grew 8 percent as of December compared with 4 percent a year earlier. Texas saw 11 percent loan growth, Louisiana 9 percent, Florida 8 percent, Arkansas nearly 8 percent, and Georgia and Oklahoma 7 percent each. Community national banks and FSAs in Mississippi and Alabama had loan growth of about 2 percent, while loans grew 1.3 percent in Tennessee in 2014.

Even with recent oil price declines, which may affect economic conditions in oil producing areas, the condition of community national banks and federal thrifts continues to improve in the district. “A large majority of borrowers were in satisfactory financial condition at the end of 2014 because they had strengthened their financial positions when oil prices were higher,” said Mr. Barker. “The OCC is closely monitoring oil price changes and expects national banks and federal savings associations with direct and indirect exposure to frequently evaluate and stress test portfolios.”

The OCC also reported that the number of problem community national banks and FSAs in the district fell to a pre-crisis level of 43 at the end of 2014, compared with 71 at the end of 2013, 133 at the end of 2012, and 148 at the end of 2011.

While the condition of community national banks and federal thrifts improved, the OCC cautions the institutions it regulates about increasing credit risk. Loan underwriting standards are easing through extending repayment terms, fewer and less restrictive loan covenants, and releasing borrowers from personal liability on business and real estate development lending. “Strong competition for good quality loans in most markets is affecting pricing and putting pressure on underwriting. In this environment, banks should take care to maintain strong underwriting standards and appropriate risk management practices,” said Mr. Barker.

Related Links

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