In a new report, the Office of the Comptroller of the Currency (OCC) said conditions are improving 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 report showed that strength stemmed from strong loan growth in each of the nine states.
“The rate of loan growth doubled across the district last year,” OCC Southern District Deputy Comptroller Gil Barker said in a news release. “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, 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,” Barker said. “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 cautioned about increasing credit risk. “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,” Barker said.