The Motley Fool Previous Page

These Banks Are Winning in the Deep South

Abbie Redmon
July 21, 2013

The southeastern part of the U.S., specifically Florida and Alabama, was especially hard-hit by the 2008 recession, and as a result, many banks saw loans sour as home prices fell and unemployment rose. Almost five years later, the region has begun to recover; let's look at what this means for the major banks in the area. 

Eight times a year, the Federal Reserve releases data summarizing the most recent economic trends in the U.S. by district (there are 12). The Fed's take on employment, the housing market, and consumer spending in the region can give us insight into which banks are benefiting from economic activity there. Since I'm from the southeast, I took a look at the most recent data for the sixth district (link opens PDF), the Atlanta District, which includes my home state of Alabama.

Source: The Federal Reserve Board.

The banks
The banks with heavy market share in this district include Regions Financial (NYSE: RF) -- which has at least 4% deposit market share in each state -- Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC), SunTrust Banks (NYSE: STI), and BB&T (NYSE: BBT):

Source: FDIC.

All states in the district reported "modest" employment gains in almost all industries except government sectors; Mississippi was the only state that showed a small gain in state government jobs. However, Alabama, Louisiana, and Florida all currently have unemployment rates below the national average:

Source: Bureau of Labor Statistics.

Housing and mortgages
The Fed's report noted that existing home sales, new home sales, and construction were all ahead of prior-year levels. Loan competition in the region was high, which led some banks to relax loan requirements and become more willing to take on loan risk. Most banks had expected a slowdown in mortgage growth because of the sharp rise in rates earlier this year, so even though banks in this district reported an increase in new purchase loan demand, it may not be enough to offset the falling number of customers refinancing their homes.

Bank of America, which has deposit market share of roughly 20% and 12% in Florida and Georgia, respectively, had good news about its mortgage underwriting business when it reported earnings on Wednesday. However, even with large market share in Florida, Georgia, and Alabama, Wells Fargo's numbers suffered a bit; it underwrote