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Ratings systems indicate performance improvement in Mississippi banks

By BECKY GILLETTE

The BauerFinancial independent ratings for the fourth quarter of 2015 show that 49 banks in the state achieved the top 5-star rating, including all the state’s largest banks and even one of the state’s smallest banks, the Bank of Walnut Grove. There were improvements from previous years with fewer banks with lower Bauer Financial ratings, as well.

Commissioner Charlotte N. Corley, Mississippi Department of Banking and Consumer Finance, said while the DBCF doesn’t use the BauerFinancial rating system, the rating system used by banking regulator like DBCF also show improvements in the performance of Mississippi banks.

Banking regulators, including the DBCF, use the Uniform Financial Institutions Rating System to assess the safety and soundness of financial institutions. Each bank is assigned a component rating for Capital, Asset Quality, Management, Earnings, Liquidity and Sensitivity to Market Risk, commonly referred to as CAMELS.

“The CAMELS ratings, along with all DBCF examination findings, are confidential,” Corley said. “However, the improvement in the regional economy since the 2007-2009 recession has positively impacted the overall financial condition of Mississippi banks, which is reflected in the CAMELS ratings.”

Corley said Mississippi bankers are historically conservative, which has served Mississippi well.

“The recovery in the banking industry is partly attributed to a healthier economy, but is largely due to successes of bank management,” Corley said. “Bankers appear more cautious in lending, especially concerning commercial real estate. Lending concentrations are lower with higher required down payment on loans. In general, loan demand is relatively low, which results in higher liquidity in banks. Bank management has been very proactive in managing interest rate risk during a prolonged low rate environment. Additionally, with the increases in compliance costs resulting from the recession, bankers have become much more diligent in managing expenses to improve profitability.”

One of the state’s largest banks, Hancock Bank\Whitney Bank, has had a 5-star BauerFinancial rating now for 106 consecutive quarters — almost 27 years in a row.

“That consecutive ranking places the bank among approximately the top 20 percent of all rated financial institutions,” said Hancock Bank Mississippi Regional Market President Keith Williams. “We believe the longevity of the Hancock Bank\Whitney Bank rating reflects our founders’ promises to local people and businesses—ways of doing business still central to who we are today:  strength and stability; solid capital — the ‘cushion’ that protects banks and clients from potential losses; proactive risk management; common-sense business practices; timeless core values; and strong community partnerships. Generations of associates have been critical to carrying on those founding commitments for 117-plus years.”

Williams said the high rankings overall for state banks is a reflection of good banking leadership in the state, but also a strengthening economy.

“The BauerFinancial ratings reflect strong industry leadership and the broader commitment among Mississippi’s banks to work together to keep banking and the economy strong,” Williams said.

Ray Britt, president and CEO, Bank of Walnut Grove, said while it will never be “one of the big boys” in banking, the bank’s 5-star ranking shows a small bank can also be profitable by serving its community.

“We are just as safe as anybody out there,” Britt said. “For banks our size to stay in business, we have to wear many hats. Regulations are tough on any bank, but especially a smaller bank where everyone has to wear three or four hats to make it work. Compliance is the toughest thing. Regulators require more. Banking is also tougher than it used to be as far as being able to provide all the bells and whistles the customers want.”

The local economy in the central part of the state where the bank is located hasn’t been going gangbusters by any means. Britt said they have seen a lot of layoffs and cutbacks in the oil industry.

“But most of them have switched over to other jobs, just not as high paying jobs in most cases,” Britt said.

John Oxford, director of corporate communications, Renasant Bank, Tupelo, said things are looking up in many areas of the state.

“Our state is starting to land some pretty big economic development projects, which in turn helps the banks and the banking environment by creating strong banks,” Oxford said. “Our 5-star rating reflects the ability to maintain a well-capitalized position. We have diligently managed our capital even though we have been acquiring banks. Bauer recognized our ability to continue to be in excess of regulatory minimums required to be classified as well capitalized. The first part of the rating is your ability to be well capitalized and the second is managing your loan portfolio and managing your non-performing loans. As far as the state goes, the state’s economy is on the upswing with new industrial announcements, a strong labor force, and being a right-to-work state.”

Randy Burchfield, senior vice president, corporate relations and communications for BancorpSouth, Tupelo, said in its view, the number of 5-star ratings is reflective of the health of the state’s banking system, as well as improvement in general economic conditions.

“Also, efforts in assisting in community support and local involvement–the key to success for BancorpSouth–help keep communities growing and vibrant, ultimately resulting in stronger community banks,” Burchfield said.

Burchfield said the company’s 5-star rating reflects, among other attributes, that BancorpSouth continues to be performing as a well-capitalized financial holding company that is profitable and continues to report stable credit quality indicators.

“Our focus on high quality assets, efficient operations, ethics and diversity in our employees and our products are all calculated to maximize shareholder value through consistently strong earnings performance and increased market share,” Burchfield said.

The net income of Mississippi banks for 2015 was $707 million, which was down compared with 2014 at $725 million. However, in 2013 when some banks were struggling, net income was only $538 million, according to the FDIC.

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