How This Midwest Bank is Doing Much Better Than Wall Street Giants

Regional banks are often smaller than Wall Street giants and rely on deposit-taking and lending for most of their revenue. The KBW Regional Bank Index, which tracks smaller lenders, is down 6% this year. In comparison, the largest banks are grouped together in the select financial sector SPDR.

Huntington Bancshares

With a few notable exceptions, regional banks are doing much better than Wall Street giants. The KBW Regional Bank Index, for example, includes smaller lenders like Texas Capital Bancshares, First Hawaiian, and Syracuse-based Community Bank System. In contrast, the Financial Select Sector SPDR includes most of the large banks.

By the end of the 1990s, Huntington Bancshares was the 31st largest bank in the United States, with $28.3 billion in assets and 529 branches across six states, including Ohio, Michigan, and Florida. As competition in the financial industry intensified, the bank launched a realignment program, resulting in annual pretax savings of $125 million. It also closed 39 branches and consolidated loan processing offices.

The merger with TCF is a good fit for both companies. The deal will give Huntington access to TCF's inventory finance and equipment finance businesses. In addition, it will give Huntington more access to the Twin Cities and the Upper Midwest.

Midwest Bank

While some Wall Street giants have been suffering from the recent recession, smaller regional banks have been faring much better. These institutions, which rely on loans and deposits, have reported better results than their Wall Street counterparts. For example, the KBW Regional Bank Index includes smaller lenders like Huntington Bankshares, Texas Capital Bancshares, and First Hawaiian, as well as Syracuse, NY-based Community Bank System.

Regional banks

While Wall Street giants are struggling, regional banks are doing much better. These smaller institutions rely on deposit-taking and lending. KBW's Regional Bank Index measures the health of smaller banks. Compared to last year, regional banks have seen their deposits increase by nearly a third.

As these regional banks continue to grow, new regulations could impose new costs and burdens. They may also lead to more bank mergers. Any new rules would go through a formal rule-making process led by the Federal Reserve. Those rules would need to be approved by the entire Federal Reserve Board.

The biggest regional banks have long faced competition from smaller private banks. In recent years, community banks have formed coalitions and merged their marketing budgets to compete against megabanks. In early August, a group of 300 community bank officials met in Dallas to discuss ways to take on the megabanks.

Safer to buy

Unlike Wall Street giants, regional banks don't rely on Wall Street to make money. Instead, they rely on deposits and lending. And they are doing much better than Wall Street giants. The KBW Regional Bank Index includes smaller lenders like Texas Capital Bancshares, First Hawaiian, and Syracuse, NY-based Community Bank System.