Fourth quarter and full-year earnings reports are about to start coming in from large regional banks, twelve in the next ten days, and even though Zions Bancorporation is the only regional to mention the need for more energy-related reserves so far, there are some concerns about how falling oil prices will affect the other large regional banks. But Sterne Agee analysts Terry McEvoy and Austin Nicholas say that energy exposure is mostly confined to a couple of regional banks.

“Even with the inflow of large exploration efforts connected to shale oil, we feel very little of that lending business trickled down to the more local banks,” they write. “Should the decline in oil prices continue or remain depressed or a prolonged period, we see little direct downside to the regional banks outside those listed at the top of Exhibit 1.”

Oil Prices Regional Banks 0115

ZION, CMA are most exposed to energy sector among regional banks

With 8% of its loan portfolio in the energy sector, investors are already aware that ZION will have to stop releasing reserves and may have to build them back up a bit, but Comerica Inc also has 7% exposure to the energy sector and will probably also have to increase related reserves in addition to restructuring some loans. McEvoy and Nicholas don’t expect to see large charge-offs for 4Q14, but considering how far oil has fallen even since December 1Q15 could be more challenging for both ZION and CMA.

Even though CMA has less overall exposure to the energy sector, it’s exposure is a lot more concentrated in E&P than ZION’s, which could put it at more risk to falling capex spending.

BBT, FTIB, and CMA are Sterne Agee’s top picks

While oil fears may get more headlines, McEvoy and Nicholas expect 2015 guidance to drive near-term price movements, which makes sense. Their top picks headed into the earnings season are BB&T Corp (trading at $36.49, reporting on January 22) because of its reasonable valuation, Fifth-Third Bancorp ($18.64, reporting January 21), which they call a value stock that could see improving investor sentiment, and CMA ($42.24, reporting January 16), which they expect to rebound if energy prices can find a floor. That could be a good example of being bold when others are afraid, but at this point it seems clear that no one really knows where oil prices are headed.