Regional bank executives are tinkering with ways to accelerate loan growth yet avoid risks that would alarm regulators.

Nearly a dozen regionals have reported scattered growth in their portfolios as part of third-quarter results in the past week, ranging from Huntington Bancshares and Comerica's strong showings to BB&T and Regions Financial's modest results. (See related chart)

A range of roadblocks to loan growth exist, including fears of a race to the bottom on pricing and an uneven economic recovery. As a result banks are trying everything from expanding their syndication businesses to cultivating niche lines.

Some, such as Synovus Financial, are seeing their investments pay off while others, such as Zions Bancorp., are getting more moderate results.

Zions has been "maintaining underwriting standards at very strong levels despite some competitors that are granting credit at greater levels of leverage," Chairman and Chief Executive Harris Simmons said Monday in discussing the Salt Lake City bank's 3.8% year-over-year loan growth with analysts.

Executives at the $119 billion-asset Regions in Birmingham, Ala., were questioned Tuesday about why some of its rivals are expanding loans at a faster pace. Loans at Regions rose 0.9% to $77 billion from a year earlier.

"[Your] loan growth has been very muted, and it's below the industry loan growth," Gerard Cassidy, an analyst at RBC Capital Markets, said during the conference call. "Would you say that the slower loan growth is more due to your customers … [who are] still concerned about the operating environment? Or is it more [the] conservative underwriting standards you are using that maybe your competitors are not?"

Regions executives responded that small businesses — which Chief Financial Officer David Turner described as the bank's "bread and butter" — have not rebounded from the financial crisis as quickly as other segments.

"A mix of our customer base … has caused us to be a little bit more muted or more moderate than some of our competitors," Chairman and CEO Grayson Hall said.

Regions' loan growth was mixed across lending segments. Commercial-and-industrial loans rose from a year earlier, as did first-lien home equity and indirect auto lending. But commercial real estate mortgages and second-lien home equity lines both fell.

Demand has been weak from the types of borrowers that typically make up Regions' owner-occupied, commercial real estate lending base, Turner said.

"We see reluctance as we talk to those customers in terms of wanting to borrow for expansion, given all the uncertainty that exists — whether it's political, whether it's domestic, whether it's what's going on in Europe … [or] Ebola," Turner said.

Second-lien home equity loans have declined as borrowers refinance and pay down personal debt, Turner said.

"We think … over time in the balance of 2015 we will see those declines slow down," Turner said. "Married with the production, we think we can have a reasonable forecast of loan growth in 2015."

Zions has taken a fairly cautious approach to lending as it deals with competition, satisfying regulatory requirements and watching concentration limits. The company has had one of the best net loan losses among large U.S. commercial banks for several quarters and it has "tightened the belt on some kinds of loans that exhibit high losses under actual and modeled stress," Simmons said.

Zions, which has $56 billion of assets, reported that total loans held for investment increased 3.8%, to $39.7 billion, from a year earlier. The company is predicting slight to moderate loan growth over the next year.

It has ramped up its syndications and participations business so it can remain active in construction and development lending while also positioning itself to do better on federal regulators' comprehensive capital analysis review, or CCAR.

The Federal Reserve Board rejected Zions' capital plan earlier this year after concluding the company's Tier 1 common capital ratio would fall below minimum requirements under severely stressed economic conditions. In response, the company is selling off more construction and development loans, which tend to fare worse than some other lending categories during stress tests.

To offset the reduction in its construction portfolio, Zions purchased "very high-quality" jumbo adjustable-rate mortgages during the quarter, mostly in California, Simmons said.

In contrast, executives at Synovus in Columbus, Ga., were more upbeat about their loan growth and future pipelines. Total loans were $20.6 billion, up roughly 4.5% from a year earlier with the possibility of mid-single-digit growth going forward. The company, which has $26.5 billion of assets, has reported an increase in new loan originations each quarter this year.

Management attributed its success to investments it has made in niche lending areas, such as senior housing, health care and equipment financing. Growth in Synovus' mortgages and home equity lines of credit "continues to be pretty respectable," Nancy Bush, an analyst with NAB Research, observed the company's conference call on Tuesday. Synovus ramped up its mortgage lending in recent quarters in key markets, such as Atlanta, Tampa, Fla., and Birmingham, Ala., and reported roughly 9% annualized growth for its retail portfolio.

Synovus' strategy has centered on expanding relationships with existing customers, management said. It has worked to finance mortgages and to hold those in its portfolio for customers who have primary checking accounts and other relationships with the bank. Additionally, the company touted the timing of the way it did its promotional home-equity lines.

Synovus' improved profile has also allowed it to bring on additional talent in corporate banking and other valued niches and it will continue to do so next year, Chairman and CEO Kessel Stelling Jr. said during the conference call. The company is doing this even as it is reducing its overall headcount by 300 positions by the end of the year and closing more than a dozen branches later this month.

The company is currently undergoing a review of its branches and office space in Atlanta to look for ways to cut costs and improve efficiencies. This may include getting out of branches that are more than 10,000 square feet and getting "more of our people in a common location," Stelling said. This should improve the bank's branding, revenue and lending opportunities.

"Across all business lines, we are in the market for high-performance bankers that share our culture of how we treat and expect others to treat our customers," Stelling said.


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