10 Banks Growing Business Loans

NEW YORK ( TheStreet) -- While the federal regulators have reported some grim news for small business credit, investors should take note of which banks are consistently growing their commercial loan portfolios.

According to Community Reinvestment Act data filed by banks and thrifts with total assets of $1.1 billion or more gathered by the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, total business loan originations among banks and thrifts required to file the data declined 9% during 2010.

In a time of turmoil for the markets overall and bank stocks in particular, investors looking for safety are well-advised to consider names that are sufficiently healthy to support a generous dividend payout. Those looking for bargains can focus on the bank stocks trading below tangible book value. Investors looking for growth during a sluggish economic recovery should key in on banks that are bucking industry trends.

One way to do this is to focus on banks growing revenue, such as the ones covered in TheStreet's 10 Banks with Solid Revenue .

Another approach is to look at which large banks have grown their commercial loan books quarter-over-quarter and year-over-year. Among the largest U.S. banks that are required to file regulatory financial statements with the Federal Reserve, these 10 reported the largest gains in commercial loan balances during the second quarter, while also growing the portfolios from a year earlier. Some, but not all, achieved the growth through acquisitions.

Several of the names also feature attractive dividend yields in a prolonged low-rate environment.

Here are the 10 large banks showing significant commercial loan growth, counting up to the banks with the largest second-quarter non-real estate commercial loan growth:

10. Regions Financial

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Regions Financial ( RF) of Birmingham, Ala., had $16.2 billion in commercial and industrial (C&I) loans as of June 30, increasing 2% during the second quarter, but 23% year-over-year, according to Federal Reserve data supplied by the SNL Financial. The company said its C&I loan growth was "driven by specialized industry lending businesses, which include energy, healthcare, franchise restaurant, transportation, technology and defense, and asset-based lending."

Regions has the distinction of being -- by far -- the largest remaining publicly traded holding company owing federal bailout funds received through the Troubled Assets Relief Program, or TARP. The company owes $7.5 billion in TARP money.

The shares were down 40% year-to-date when they closed at $4.19 Thursday. The stock trades for 0.7 times tangible book value according to SNL and 7.6 times the 2012 consensus earnings estimate of 60 cents a share, among analysts polled by FactSet.

9. Huntington Bancshares

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Huntington Bancshares ( HBAN) of Columbus, Ohio, had $9.1 billion in C&I loans as of June 30, increasing 2% from the first quarter, but 31% year-over-year. The company said when it announced its second-quarter results that the "C&I portfolio is expected to continue to show meaningful growth," with focus on "areas like specialty banking, asset based lending, and equipment financing, in addition to our long-standing continued support of small business lending."

Huntington also raised its dividend to a quarterly payout of four cents, for a dividend yield of 3.38% at Thursday's closing price of $4.74. The shares were down 31% year-to-date and were trading just below tangible book value according to SNL Financial.

The shares were also cheaply priced to forward earnings, at 7.6 times the consensus 2012 earnings estimate of 67 cents, among analysts polled by FactSet.

8. SunTrust

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SunTrust ( STI) of Atlanta had $26.2 billion in commercial and industrial loans as of June 30, increasing 2% from the previous quarter and 15% from a year earlier, which the company said was "most pronounced within areas that we have been targeting for growth, such as asset based lending and middle market lending." Meanwhile, "higher risk" commercial construction loans declined 52% year-over-year.

SunTrust closed at $17.71 Thursday, down 40% year-to-date. The shares trade for 0.7 times their tangible book value according to SNL Financial.

The shares trade for 8.6 times the consensus 2012 EPS estimate of $2.21, among analysts polled by FactSet.

7. U.S. Bancorp

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U.S. Bancorp ( USB) of Minneapolis had $36.9 billion in commercial and industrial loans as of June 30, increasing 2% from the previous quarter and 9% from a year earlier. The company cited "higher loan demand from new and existing" commercial customers.

U.S. Bancorp's shares closed at $30.62 Thursday, declining 21% year-to-date. Based on a quarterly payout of 13 cents, the shares have a dividend yield of 2.37%.

The shares trade for just over twice their tangible book value according to SNL, and 8.5 times the consensus 2012 EPS estimate of $2.64, among analysts polled by FactSet.

6. Zions Bancorporation

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Zions Bancorporation ( ZION) of Salt Lake City had $8.8 billion in commercial and industrial loans as of June 30, increasing 3% from the previous quarter and also 3% from the second quarter of 2010.

When the company announced its second-quarter results, CEO Harris Simmons said that Zions said that "commercial and consumer loan growth was more than offsetting a modest decline in commercial real estate loans," and that the bank's "relatively strong capital and funding ratios position us to take advantage of lending opportunities as they arise."

Zions Bancorporation's stock closed at $15.75 Thursday, down 35% year-to-date. The shares were trading for 0.8 times their tangible book value, according to SNL Financial.

The shares trade for 9.5 times the consensus 2012 EPS estimate of $1.80, among analysts polled by FactSet.

5. PNC Financial Services

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PNC Financial Services ( PNC) of Pittsburgh had $42.3 billion in commercial and industrial loans as of June 30, increasing 3% from the previous quarter and 5% from a year earlier, "largely from new client acquisition," and also from "higher utilization rates" for credit lines, according to the company.

PNC's stock closed at $45 Thursday, declining 25% year-to-date. Based on a quarterly payout of 35 cents, the shares have a dividend yield of 3.11%.

The shares trade just above tangible book value according to SNL, and 7.6 times the consensus 2012 EPS estimate of $6.23, among analysts polled by FactSet.

4. Wells Fargo

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Wells Fargo ( WFC) had $131 billion in commercial and industrial loans as of June 30, increasing 5% from the previous quarter and 8% year-over-year. The company said that "many portfolios had double-digit linked quarter annualized growth in average loan balances," including asset-backed finance, capital finance, commercial and government loan portfolios.

Wells Fargo's stock closed at $23.72 Thursday, down 23% year-to-date. Based on a quarterly payout of 12 cents, the shares have a dividend yield of 2.02%.

The shares trade 1.7 times tangible book value according to SNL Financial, and 7.2 times the consensus 2012 EPS estimate of $2.35, among analysts polled by FactSet.

3. BB&T Corp.

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BB&T ( BBT) of Winston-Salem, N.C., had $13.7 billion in commercial and industrial loans as of June 30, increasing 6% during the second quarter, although the increase was only 1% from the second quarter of 2010.

The company said the commercial loan growth reflected its "focused efforts to grow this component of the loan portfolio."

Meanwhile, BB&T reported a significant expansion of its net interest margin to 4.15% during the second quarter, from 4.01% in the first quarter.

BB&T's stock closed at $19.79 Thursday, declining 23% year-to-date. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 3.23%.

The shares trade for 8.5 times the consensus 2012 EPS estimate of $2.46, among analysts polled by FactSet.

2. M&T Bank

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M&T Bank ( MTB) of Buffalo, N.Y., had $12 billion in commercial and industrial loans as of June 30, increasing 10% just in the second quarter, and 18% year-over-year, mainly as a result of the second-quarter acquisition of Wilmington Trust, which brought on roughly $1.4 billion in non-real estate commercial loans and leases.

M&T's stock closed at $71.56 Thursday, down "only" 16%year-to-date, for the best performance among this group of 10 bank stocks. Based on a quarterly payout of 70 cents, the shares have a dividend yield of 3.91%.

The shares trade for just under twice their tangible book value according to SNL, and 10 times the consensus 2012 EPS estimate of $7.46, among analysts polled by FactSet.

1. First Niagara

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First Niagara Financial Group ( FNFG), also headquartered in Buffalo, N.Y., had $3 billion in commercial loans as of June 30, increasing 24% from the previous quarter and 62% from a year earlier, mainly from the second-quarter acquisition of NewAlliance.

The company also said that commercial loans grew at an annualized 17% pace, irrespective of the NewAlliance acquisition.

First Niagara agreed on July 30 to purchase 195 branches from HSBC ( HBC), with an eventual plan to divest 100 of the acquired branches.

First Niagara's stock closed at $10.25 Thursday, down 24% year-to-date. Based on a quarterly payout of 16 cents, the shares have a dividend yield of 6.24%.

The shares trade for 1.4 times tangible book value according to SNL and 8.9 times the consensus 2012 EPS estimate of $1.22, among analysts polled by FactSet.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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To submit a news tip, send an email to: tips@thestreet.com.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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