BB&T's Smaller Rivals Sense Chance to Steal Loan Business

Some of BB&T's competitors are convinced that the $184 billion-asset bank has taken loan authority out of its branches and shifted decision-making to its home office in Winston-Salem, N.C.

Just don't tell BB&T that.

BB&T's smaller rivals say they know the bank is centralizing how it makes decisions on loans because they have picked off new customers from the larger bank. The borrowers are said to be frustrated by the red tape they have encountered with BB&T and have shifted their business to community banks, which contend they make quicker decisions on loan requests.

"[Those customers] say that when they call BB&T and ask to talk to someone, it's like calling an out-of-the-country call center," said Harvey Glick, chairman-elect of $428 million-asset Bank of the Carolinas in Mocksville, N.C.

Ricky Brown, president of BB&T's bank unit, Branch Banking and Trust, insists it is not doing anything differently.

"We're as dedicated to community banking now as we've always been, if not more so," Brown said. "We try to create a situation where we're close to the client [and] they're close to us. We think it differentiates us against large and small banks."

Yes, BB&T reviews and makes decisions on some commercial loan applications at one of six "credit hubs," Brown said. Those are located in Atlanta; Baltimore; Dallas; Greensboro, N.C.; Louisville, Ky.; and Orlando, Fla. And the largest credit applications, largely those related to real estate or capital markets, go to Winston-Salem. But that has always been the case, Brown said.

"We feel like we're as local as we can possibly be to make credit decisions," Brown said.

"At the end of the day, clients don't really care where loans are approved or who approves them," Brown said. "What they care about is if it meets their needs and if it's on their time schedule. Responsiveness is what matters."

Outsiders may be misinterpreting what BB&T is doing, since they are not privy to all of the details, said Chris Marinac, director of research at FIG Partners. But it is clear that BB&T is making significant changes, he said, as it deemphasizes its historical reliance on commercial real estate lending and shifts to potentially more lucrative commercial-and-industrial loans to corporations.

"They've gone toward a big-bank model," Marinac said. "It's much more like Wells Fargo now than it is a community bank."

BB&T's C&I loans rose 28% to $18.5 billion on June 30, from $14.5 billion at the end of the second quarter of 2012, according to call reports. BB&T has had a harder time weaning itself off commercial real estate. Its CRE book rose 0.4% to $22.7 billion over the same period.

Costs, which BB&T has identified as a major focus, are also an issue. BB&T can better manage its expenses by moving decisions to regional credit hubs, instead of having loan officers with decision-making authority spread out over hundreds of branches, Marinac said.

"You can make sure you have a uniform process," Marinac said. "It's easier to control six different areas than it is to control 40."

BB&T has said its goal is to improve its efficiency ratio to 56% by Dec. 31, from 59.8% at June 30. (The lower the efficiency ratio, the lower a bank's expense burden.)

Another sign that BB&T has moved loan decisions to Winston-Salem or the credit hubs is a recent exodus of some BB&T senior loan officers to community banks, Marinac said. Several institutions, including NewBridge Bancorp in Greensboro, N.C., and State Bank Financial in Atlanta, have hired commercial lenders from BB&T, he said.

Anecdotal evidence is also cropping up more frequently. Richard Moore, president and chief executive of $3.3 billion-asset First Bancorp, in Southern Pines, N.C., recently told Marinac that his bank has signed up smaller commercial customers, particularly in smaller towns, that BB&T once served. First Bancorp was able to pick up the new clients as BB&T has "re-centralized" its decision-making to Winston-Salem, Moore told Marinac. Moore did not respond to requests for comment.

The changes seemed to begin in mid-to-late 2013, not longer after the Federal Reserve Board rejected BB&T's capital plan in March 2013, according to Glick, Marinac and Moore. BB&T in May 2013 eliminated 14 regional presidents and consolidated geographic regions to become more efficient. The expense reductions have continued, as BB&T cut about 450 jobs in the second quarter.

Brown denied that BB&T has made any changes to its lending procedures as a result of its performance on the stress test from the Fed's yearly comprehensive capital analysis review, or CCAR.

"I think our structure has pretty much been the same since then," Brown said.

Eagle Bancorp, a $3.9 billion-asset bank in Bethesda, Md., has been able to steal customers from BB&T, as it takes the bigger bank longer to make credit decisions, said Ron Paul, Eagle's chairman and CEO. But Eagle has won customers away from many larger rivals, not just BB&T, he said.

"BB&T falls into the same category as the rest of the regional and national banks," Paul said. "They can't get decisions made in the two weeks that we can. There's no substitute for a borrower being able to call up the CEO and I can give him an answer on a loan in 24 hours and close two weeks later."

BB&T's purported changes primarily involve commercial loans, but some rival lenders say they see changes to BB&T's approach to residential mortgages as well. BB&T has always centralized its decision-making on residential mortgage applications, said Jim Blaine, president of the $29 billion-asset State Employees' Credit Union in Raleigh, N.C. But now BB&T is pulling back from residential lending, based on tough new qualified mortgage rules, he said.

"BB&T is now confronted, as we all are, by an exactitude in regulation which requires institutions to back away from good borrowers, due to the high risk of compliance scrutiny," Blaine said.

Whatever the reasons behind customers' changing perceptions of BB&T's service, community bankers are licking their chops. BB&T may be saving money by moving decision-makers to Winston-Salem or its credit hubs, but it is losing customers in the process, Glick said.

"It does have a cost savings associated with it, but you're giving up the human factor," Glick said. "It creates confusion in the marketplace, and if a community banker is on his toes, he can pick up some good credits."