Fitch Completes Review of Mid-tier Regional Banks

Fitch Ratings has affirmed the ratings and Outlooks for 12 of the mid-tier regional banks which includes: BOK Financial Corp. (BOKF), East West Bancorp, Inc. (EWBC), First Horizon National Corp. (FHN), First National of Nebraska, Inc. (FNNI), First Republic Bank (FRC), Fulton Financial Corp. (FULT), Synovus Financial Corp. (SNV), Webster Financial Corp. (WBS), Wintrust Financial Corp. (WTFC), and UMB Financial Corporation (UMB).

Fitch downgraded the long-term Issuer Default Rating (IDR) of PBCT to 'BBB+' from 'A-' and revised to Outlook to Stable from Negative. Fitch also affirmed TCB's long-term IDR at 'BBB-' and revised the Outlook to Stable from Negative.

Please see separate rating action commentary for each institution detailing the specific rating action and rationale.

The Rating Outlook for the Canadian banks remains Stable.

The Stable Outlook for the mid-tier regional bank universe is supported by good liquidity levels, solid capital, declining nonperforming assets (NPAs) and low credit costs. The strengths are balanced by Fitch's expectation of flat earnings for the group, continued home equity risk and weakening commercial underwriting standards for some of the individual banks in Fitch's mid-tier bank peer group.

Fitch's mid-tier regional bank group comprises banks with total assets ranging from $10 billion-$48 billion. Issuer Default Ratings (IDRs) for this group are relatively dispersed with a low of 'BB+' and a high of 'A+'. Typically, the higher rated banks have combination of strong franchises, solid asset quality and good revenue diversification.

NPA levels continue to improve across the industry yet remain well above historical levels. At first-quarter 2014, the median NPA level for the mid-tier group was 2.6%. Included in the NPA number is 30 basis points (bps) of foreclosed assets and 37bps of trouble debt restructures (TDR). Fitch expects continued reduction of NPAs for most banks in the group. However, banks with large home equity portfolios could face stagnant or increasing levels of NPAs as said loans begin to amortize.

Mid-tier banks have experienced very strong loan growth over the past few years. Loan growth has been led by commercial and industrial (C&I) loans. Fitch believes competitive pricing and easier terms offered by U.S. banks on C&I loans have augmented growth. Fitch expects that some asset quality deterioration will arise from weaker underwriting standards and a higher interest rate environment over the medium to longer term.

Core earnings, as measured by pre-provision net revenue (PPNR) divided by average assets, for the mid-tier improved modestly due to declining expenses. Fitch expects earnings performance to be relatively flat in 2015 absent a sharp rise in short term interest rates.

Fitch expects that all of the mid-tier banks will achieve the Basel III capital requirements. With most of the mid-tier banks having tangible common equity levels of over 7%, maintaining the required 7% Tier 1 common equity ratios should be comfortably maintained well ahead of 2019 for the group.

Fitch will published a special report on the Mid-tier Regional banks titled 'U.S. Banks: 2015 Mid-tier Regional Bank Guide' in the coming weeks.

Additional information is available at 'www.fitchratings.com'.

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