Revenues are falling, margins are tightening and fee income is shrinking, but the good news in regional banks' third-quarter earnings results was that loan portfolios continue to grow despite economic uncertainty and intense competition.

PNC Financial Services Group (PNC), U.S. Bancorp (USB) and KeyCorp (KEY) all reported loan growth of at least 5% in the third quarter when compared with a year earlier as they focused heavily on strengthening customer relationships.

Regional banks are also starting to reap the benefits of their expansion into new markets or business lines, bank executives said in earnings calls with analysts Wednesday.

PNC, which moved into the Southeast last year when it bought RBC Bank, is adding clients in that region at a much faster clip than it is in its more traditional markets in the Northeast and Midwest, according to President and Chief Executive William Demchak. Meanwhile, U.S. Bancorp in Minneapolis is benefiting from its emphasis on corporate banking.

"U.S. Bank continues to be invited into more syndicated deals and at a higher position by far than we used to be and in some cases it is a lead position," Richard K. Davis, U.S. Bancorp's chairman and chief executive, said in a conference call. "That is a big turnaround from what we might…have expected a few years ago."

To be sure, regionals still face immense challenges, particularly on the revenue side. Yes, they are bringing in more loans, but tightening spreads means they are making less money on them. PNC, U.S. Bancorp and KeyCorp also reported sharp declines in fee income in the third quarter, due largely to a slowdown in mortgage refinancing activity that resulted in lower gains on loan sales.

Overall, PNC's revenue declined 4% year over year, U.S. Bancorp's fell 5% and KeyCorp's declined 5%.

On the plus side, though, loan growth for the regionals is outpacing the growth of the industry overall, says Jack Micenko, an analyst at Susquehanna Financial Group. So far, the companies he covers have reported an average annual loan growth of 4.7%, compared with 2.5% for all banks, according to recent data from the Federal Reserve.

"They appear to be taking market share from smaller competitors and money center banks," Micenko says.

Regionals appear to be winning, in part, by offering discounted rates, which Micenko says is not necessarily a bad thing because they can make up for the discount by collecting fees on products other banks - particularly smaller ones -- may not offer.

U.S. Bancorp increased its average loans by 5.7% from a year earlier to $229.4 billion.

Andrew Cecere, the chief financial officer at U.S. Bancorp, said in an interview on Wednesday that the loan growth in the quarter "was at one of the highest levels we've seen" in several years. The company is projecting once again expecting to be on the high side of loan growth guidance of 1% to 1.5% in the fourth quarter.

Commercial loans grew nearly 11% from the previous year and 2.2% from the previous quarter, while commercial real estate grew 5.1% and 1.6% over the same periods. Even its residential real estate loans held in portfolio are experiencing big growth -- up nearly 20% from a year earlier and 4.8% from the previous quarter.

Cecere acknowledged that U.S. Bancorp is winning some credits by competing on rates and that it can afford to do so because it has lower funding costs than most of its competitors.

Still, Davis, the CEO, said that while company is not afraid to compete on rates, it will not water down terms.

"We will not take risk on underwriting," he said. "We are not going to be in harm's way."

For the quarter, U.S. Bancorp reported earnings of $1.5 billion, essentially flat from a year earlier. Its earnings per share of 76 cents per share matched analysts' estimates, according to Bloomberg.

At PNC, loans increased 5% year over, to $193 billion. Demchak said that most of the growth was in commercial real estate lending but that the bank also saw modest growth in asset-based lending and other specialty segments.

Demchak said that competition for commercial loans is more fierce than it was even a few months ago and, like, Davis, said that the bank will discount the rate when it's warranted.

PNC will "aggressively" seek to retain clients when it has a lot of cross-selling opportunities, and "we will give on price when necessary," Demchak said. "We won't give on structure."

Demchak was particularly bullish on growth opportunities in the Southeast, where PNC is still establishing itself. He said the bank now has 51 corporate banking clients in that market, up from 44 at June 30, and that loan growth in the region is "significantly outpacing" that of its legacy markets on a percentage basis.

"It's starting to make a difference in the growth rate for the entire company," he said.

PNC reported earnings of $1 billion in the quarter, up 10% from the same quarter last year. Earnings per share of $1.79 beat analysts' estimates by 17 cents.

KeyCorp's loan growth in the quarter was driven primarily by and 11% increase in its commercial and industrial lending. Christopher Gorman, president of Key Corporate Bank, said that the growth is a direct result of its focus on building and deepening relationships.

"We are not focused necessarily on growing loans," he said during an earnings call. "What we are focused on is growing clients and expanding relationships and as we look at the pipelines that come out of that, we feel pretty good about it."

The company has also been successful in booking commercial loans because it was able to move resources from dealing with credit problems to loan production after the economic crisis quicker than some of its peers, says Gerard Cassidy, an analyst at RBC Capital Markets.

KeyCorp also has trimmed more than $207 million of expenses this year. The company had pledged in July 2012 to cut between $150 million to $200 million in costs by the end of 2013.

Though KeyCorp's official cost-cutting goal has been exceeded, executives vowed to continue to look for ways to lower expenses. This is "job No. 1" going forward, Cassidy says.

Overall KeyCorp earned $266 million in the third quarter, up roughly 24% from a year earlier. Its earnings per share of 29 cents beat consensus estimates by 6 cents.

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