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First Financial, Pinnacle rank among banks with most retail exposure

First Financial Bancorp., Pinnacle Financial Partners Inc. and Simmons First National Corp. rank among the banks with the highest disclosed exposure to retail property, as measured by percentage of gross loans, according to first-quarter filings.

Many state and local authorities have closed all non-essential businesses to stem the spread of the coronavirus pandemic, and most retail stores fit that category. Retail sales in segments like clothing and accessories fell more than 50% year over year in March as unemployment figures mounted. At the close of April, regional malls across the country remain shuttered.

"The fact of the matter is that retailers cannot afford to pay their rent right now, along with a lot of other different industries, because they simply don't have revenue coming in," Gayle Klein, principal at the law firm McKool Smith, said in an interview. "Or if they have revenue coming in vis-à-vis online shopping, it's certainly not enough to support their physical locations."

Through the start of earnings season, some banks have disclosed exposure to industries particularly affected by the pandemic. First Financial's $1.5 billion in loans to non-owner occupied retail real estate, franchises and retail trade there are slight variations in how each bank classifies commercial retail represented 15.9% of its gross loans at quarter-end. Pinnacle's exposure was 12.9%, and Simmons' was 11.7%.

Among reporting lenders, Bank of America Corp., Wells Fargo & Co. and U.S. Bancorp, in that order, had the highest exposure by total loan balance. Bank of America's $58.6 billion in retail loans represented 5.5% of its gross loans, and Wells Fargo's $53.9 billion in loans represented 5.2% of its total loans.

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Forced business closures and local stay-at-home orders have undermined restaurant operations, in particular. More than 77% of restaurant respondents in a survey conducted by the James Beard Foundation reported they had seen at least a 50% reduction in sales as of mid-April.

First Financial and Pinnacle also reported relatively high exposure to the restaurant segment. First Financial's $455 million in franchise restaurant loans represented 4.9% of its gross loans at quarter-end, representing the highest relative exposure to restaurants among banks that have disclosed figures. Pinnacle also had $538 million in loans to restaurants, representing 2.6% of its gross loans.

Wells Fargo, Citizens Financial Group Inc. and Truist Financial Corp. had the highest exposure to restaurants by total loan balance. Wells Fargo's $5.8 billion in restaurant loans represented 0.6% of its gross loans; Citizens' $2.9 billion in loans represented 2.2% of its total loans; and Truist's $2.5 billion in loans represented 0.8% of its loans.

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