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Banks lending again, Fed says

By Thomas Olson
Friday, Dec. 30, 2011

Banks are lending again to businesses after nearly three years that included the recession and falling loan balances, according to the latest data from the Federal Reserve.

A pickup in lending resumed this summer and continued through October, latest data available.

Total outstanding bank loans grew at an annual rate of 3.9 percent in the July-through-September period and at a 7.4 percent rate in October. By comparison, bank loans declined in 2009 and 2010.

"We saw modest improvement in our (small-business) optimism index in the last three months, so this lending data may be an illustration of that," said Kevin Shivers, state director of the National Federation of Independent Business, Harrisburg.

Commercial and industrial loan activity to companies increased 9.9 percent in the period, including a 20.5 percent leap in August. They jumped 15.1 percent in October.

In addition, loans to consumers rose by 2.2 percent in the three months, marking the first improvement since 2008. October levels also climbed, by 3.4 percent.

The NFIB surveyed nearly 4,000 small businesses in November. It showed a 1 percent rise in the number of businesses that expect to expand within the next six months, and a 3 percent rise in the number of businesses that plan to make capital expenditures.

For instance, Pennsylvania Drilling Co., Imperial, borrowed nearly $50,000 from Brentwood Bank in early December, mainly for a new forklift. With sales of more than $10 million a year, the company provides contract drilling for test boring and mineral exploration and employs about 50.

"Business is good. We're having a good year," said President Tom Sturgess. An increase in commercial construction this year boosted company revenue, he said.

Brentwood Bank, based in Bethel Park, saw overall lending increase by about 9 percent through the third quarter, said Chief Executive Tom Bailey. Outstanding commercial and industrial loans that totaled about $17 million at the end of last year grew more than 29 percent to about $22 million as of Sept. 30.

"Part of that is that we're out there looking for loans," said Bailey, who notes that his and other community banks maintain strict underwriting.

"Demand seemed to be across the board in different industries," he said. "It was predominantly for new equipment or to replace a piece of machinery."

Many of the business loans were to refinance debt, and mostly among big corporate borrowers, said other business loan experts.

"Who's getting these loans• It's the larger companies, and it's in larger loan amounts," said Marilyn Landis, president of Basic Business Concepts, a small business consulting firm on the North Shore that specializes in finance.

Figures from the Federal Deposit Insurance Corp. for the level of commercial and industrial loans of $1 million or less tend to support her claim. Such loans to small businesses from the nation's banks have receded from an aggregate $336.4 billion at year-end 2008 to $279.9 billion as of Sept. 30.

"Banks are continuing to tighten lending standards, even though they say they are not," said Landis, a former chairwoman of the National Small Business Association.

The Fed, which surveyed 875 banks nationwide, also found commercial real estate loans continued to decline, as they have since 2009. They dropped by 6.3 percent in the summer quarter and fell 7.8 percent in October.



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