Banks aren’t lending enough for their own good according to Pat Dalrymple, who has spent almost 50 years in mortgage lending and banking in the Roaring Fork Valley in Colorado.
In a recent article in the Post Independent, Pat states banks are in fact lending, they just are not lending enough for their own well-being or to help the economy. A recent survey of 821 banks in a five-state area showed at the end of the third quarter of 2013, only 4.2 of these banks posted loan growth of 25 percent or better. Another 169 showed new loan growth of 10 to 24.9 percent, and 329 saw an increase by 0.01 to 9.9 percent. Of these banks 281 showed no growth or a decline in total loans.
According to Mr. Dalrymple, even though this seems like things are moving along ok, they aren’t. In what he calls “banker babble” a 5 percent annual loan growth is basically like standing still or worse. Without an expanding loan portfolio he says banks wither. When people deposit money into the bank, it has to be put to work or it will just sit there and slowly sink the institution.
Dalrymple says banks are “awash in cash” right now as the economy improves but they are also in the same position as everyone else, unable to get much return on acceptable liquid investments. With this in mind, 610 banks in the surveyed group, 74 percent of them, had no or only mediocre loan growth.
Banks want to reverse the situation but there aren’t enough loans that meet current criteria to go around. Regulations were put into place due to lending done prior to the Great Recession that no one will argue should not have been done. But current regulations constrain banks from doing good, but now discontinued loans. The intentions, while good to keep us from the meltdown of ’08, are also making borrowing money a difficult job.
To read the full article go to Post Independent, click on E-Edition, December 30, 2013 edition.