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Local Banks See Sustainable Lending in 2015

With interest rates remaining low and consumer confidence growing, local financial institutions project increased lending in 2016

By Molly Priddy
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Just a few years ago, not having enough money for a new house or remodeling project or getting a new car meant for many people that those wants or needs would have to wait.

As the country continued to suffer in the financial winter of the recession, institutions tightened up the lending process, making credit difficult to come by.

But now, in what could be considered the spring awakening after a long winter, financial institutions in the Flathead Valley are largely back on track with lending, ranging from personal loans to real estate financing.

“Credit’s getting a little easier,” said Patrick Barkey of the Bureau of Business and Economic Research at the University of Montana. “My sense is that things are not as tight as they were even a year ago.”

The country’s economy continues to see gains in employment and other major industries, such as housing, as the icy grip of recession continues to fade. U.S. housing starts reached an eight-year high last July at 1.21 million units, the highest since October 2007.

According to a Bankrate survey, an estimated 24 million American adults plan on taking out a personal loan in the next year. Credit reporting companies estimate that the average personal loan will grow 5 percent, on top of the 7.1 percent growth from last year.

In the Flathead, the real estate market held steady through 2015 with consistent growth, but lacking the all-out chaos that dominated the market in the early 2000s.

“We’ve had a major uptick in real estate loans, but I think a lot of that’s driven by the current rate environment,” Jim Kenyon, president and CEO at Whitefish Credit Union, said. “Anything consumer is doing really well.”

Those consumer loans are helping pay for all sorts of projects, Kenyon said, especially with interest rates staying near zero since the Great Recession. While consumers are getting back into the game, smaller businesses remain a bit wary, he said.

“The mom-and-pop business is probably a little more conservative,” Kenyon said. “They’re not as confident in borrowing or wanting to take more money out as an individual consumer.”

At Valley Bank, president Ron Rosenberg said 2015 was a “definite improvement” over 2014 when it came to loans, especially in real estate lending.

“There was significant growth on what I would imagine is considered entry-level houses,” Rosenberg said.

While smaller businesses might be leery of going gangbusters just yet, Rosenberg said the upward trend in commercial loans shows a competitive market and the potential for more growth.

“The commercial side of that has shown improvement as well,” Rosenberg said. “I think it’s obvious to everyone what’s going on in town, but that’s encouraging that people have the confidence, that they’ve seen the improvement.”

Randall Chesler, president at Glacier Bancorp, Inc., said the bank saw growth in 2014 and 2015, with commercial loans accounting for 60 percent of its business, ending last year with a total increase of 8 percent.

“This year we’re projecting another solid year of growth,” Chesler said. “January and February are looking steady.”

Challenges in the coming year include the Bakken slowdown, which won’t have many primary effects in the Flathead, but there will likely be ripple effects, Chesler said. Agriculture also faces a tough economy, and the Canadian dollar’s weakness could continue limiting tourists from the north.

Worldwide, the American economy continues to perform well. Other major markets – Europe and Japan – have taken on negative interest rates in an attempt to jumpstart their economies.

Meanwhile, the Federal Reserve continues its near-zero interest rates, though there has been discussion about negative rates here as well. Barkey said all growth comes to an end eventually, but Montana banks are “by and large not involved in the big, Wall Street-type stuff, it’s much more retail banking.”

Rosenberg and Chesler said they expect interest rates to stay just about where they are for the foreseeable future, and that sustainable growth with sensible lending should allow for stable, predictable market landscape.

“Some of the people who had gotten hurt through the recession and got conservative in the recovery are now confident enough that they’re not going crazy,” Rosenberg said.