Flathead Valley banks are reporting an uptick in lending, or at least emerging signs of increased borrowing confidence, providing one more reason to believe the economy has bottomed out and is once again on the rise.
Refinancing, mixed in with scattered new home purchases, is driving the residential loan market, with homeowners taking advantage of low interest rates. And in the commercial sector, more businesses are looking to reinvest and expand, seeking loans to help them with that growth.
“I think things have stabilized here locally and people are starting to take steps in a direction going forward again – being in an offensive mode rather than a defensive position,” said Ron Rosenberg, president of Valley Bank.
Rosenberg said he’s seen “a lot more positive signs over the last year,” a trend that applies to both consumer and commercial loans. When consumer loan demand increases for assets like vehicles, Rosenberg said the demand translates to the commercial market.
Though his bank hasn’t experienced a dramatic rise in business loans on its books, Rosenberg is seeing more inquiries. He points to increasing confidence – a changing “attitude” – among consumers and business owners as reason to believe these positive trends will continue through 2012.
“In the commercial accounts I deal with, they’re showing a lot more signs of stability and a much more positive attitude going into this calendar year,” he said.
Dennis Beams, vice president and chief credit officer at Glacier Bank, said new loan originations increased in 2011 from the previous year and his bank is “starting to see a quarter-over-quarter increase in demand for loans.” Charge-offs, which occur when a debt is written off as unlikely to be collected, were a third lower last year than 2010, Beams said.
Though only two months into 2012, Beams has already seen indications of a solid year ahead.
“So far, so good,” Beams said. “January was a very good month.”
The two biggest sectors of the commercial market for Glacier Bank have been hotels and health care, Beams said, driven by a handful of large projects stretching across the state all the way to Sidney.
John King, CEO of Three Rivers Bank, says his customers are gradually borrowing more, giving him a feeling of “cautious optimism.” By all accounts, lending activity is significantly higher than its low around 2009, he said, when customers were very reluctant to take on new loans. Lending at Three Rivers Bank grew in the fourth quarter of 2011, King said.
Three Rivers Bank “never shied away from making loans during the recession,” King said, so long as customers met the appropriate collateral and repayment ability requirements. He credits the recent uptick in lending to borrowers’ confidence.
“I really don’t think any bank in this valley stopped making loans, but when the jobs aren’t there and money is tight, people just aren’t borrowing,” King said.
In the residential sector, King said homeowners are refinancing and using that extra cash to either pay off other debts or put money into improving their homes. In commercial real estate, King is seeing businesspeople who previously leased spaces now purchasing their own storefronts.
“That’s a good sign for the economy,” King said.
With development at a standstill throughout the valley, construction loan activity continues to lag. As Rosenberg puts it: “Construction is still kind of nonexistent.”
Rosenberg said the positive lending outlook coincides with recent optimistic, even if hesitantly optimistic, economic reports. Researchers from the University of Montana Bureau of Business Economic Research released a poll showing that Montanans are largely upbeat about the economy.
The UM researchers spoke in terms of recovery at a recent economic outlook gathering at Kalispell’s Hilton Garden Inn. Also, Jim Kelley of Kelley Appraisal released his annual Flathead real estate report, offering mixed results but overall providing more encouraging news than previous reports.
Still, both Beams and King point to the region’s lingering high unemployment rates as a hindrance to full recovery.
“The number one obstacle is high unemployment,” Beams said. “Until we see that unemployment number come down, it’s going to be a long trudge out of this.”