Local banks resist loan temptations
Published on: August 5, 2011
Christopher Sheffield, Memphis Business Journal
A national concern expressed by ratings agencies that banks feel tempted to loosen lending standards to pump up loan portfolios appears to be a concern even around Memphis, some bankers say.
That, however, isn’t going to translate into a flood of commercial loans. Only the best customers with the best deals and existing relationships with lenders are going to see those opportunities, says John Van Hoozer, senior vice president and commercial mortgage banker with thrift Financial Federal Savings Bank.
“We’re not seeing a lot of portfolio requests that we would put on the books,” says Van Hoozer.
The depressed loan volume comes even as rates on commercial loans continued to plummet in the hours leading up to the congressional debt stalemate and immediately after. That surprised some who expected some resolution on the debt ceiling debate to result in renewed confidence and, thus, a pickup in rates.
“Rates have gone steadily down since the debt ceiling was resolved,” Van Hoozer says. “There was a lot of panic built into market leading up to and until that was resolved.”
Andrew Petro, senior vice president and commercial relationship manager with Trustmark National Bank, says based on Universal Commercial Code filings in the Memphis area, even a favorable rate climate hasn’t dislodged potential customers to start projects.
“There’s not a whole lot of activity in our market,” he says.
That urgency to get some deals on the books is leading to a lot of wheeling and dealing, including reaching out to some clients to refinance their 10-year Treasury dropping, the reality is that interest rates are heading upward as the federal deficit mounts.” says Rick Wood, executive vice president of the commercial/multifamily division of Financial Federal.
Petro says he hasn’t seen a lot of refinancing interest among the smaller mom-and-pops who, for even the best credits, traditionally have had to meet higher benchmarks, lower loan-to-value ratios and floating rates than the commercial mortgage borrowers.
“I think our market is sitting tight and waiting and trying to stabilize their businesses and reluctant to pull the trigger,” he says.
To get borrowers to move, some banks anxious to make deals are dropping rates to unheard of levels, both Petro and Van Hoozer say.
In June, Fitch Ratings expressed concern about the potential of U.S. banks to loosen lending conditions as total loan portfolios for U.S. banks have fallen below $8 trillion or, pre-recession levels.
"It’s a good time to borrow if you have the balance sheet and cash flow to support it.” Petro says.