INSIGHT ON: Business Lending – Bouncing back

Posted on Jul 1, 2015 :: Business Services , Insight On
Posted by , Insight on Business Staff Writer


It’s been a long road back for business lenders.

Six years removed from the financial meltdown that triggered the Great Recession, sparking bailouts and increased scrutiny from regulators, area banks have found more solid footing for their lending practices and growing loan portfolios.

During the first quarter of 2015, Wisconsin banks posted a 14.6 percent increase in profit compared with the same period in 2014, according to the Federal Deposit Insurance Corp. Banks reported earnings of $259 million, up from $226 million during the same period in 2014.

Seventy-two percent of the 247 banks based in Wisconsin posted profits while only 11 lost money. The number of loans and leases made by Wisconsin banks rose 5.6 percent during the first quarter to nearly $71.6 billion, up from $67.8 billion during the same period a year ago.

Simply put, banks are doing better.

As for why, the improvingeconomy is a major factor as are the decisions by banks in how they do business.

Christopher Del Moral-Niles, chief financial officer for Associated Bank, says the financial crisis made the Green Bay-based bank focus more on select lending areas and on certain geographical markets. In Associated’s case, that’s Wisconsin, Minnesota and Illinois.

“We are much more Wisconsin- centric now than what we were before,” he says. “We learned you shouldn’t go to places where you don’t have a lot of knowledge. And if you do enter a new market, hire local people who know that market — don’t just parachute people into new markets, thinking that they’re all the same.”

That’s a rule Nicolet National Bank adheres to as well. The Green Bay bank has grown in recent years in new markets, but it’s been through acquisitions — including three in the past four years — and organic growth, says CEO Bob Atwell.

“We’ve expanded our natural territory and get to know the people in the community where we’re doing business,” he says. “We’ve moved south into the Appleton area as well as into central Wisconsin and to the north in Eagle River and Rhinelander.”

As for lending decisions, Atwell says Nicolet’s haven’t changed too much in the past five years — something he attributes to the bank’s concentration in the commercial and industrial lending markets. In 2014, Nicolet’s total loans grew by 4 percent to $883 million.

“We really focus on businesses that make things or provide services,” he says. “We do a little commercial real estate — which was what grew so much and then burst, leading to a lot of the problems banks had — but it’s only with the best developers and projects we’re confident in.”

First National Bank-Fox Valley’s loan portfolio has burgeoned as the number of business acquisitions has grown and businesses are looking to expand by either adding new space or equipment, says Tim Vogelsang, senior vice president-commercial banking for the Menasha-based bank.

“Banks, in general, have an excess of liquidity right now because lending was down for a while,” he says. “There’s definitely more competition or business loans. Before, there might be two banks bidding for a project. Now, there are five or six.”

While banks do have capacity to lend, Vogelsang says they have become more selective about businesses they lend to. The due diligence research before a loan is made is more intensive now than before the financial crash, due to both lessons learned and increased federal regulation.

Del Moral-Niles says the financial crisis also allowed Associated Bank leaders to study its portfolio and focus on strengths.

“Certain kinds of construction loans made up too high of a percentage of our portfolio,” he says. “We set about building a commercial real estate portfolio that was smarter.”

That includes investing in manufacturing expansion projects.

“That’s definitely a growth area,” Del Moral-Niles says. “That part of the economy is doing well, so investing in it through construction projects is smart.”

Nicolet’s loan activity has increased, Atwell says. “It all goes back to how the economy is doing. Our activity reflects what our customers are doing. If they are feeling confident and adding on, then we’ll be busier,” he says.

Credit unions loosen up

Credit unions are also lending more funds.

According to data from the Wisconsin Department of Financial Institutions, lending grew by 10.7 percent at the state’s 156 chartered credit unions during the first three months 2015 compared with the same period in 2014.

Credit unions loaned $20.4 billion in January, February and March, up from $18.5 billion during that same time last year.

In addition, net income totaled $68.5 million during the first quarter of 2015, up from $56.3 million during the first three months of 2014.

“Many of the key indicators by which credit unions measure success are in very good shape. Credit unions are in great position to continue to help the Wisconsin economy grow by providing consumers and businesses the products and services they need to prosper,” says WDFI Secretary Ray Allen.