We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
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Figures submitted by local banks to the Federal Deposit Insurance Corp. show that commercial loans totaled more than $2.2 billion in the first quarter of 2014, compared with slightly more than $2 billion in the same period in 2013.
At the same time, personal loans, which include mortgages, decreased from $34 million in 2013 to $30 million in 2014.
The figures represent a shift away from mortgage lending to business and construction lending, caused by continued economic growth in the area, according to Don Childears, president of the Colorado Bankers Association.
The level of mortgage lending is still high, but dropped off after the refinancing boom that occurred in 2012 and 2013.
Mortgage applications have bounced back and forth in the past year, according to the Mortgage Bankers Association, but when the organization completes its weekly analysis of mortgage applications, more often than not it reports a decrease in application volume nationwide.
Most recently, the MBA found that mortgage applications for home purchases in June were down 15 percent from the same period last year, even though interest rates remain low at about 4.5 percent for a 30-year, fixed-rate mortgage.
Another telling statistic in the decline of mortgage demand is that independent mortgage banks and mortgage subsidiaries of chartered banks reached new profit lows at the end of 2013, according to MBA data.
As volume shrank and costs increased, these companies made an average profit of $150 on each loan they originated in the fourth quarter of 2013, compared with $743 per loan just one quarter before.
“One consolation was in mortgage servicing, where financial income was improved,” said Marina Walsh, vice president for industry analysis at the MBA. Mortgage servicing refers to the administrative functions some mortgage companies offer for mortgage loans.
While the housing market in the area is still moving at a very fast pace, home sales have decreased slightly so far in 2014 when compared with the previous year. According to data from Information and Real Estate Services, 3,088 homes had been sold through May, a 4.5 percent decrease from the same period last year, when 3,228 homes had been sold.
But while personal loans have been on the decline, commercial lending has improved at six of nine banks based in Northern Colorado and the Boulder Valley.
New, fast-growing industries are partially responsible, said Childears.
“The increase in commercial lending can be attributed to the growth and expansion of the economy, particularly related to high-tech companies that dominate Boulder County.”
Loveland-based Home State Bank has been able to capitalize on some of that activity at its branches in Lafayette and Louisville, according to chief financial officer Mark Bower.
Commercial loans jumped by 28 percent at Home State Bank year-over-year in the first quarter, from $51 million in 2013 to $65 million in 2014. Through May, the bank has seen 13 percent growth in commercial loans so far this year, Bower said.
But across Northern Colorado and the Boulder Valley, commercial loans are coming from all sides, said Bower.
In addition to loans to the technology sector, banks are lending again to small businesses and for commercial construction, as well as in the commercial and industrial sector, which includes loans to oil and gas companies and those ancillary companies that provide products and services to oil and gas producers.
Most of the growth comes from the improving economy, Bower said.
“All banks are extremely hungry for loans,” he said.
Molly Armbrister can be reached at 970-232-3129, 303-630-1969 or firstname.lastname@example.org. Follow her on Twitter at @marmbristerBW.