Local banks’ business lending gains as residential slows

Improvements in the economy and the end of the refinancing boom have created a shift from residential lending to commercial at locally based banks, with many fourth-quarter balance sheets showing double-digit gains in commercial lending.

Eight banks are based in Larimer, Weld, Boulder and Broomfield counties, and half of those saw increases in commercial lending of 30 percent or more, year-over-year in the fourth quarter of 2013, according to the most recent data from the Federal Deposit Insurance Corp.

Fort Collins-based Bank of Colorado saw its commercial lending increase 37 percent, said its president, Shawn Osthoff, an increase to $96 million from $70 million in the fourth quarter of 2012.

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In general, this region has fared better than the rest of the state, Osthoff said. Denver, along with Northern Colorado and the Boulder Valley, is experiencing renewed activity in the commercial sector, while Western Slope communities continue to lag.

The increase has less to do with oil and gas activity than in recent years, when commercial gains have been largely attributed to Weld County’s energy industry.

The bank’s commercial portfolio is diverse, said Osthoff, but the three areas with the most growth have been multi-family, office and industrial real estate. Retail hasn’t quite caught up to other sectors yet, he said.

However, declining residential activity has freed up capital to be lent to commercial enterprise.

“Our focus hasn’t shifted,” Osthoff said, but the environment for residential rates isn’t as favorable as it was a year ago.

Rates are still low, at around 4.4 percent for a 30-year, fixed-rate mortgage, according to Freddie Mac, but they have risen from the 3.5 percent average a year ago, and that uptick has been enough to effectively end the refinancing boom for many local banks.

Banks still are making mortgage loans, but mostly for new-home acquisition or construction instead of refinancing, Osthoff said.

Other local banks that have seen similar increases in commercial activity are Loveland-based Home State Bank, with a 30 percent jump from $47 million to $62 million, and Boulder-based Flatirons Bank, with a 37 percent increase from $16 million to $22 million.

In Weld County, First Farm Bank also has increased its commercial lending by 37 percent, from $6.2 million to $8.5 million year-over-year in the fourth quarter, and president Dan Allen points to the company’s all-over growth in 2013 as a likely cause.

The Greeley-based bank established a new headquarters building in St. Michael’s Square on Greeley’s fast-growing west side in 2013, and also established two new branches on the eastern plains in Yuma and Sterling.

The bank keeps its focus on agricultural lending, as it has since its founding in 2007, but when First Farm’s lending officer steps outside of the agricultural realm, it is to serve small-business owners, he said.

“We’re cautious moving into commercial real estate, but we do a few things,” he said. “We focus on Main Street business, and the smaller-business man who might need to finance an expansion or equipment.”