Area banks hold more deposits but make fewer loans
Bankers and borrowers don’t see eye to eye on loans. </p><p>Each points at the other to explain a continuing decline in the amount of lending among Kansas City area banks.</p><p>And they’re both right. </p><p>Reluctant lenders and hesitant borrowers have contributed to a 7.4 percent drop in the amount of loans at area banks in the last year, according to lenders’ most recent financial statements.</p><p>It means $3.4 billion less credit in the hands of businesses, consumers and other customers of the Missouri- and Kansas-based banks with branches in the Kansas City market. And that puts a pinch on the local economy.</p><p>The lending drought also is beginning to weigh on banks, which after all are in the business of making loans. Without new loans to replace the ones that pay off, banks’ revenues shrink, and their profits thin.</p><p>“One of the biggest challenges facing banks going forward is, how are they going to grow those revenues?” said Richard Cofer, a regional manager in the Kansas City offices of the Federal Deposit Insurance Corp.</p><p>This is the new challenge facing an industry that has spent years cleaning up the loans that turned sour amid the financial crisis and recession that followed.</p><p>Kansas City area banks have made progress with their cleanup — though some still struggle with too many problems and too little capital backing.</p><p>A stronger economic recovery would help both the cleanup of old problems and the creation of new profitable loans.</p><p><span class="subhead">Plenty coming in the door</span></p><p>Area banks have plenty of money to lend. </p><p>They’re positively fat with deposits as money has flocked to the safety of FDIC insurance and away from Wall Street’s gyrations. </p><p>Nationally, the banking industry reached $10 trillion in deposits for the first time ever at the end of September, according to Market Rates Insight Inc. of San Anselmo, Calif., which tracks industry data.</p><p>Kansas City area banks have shared in the bounty. Deposits among the regionally based banks were 3.5 percent higher at the end of September than a year earlier.</p><p>But measurably fewer of those deposits are making it out the door as loans, the banks’ financial reports show. </p><p>A few years ago, loans soaked up most or even all of the deposits at many area banks. Some banks funded still more loans by borrowing from the Federal Home Loan Bank System.</p><p>Bankers have set their sites much lower these days. Three-fourths of area banks had less of their deposits out on loan at the end of September than they did a year earlier, according to an analysis of the numbers..</p><p>“If you could operate … in the range of 60 percent to 80 percent somewhere (in terms of loans to deposits), I think most banks would be happy right now,” said John Pittman, a managing director at CrossFirst Advisors LLC in Leawood.</p><p>Some business borrowers blame the bankers.</p><p>Bryan Caton has tried shopping for new mortgages on the buildings for his business, Midland Marble & Granite LLC in Lee’s Summit. Refinancing the existing loans when they come up for renewal could mean a lower interest rate.</p><p>“It’s tough. I looked at other banks, and people are just saying no, unless you don’t need the money or you are willing to put another 20 percent down,” Caton said.</p><p>Examiners have pressed banks in recent years to tighten lending standards as so many loans were going sour. Pittman said the pressure hadn’t eased appreciably.</p><p>If bankers and regulators are saying no to new loans, so are some borrowers.</p><p>Many businesses are using less of their established lines of credit at banks, deciding not to draw down as much of their available bank funding as they had in the past.</p><p>It’s the chief reason that commercial and industrial loans have fallen more than 10 percent at Commerce Bank in the last year, said Kevin Barth, its president and chief operating officer.</p><p>Barth said companies were cautious about using the untapped credit to build up inventories, expand operations or hire. Many had to cut back and lay off employees during the harsh downturn.</p><p>“That’s not a lot of fun,” Barth said. “They don’t want to have to do that again.”</p><p>Meanwhile, borrowers’ underused lines of credit sit idle until business managers see a productive use for the money.</p><p>“There’s a lot of cash available when the need arises,” Barth said.</p><p>A few area banks are posting loan growth. </p><p>The Bank of Prairie Village, a $94 million one office bank, has picked up enough new loan customers to enjoy what Dan Bolen, its chairman, calls a normal year. Loans were up 7.6 percent at the end of September compared with a year ago.</p><p>Bolen said he is mindful of keeping the bank’s growth within the limits that the bank’s capital can support. </p><p>“It’s almost as if we’re trying not to grow and good opportunities come to us,” Bolen said.</p><p>Loans at Missouri Bank & Trust were up 13 percent at the end of September compared with a year earlier.</p><p>“We’re finding a lot of really solid loan demand from our existing customer base, but also (from) new customer acquisitions,” said Grant Burcham, president and CEO of the $436 million bank.</p><p>A new loan customer at Kansas City-based Missouri Bank typically means a lost customer somewhere else, a process Burcham called cannibalization.</p><p>Burcham said the fight for loans is starting to heat up. </p><p>He said bigger banks are becoming more aggressive on interest rates and loan terms. And Burcham said some area banks that had cut back on lending to concentrate on fixing their problems have begun to compete for borrowers again.</p><p>“There are more banks going after the fewer good loans that are out there,” Burcham said.</p><p><span class="subhead">Sweeping up</span></p><p>Bankers have been managing the loan drought by stuffing their bond portfolios. </p><p>Buying bonds lets them earn a bit of interest on their excess deposits until the more profitable lending side of their business heats up.</p><p>But this strategy faces its own challenge, as interest rates have tumbled to historic lows. </p><p>As banks’ older bonds mature and pay off, new bonds they can buy pay lower interest rates. The longer the loan drought lasts, the worse the bond-buying strategy works.</p><p>In short, at some point the banks need to make loans.</p><p>Of course, the last thing bankers want is to do is make a lot of new bad loans. The industry is still cleaning up its old problems.</p><p>Noncurrent loans among area banks, as defined by the FDIC reports, have fallen 27 percent since September 2010. It means bankers have $509 million less to worry about.</p><p>Much of the bad debt had been secured by real estate that the banks now own as foreclosed property. Banks typically try to sell the properties quickly, but they held more than $1 billion worth at the end of September, a 6 percent increase from a year earlier.</p><p>Counting noncurrent loans and unsold real estate, banks have 17 percent less of these problem assets to work through than they did at the end of September 2010.</p><p>“Kansas City area banks are in better shape than they were a year ago,” said Cofer at the FDIC.</p><p>In another sign of improvement, banks’ profits are up.</p><p>Gains have come largely because banks have fewer problem loans and foreclosed properties. Banks can’t wait until these potential setbacks become actual losses. They have to set aside money to cover them as soon as the potential for a loss becomes evident.</p><p>Area banks’ provisions for such losses were down more than 37 percent in the first nine months of this year, leaving that much more as bank profits.</p><p>Though profits have climbed, they remain weak by historical standards. Also, roughly the same number of area banks were losing money through the first nine months of this year as were losing money a year earlier.</p><p>The number of banks short on capital is about the same too, the reports show.</p><p>Financial information on all 121 banks with branches in the Kansas City area are available at KansasCity.com/business (look for the listing of “links and tools”). The list includes out-of-state banks with branches here, including Bank of America and Wells Fargo Bank</p><p>Stronger profits would help banks boost their capital, but progress will be slow until banks can replace some of their low-interest-rate bonds with higher-paying loans.</p><p>A clock is ticking for banks that gained capital under the U.S. Treasury’s TARP program and haven’t paid it back. </p><p>Currently these banks, including a handful in the Kansas City area, pay the Treasury a 5 percent dividend on the TARP money. But the price jumps to 9 percent about two years from now. </p><p>It’s a price few of the banks probably can afford to pay for long, said Bob Wray, president of The Capital Corp. in Lenexa.</p><p>Along those lines, the Treasury sent a letter to TARP banks late last month, urging them to come up with a plan to repay the TARP funds, according to a report in the American Banker trade publication.</p><p>Wray said most of these banks wouldn’t be able to do that from their current earnings. They’ll need to boost profits by boosting their lending.</p><p>“That’s the critical step to get these banks to good profitability, to get enough good loans in there to change the income statement.
Us Bad Credit Home Purchasing Loans - News
The longer the loan drought lasts, the worse the bond-buying strategy works. In short, at some point the banks need to make loans. Of course, the last thing bankers want is to do is make a lot of new bad loans. The industry is still cleaning up its old
The result is not just bad for the students, who spend their 20s floundering, stressing over and often failing to repay such debts, but also for the economy. Rather than purchasing big-ticket items typical of their age range, from homes to automobiles,
“Some new real estate projects have begun to slash prices to attract buyers, who certainly prefer new homes instead of pre-owned ones, which is the very culprit behind the bleak outlook of the secondhand home market,” he said. ??? For Huang, who is
The job of the Open Market Desk is to provide whatever additional money and credit our economy needs without providing so much there is inflation. It does this by literally creating liquidity and then getting it into our economy by buying financial
Having overextended themselves over the past few years in a flood of government-directed credit, banks now must face rising problems with bad loans—a lot of this is basic math. But myths about how Beijing could solve the problem abound.
A 100% Financed Bad Credit Mortgage Loan – Myth Or Reality?
Apartment dwellers and homeowners with bad or poor credit who are looking for a mortgage with 100% financing may be surprised to discover, that due to today’s more lenient lending practices, it is almost as easy to get approved for a new home loan or to refinance your current mortgage with a poor credit rating than it is if you had good a credit rating.
Tip – This type of bad credit mortgage loan normally doesn’t translate into lower interest rate loans. You may qualify for a 100% mortgage but the terms of the loan and interest rate won’t be a favorable as if you had great credit.
Bad credit (i.e. also known as Subprime) mortgage lenders offer a variety of 100% mortgage packages for borrowers and in some instances even 103% mortgage loans are available which also include your closing costs. You have several options when it comes to this type of financing. Below are few things that should help you get started on the right track.
100% Mortgage Loans – The Good and the Bad The primary benefit of a home loan that offers 100% financing, especially if you have less than perfect credit, is that you can purchase a home with little or no cash down. Rather than continuing to throw money down the rat hole of monthly rent you can begin to build equity in a home of your own.
On the other hand, the primary disadvantage of 100% financing is that you will pay more for financing through a higher interest rate and in many instances higher closing costs and rather than having a 15 or 30 year fixed loan you will normally get an adjustable rate mortgage than will go up after 2 or 3 years. Another risk for the homeowner is that because you are purchasing a home with no money down you will have zero equity. If the housing market goes into a slump and the value of your home declines, you could end up with a mortgage for more than your home is worth.
Tip – To find out further information about how to purchase a home with bad credit or no credit visit your local real estate company and they might be able to refer you to a bad credit mortgage specialist. Another option is to simply do research on the internet or use your local phone book but shop around because like any business the mortgage business is very competitive and more options you have the better position you will be in to get the best deal possible.