Minnesota banks still willing to lend, despite financial crunch

Nationally, statistics collected by the Federal Reserve suggest commercial bank lending --including real estate, business and consumer loans -- has been rising. As of early October, total bank lending was up about four percent over the course of a month and up about nine percent annually.

That's despite tighter credit standards at many banks. Brad Ruiter, of the Minnesota Bankers Association, notes there's a hesitancy among many consumers and businesses to borrow money. Still, Ruiter said lending by Minnesota banks has been rising.

"The real estate loan business is a little slow," Ruiter said. "But all the other major loan categories, small business and that sort of thing, are up in a lot of banks across the state."

Lending for the more than 500 banks and credit unions headquartered in Minnesota increased 3.5 percent in the first half of this year. Despite those statisitics and the assurances of the bankers' association, many businesses are nervous.

Bill Blazar is a senior vice president at the Minnesota Chamber of Commerce, the state's largest business organization. He sais many firms worry they won't get loans.

The mortgage application door is open. The home equity door is open. And the car loan and small business loan doors are open.

"Most of the businesses that I visit with, they're concerned about what might happen when they go to their banker," Blazar said.

But, Blazar said credit-worthy businesses are getting money.

"I haven't had any tell me that when they've had to cross that threshold, they've had a bad experience," he said. "Those that are asking are not reporting the cold shoulder. If they have a standing relationship with a banker, that relationship is holding up.

"By and large, they're finding that their Minnesota banker is cool, calm and collected and if they need resources to expand their business, those resources are going to be there."

U.S. Bank, one of the dominant banks in Minnesota, said it has tightened credit standards by about ten percent. But U.S. Bank said it's not turning away credit-worthy borrowers.

"[The] mortgage application door is open, the home equity door is open and the car loan and small business loan door are open," said Richard Hartnack, vice chairman of U.S. Bancorp., the parent company of U.S. Bank. "So, we're doing business.

"Most banks are actively interested in making good consumer and small business loans for sure," Hartnack said. "Even today, even in this economic time, if a person has a track record of handling credit well, in all likelihood they can get the loan they want, whether it's for a car, home remodel, home purchase or anything like that."

Hartnack sais U.S. Bank's corporate and government lending has been been increasing, too, as customers return to banks because they can't tap non-bank lenders at favorable terms right now.

Lending is up at Wayzata-based TCF Bank too. CEO Bill Cooper said the bank's lending is rising because TCF is in good shape.

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"Ours are up because we're well capitalized and a growing bank," Cooper said. "We didn't have the same problems others did and we don't have to adjust in terms of booking loans on to our balance sheet."

Cooper said banks that made a huge amount of bad loans are now gun-shy about lending. Cooper believes bank lending nationally is actually falling, despite what Federal Reserve figures show. He suspects the Fed's numbers are inflated and said that's because many banks are now having to hold loans they once could sell to investors. And that's artificially making it look like lending is on the rise.

Cooper said it's clearly harder for some businesses and consumers to borrow from banks, particularly banks that are hurting financially.

"Good credit risks are paying more and the marginal ones in many cases can't get as much or can't get a loan," Cooper said.

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In Minnesota, Cooper said borrowers may fare better because the leading banks in the market are in better shape than most banks across the country. He said they didn't engage in the reckless lending that's landed some prominent national banks in so much trouble.

"Minneapolis might be a little different, because in Minneapolis, you've got Wells Fargo, TCF and U.S. Bank, all banks that are in a different situation than the banking industry as a whole," Cooper said.

But, banks in Minnesota are not immune from the woes afflicting the economy and the financial services industry. In the first half of this year, about one of every seven Minnesota banks lost money, most were small-town community banks. And, bank profits are slipping as more consumers and business fall behind or stop making payments on loans.

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