Late payments up at Conn. banks
As federal agencies ready new regulations from Sen. Chris Dodd”™s massive financial reform law, Connecticut banks continued their recovery despite an increase in loan delinquencies.
Since mid-October, small and mid-sized banks in the tri-state area reported steady demand across all loan categories along with increased demand for refinancing existing loans, according to researchers with the Federal Reserve Bank of New York.
At the same time, nearly one in five banks reported tightening their credit standards for commercial and industrial loans, and none of the bankers surveyed said they had eased lending standards in any category of loans.
“Businesses still don”™t know what the tax regime will be in the coming year, let alone for the medium term,” said Terrence Checki, executive vice president of the New York Fed, speaking last month at a gathering of the Economic Club of New York. “They face questions regarding the new health regime and its costs. On the financial side, there are hundreds of new regulations to be written during the next year or so in the context of Dodd-Frank and Basel III, and those carry with them concerns about the availability and cost of credit, as well as the durability of certain business models.”
Late loan payments again increased in the third quarter at Connecticut banks, according to the Federal Deposit Insurance Corp., making up 2.6 percent of all loans outstanding versus 2.46 percent in the second quarter, and 2.2 percent a year ago. Delinquent loans, however, leveled off in the tri-state area between mid-October and December, according to the New York Fed.
Last month, the Connecticut Office of Legislative Research said the Connecticut General Assembly would likely consider modifying a foreclosure mediation program to assist homeowners on the brink of losing their homes.
Banks increased total loans outstanding in Connecticut to nearly $52.5 billion in the third quarter, a 1.7 percent increase even as banks nationally contracted lending slightly. Connecticut deposits were up more than 4 percent and banks continued to sock away some of that money to bolster their capital ratios. As a result, loans as a percentage of total assets went from just over 67 percent a year ago to 65 percent today.
Nationally, bank provisions for loan losses were the lowest since the fourth quarter of 2007, the FDIC said, and 45 percent below what institutions had set aside a year earlier. And for the second quarter in a row, net charge-offs nationally were lower than in both the previous and the year-earlier quarters. Prior to the second quarter, net charge-offs had increased for 13 straight quarters on a year-over-year basis. Charge-offs on commercial and real estate loans were down 42 percent from the third quarter of 2009, and those on real estate loans were 32 percent below their totals a year ago.
“The banking industry is indeed regaining its footing in spite of the still fragile economy,” James Chessen, chief economist of the American Bankers Association, said following the FDIC report. “Asset quality has improved, loan losses have declined, and banks continue to increase their capital levels. As economic conditions improve, banks will be in a strong position to look for new lending opportunities and meet loan demands in their communities.”