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Spotlight on lending: Preparing for Q3 bank reports

October 27, 2014
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With the fourth quarter of 2014 well underway, both banks and credit unions are in the midst of reporting their results from the previous three months. While Q3 reports will trickle in over the coming days to meet the end of October deadline, a crucial piece of the puzzle the financial community and economists will be looking at is loan growth rates.

As American Banker reported last week, nearly a dozen regional banks saw scattered growth in their loan portfolios as part of the Q3 filings. The article comments, “A range of roadblocks to loan growth exist, including fears of a race to the bottom on pricing and an uneven economic recovery. As a result banks are trying everything from expanding their syndication businesses to cultivating niche lines.”

Is scattered growth likely to be the trend for the third quarter across all financial institutions?

Data from Sageworks Bank Information, a web-based data platform that includes financial and regulatory information on every U.S. bank and credit union, on total loan growth quarter over quarter paint a picture of the state of bank lending leading up to the third quarter. The data pulled represents total loans and leases across all U.S. banks, beginning with fourth quarter results in 2010, through second quarter of 2014.

Source: Sageworks Bank Information

Over this four-year period, the data showcases a steady increase in bank lending. As the U.S. economy began to rebound from the financial crisis, the last quarter of 2010 saw about $5.88 trillion dollars in loans and leases from banks of all sizes – the household names in banking to local community institutions. Bank lending continued to increase the following quarter, before taking a slight decline in Q2 2011, when the total number for loans and leases decreased by approximately $3.7 billion. A minor tick on the scale, but still notable for the American economy.

Overall lending rebounded the following quarter, for the period ending September 2011, and then a more consistently positive trend emerged, with seven straight periods of growth. By the end of the first quarter of 2013, total loans and leases across all U.S. banks reached $7.4 trillion, a significant overall increase from the lows of the recession. That high slipped in both the second and third quarters of 2013, before seeing another notable spike to $7.8 trillion in Q4 2013 – an increase of $660 billion over the same time period the previous year.

Bank loans in 2014 have seen some fluctuation, with Q1 lending down from the previous quarter (to $7.65 trillion) and then Q2 lending up significantly, with bank lending hitting a four-year high of $7.97 billion. These reported numbers, though, do follow a pattern of a lull in the first quarter, followed by overall loan growth.

As American Banker pointed out, uneven economic recovery has been a factor in these rises and falls quarter over quarter. Will the financial community see the same shifts as Q3 call reports are filed?

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