Commercial lending appears to be on the rise in Kansas, region

Commercial lending activity generally appears to be on the rise in Kansas and the region in the first half of 2013.

And for some Wichita banks, the increases are much heftier than the year-over year increases for all banks in Kansas as well as for the states that compose the Federal Reserve Bank of Kansas City’s 10th District.

Data from the Fed and the Federal Deposit Insurance Corp. point to an improving lending environment, and one that seems more robust in the Wichita area.

For all the talk of a slow recovery, Wichita bankers said there are companies doing things to grow their businesses. While the level of loan activity still lags that of the period before the 2008 recession, companies are successfully borrowing money to build or buy buildings, expand their facilities or buy new equipment.

“I would say we are probably as busy as we’ve been for the last couple of years,” said Jeff Ronen, Fidelity Bank’s senior vice president and commercial lending division manager.

Data provided to the Eagle by the Fed show total commercial real estate loans by Kansas banks between June 30, 2012, and June 30, 2013, were up just 1.2 percent to $8.5 billion. But Kansas banks’ commercial and industrial loans – which include lines of credit, operating capital and business equipment purchases – rose nearly 3 percent to $5.25 billion in the same period.

For all banks in the 10th District commercial real estate loans were up 1.1 percent to $64.1 billion and commercial and industrial loans rose 10 percent to $35 billion. The 10th District includes all commercial banks in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the western third of Missouri and northern New Mexico.

The growth in both loan categories was much greater for several area banks in the same period, based on an examination of their FDIC data.

Fidelity, a $1.5 billion-asset bank, saw significant year-over-year growth in both commercial real estate and commercial and industrial loans. Fidelity has a 21 percent increase in commercial real estate loans in the June 2012 to June 2013 period. Its loan portfolio totaled $410.9 million. It saw an even greater gain in C&I loans in the same period, rising 38 percent to $83.4 million, according to FDIC data.

“We’re seeing lots of deals, but not so many that we can’t manage it and not so many that the market can’t handle it,” Ronen said.

Jim Faith, senior vice president and Wichita commercial manager for Emprise, said activity in commercial lending has increased. “Generally the trend line is up,” he said.

According to the FDIC data, Emprise’s commercial real estate loan portfolio was up 12.1 percent as of June 30, to $255.7 million. Its C&I portfolio was up 5 percent to $162 million in the same period.

At the smaller RelianzBank, a $48 million northwest Wichita institution, C&I loans were up 4 percent to $11.2 million and commercial real estate loans were 15 percent higher, to $16.5 million, according to FDIC data.

“We’re seeing strong commercial real estate activity,” RelianzBank CEO David Harris said. “The level of activity certainly has elevated in the last six months.”

Intrust Bank, which at $4 billion in assets is the area’s largest locally based bank, saw year-over-year commercial real estate loans increase 10 percent to $415.6 million. But its C&I loans fell 4 percent during the same period to $1.02 billion.

Steady but not robust

Bankers said a number of factors are driving commercial and commercial real estate lending higher.

Faith thinks it’s a combination of cautious optimism and the realization by Emprise’s commercial customers that “things have to be done.”

“It’s better today, the level of economic activity,” he said. “Company profits are much improved today … and people’s outlook is generally more positive.”

Harris said a lot of his customers are simply tired of “sitting on the sidelines” waiting for the post-recession economy to boom. And, he said, he’s had a lot of business owners who were ready to buy a property instead of renting. “I wouldn’t call it a robust commercial real estate market, but the level of activity has increased,” Harris added.

Gary Schmitt, Intrust division director of commercial real estate lending, said a lot of what has driven his bank’s uptick in real estate lending is apartment developers and home builders. Schmitt noted that there hadn’t been much activity in those two sectors for some time but demand has risen over the past year or two. “Those are the two main areas I’d say we’ve had growth in,” he added.

As for C&I, Schmitt hasn’t seen the demand for such loans that Fidelity, Emprise and Relianz have. “I think the key on commercial loans in general is our customers are not seeing an increase in sales volume, in their business,” he said. “A lot of it is just related to our customers’ business and the overall economy.”

Cautious optimism seems to be the term bankers are also adopting in terms of expectations for the remainder of the year.

They generally expect the same level of activity to continue.

“I don’t see anything in the fourth quarter that would cause that to change, the caveat being if the government is shut down till Christmas that will have a chilling effect on everything,” Emprise’s Faith said.

Harris said 2013’s commercial lending environment has been a mirror of the economy.

“It’s kind of indicative as to how we’ve come out of this recession.” Harris said. “We’ve not bounced back in a strong way, but just gradually continued to pick up steam.”