Richmond-area credit market remains slow

By: Dave Ress | Times-Dispatch
Published: December 27, 2009

The Richmond area's credit market remained slow during the third quarter -- though local bank customers seemed to do better repaying debt on time.

As economists hailed the end of recession this summer, area community banks' lending barely was changed, a Richmond Times-Dispatch review of more than 1,500 pages of regulatory filings found.

"We're still not seeing much lending," said Kenneth N. Daniels, a professor of finance at Virginia Commonwealth University.

Nationwide, bank credit contracted during the third quarter, according to data compiled by the Federal Reserve Bank of New York. The shrinking accelerated in October, when total bank lending contracted by 1.2 percent in just four weeks, compared with a 2 percent decline during the entire July-to-September quarter.

In the Richmond area, locally based banks' mortgage lending declined slightly, posting a 0.3 percent decline over the course of the third quarter, The Times-Dispatch's review found.

Consumer loans -- everything from credit-card balances to student loans to car financing -- declined 0.9 percent.

But loans made to businesses were up slightly, the reports show.

"That's good news," said Christine Chmura, president and chief economist at Chmura Economics & Analytics, a Richmond-based forecasting firm. It is when businesses start borrowing, whether to buy raw material or equipment, that economic growth really takes hold, economists say.

Loans for general business purposes -- ranging from financing working capital to purchasing equipment -- rose by 0.9 percent during the quarter, The Times-Dispatch review found.

Loans backed by businesses' real estate rose by 4 percent. But that may not reflect much new investment or new projects. Construction lending was down sharply, by 7.7 percent, the bank reports show.

And one pipeline of future credit -- the unused portion of business credit lines -- basically was unchanged, posting a 0.1 percent decline over the quarter.

Generally, individuals did better keeping up with payments on their debt.

The total number of mortgages on which borrowers were 30 or more days late declined 13.6 percent. Consumer loans more than 30 days late declined 12.3 percent.

Chmura said that may reflect a seasonal trend -- the second quarter is when income taxes are due, and many people put off paying other bills to scrape by.

Businesses, meanwhile, seemed to have a tougher time with third-quarter loan payments: Loans more than 30 days past due more than doubled.

But overdue loans of all kinds remained well less than 2 percent of all lending.

The Times-Dispatch reviewed regulatory filings of 10 locally based banks with operations primarily in the Richmond area. Larger, multistate banks do not break out metropolitan-area or state-by-state results in these reports.

Contact David Ress at (804) 649-6051 or dress@timesdispatch.com.