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Cashing in on a Growing Economy
With confidence high and interest rates low, many banks are full of money to loan
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When the Great Recession hit the Flathead Valley, lending activity slowed drastically. High unemployment kept consumers from borrowing and spending, and financial institutions tightened up on loans.

But now, with interest rates still near historic lows and an economy that continues to find its legs, there’s a decidedly different feel when it comes to loan activity.

“Everyone was hunkering down, both from the consumer side and the financial side,” Jim Kenyon, president and CEO of Whitefish Credit Union, said of the period during the recession. “And that’s not the case today.”

Earlier this month, Federal Reserve Chairwoman Janet Yellen told Congress she would not automatically start raising the federal funds target rate above zero if national unemployment fell below 6.5 percent.

The federal fund target rate has been at zero to 0.25 since December of 2008, which means interest rates from banks have remained at historic lows. According to the Federal Home Loan Mortgage Corporation, called Freddie Mac, the average annual rate for a 30-year fixed mortgage for 2013 was 3.98 percent. A few years before the recession hit in 2008, these rates hovered between 5 and 6 percent.

Last week, Freddie Mac announced that the average rate for a 30-year loan increased to 4.33 percent from 4.28 percent, adding about a full percentage point since hitting record lows last year.

Brad Eldredge, an economist at Flathead Valley Community College, said the combination of low interest rates and a growing economy makes for a positive outlook for the Flathead. Growing optimism in the market is “what you’d expect with really low interest rates,” he said.

Glacier Bank president Bob Nystuen said the Federal Reserve’s position on interest rates is important, but he tends to judge the pulse of the local economy based on consumer and borrower confidence.

“What happens with the Fed is important, but from a local or regional perspective, let’s see how we can get the economy going with consumers spending more and businesses expanding as appropriate,” Nystuen said.

And from his perspective, confidence is getting better. For example, the bank’s construction loan department, which supervises and coordinates construction-lending activity, had its best year since 2008 last year.

Consumer confidence is one part of the equation, Nystuen noted; there must also be a willingness from banks to loan out the money. At this point, most banks and credit unions are ready and waiting to lend the cash, given the higher rate of deposits they’ve experienced, he said.

“It’s not just Glacier Bank; I think all financial institutions have huge amounts of money available for loans,” Nystuen said.

Kenyon of Whitefish Credit Union said he also believes the uptick in consumer confidence is more of a result of the growing local economy than the recent Federal Reserve decisions to keep rates low.

“I honestly believe there’s just more confidence in our marketplace and area, as compared to the rates driving that optimism,” Kenyon said.

Kenyon said his credit union is ready to loan money as the economy continues to stabilize.

“People are feeling better, (interest) rates are at a great place,” Kenyon said. “Whitefish Credit Union is looking to get money out the door.”

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The winter is typically slow for loan activity, Kenyon said, and he believes there are still people who are watching the marketplace to ensure more stability before borrowing.

However, even though the Federal Reserve doesn’t immediately intend on raising its target rate, any future announcements of an increase will likely cause more loan activity.

“Once people believe that rates are going to go up considerably, I think we’ll have that late rush,” Kenyon said.

The local real estate market is also picking up pace, with commercial and residential property sales increasing in 2013, and foreclosures falling yet again, according to information from the Flathead Valley Economic Forecast earlier this month.

“Coupled with banks with money to lend, that’s a recipe for good times ahead,” Nystuen said. “We’re looking forward to spring coming around the corner and looking for a great summer.”

Kenyon said the credit union is also expecting more activity as 2014 continues to move toward the busier time of year for real estate markets.

“This is probably the weakest time in the calendar,” he said. “Certainly we’re optimistic, but we’re expecting good things once the snow goes away.”

While financial institutions are still keeping a close eye on economic growth, there’s guarded optimism in the valley now. Eldredge said with the local economy appearing to move from recession to expansion, loan confidence is another sign the Flathead is moving in a positive direction.

“That’s a good sign, that (financial institutions) want to loan money,” he said. “It’s a very good sign.”
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