December 20, 2012
By Alex Walsh | awalsh@al.com
Harlan Parrish is the CEO at Aliant Bank.
New regulations and muted economic growth are keeping banks from growing their loan portfolios in Alabama. That trend was made evident by the Federal Deposit Insurance Corp.'s latest State Profile report for Alabama, released earlier today.
Among the many statistics tracked by the report is one that measures lending volume relative to bank size; the technical term is "net loans to assets." In 2010, the ratio of net loans to total assets for the median bank in Alabama was 59.36 percent; since then, the ratio for the median bank has been slowly falling, and now stands at 55.43 percent.
Several factors are contributing to the trend, says Harlan Parrish, CEO at Aliant Bank.
For one, stricter capital requirements are tying bank's hands. Regulators are requiring banks to keep more cash in the vault relative to outstanding loans, Parrish says, which prevents banks from creating too many new loans. That theory is supported by the numbers: the median tier 1 leverage rate among Alabama banks, which measures a bank's equity-to-loan ratio, is up to 10.64 percent in the third quarter, from 9.73 percent in 2010.
At the same time, banks are having a tough time finding business to lend to because many entrepreneurs are still frozen by uncertainty, Parrish says. The hope had been that the completion of the presidential election would set off some growth. Unfortunately, because the "fiscal cliff" remains unaddressed, many business owners are still hesitant to commit to big investments.
"Businesses are sitting on $1.7 trillion in cash," Parrish says. "They're just not spending it."
Overall, total Alabama bank assets have grown just 1.2 percent since 2010, and now stand at $227.9 billion, the FDIC says.
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