Lending up – modestly – across much of Federal Reserve system, Beige Book reports

Lending was up, if modestly, in most districts of the Federal Reserve System during September into early October, according to the most recent “Beige Book” published Wednesday by the Fed. Mortgage, new and used auto, and business loans showed upticks in many districts. At least one district reported an uptick in deposit rates.

Federal Reserve Banks from most districts, but not all, reported on banking and finance activities in their areas (Minneapolis offered no reporting on this subject); those are:

New York

Small to medium-sized banks in the District reported higher demand for residential mortgages but no change in demand for consumer loans, commercial mortgages, or commercial & industrial loans. Bankers also reported that refinancing activity decreased, on net. Contacts reported tighter credit standards for commercial mortgages, and unchanged credit standards across all other loan categories. Banks reported higher loan spreads overall, largely reflecting higher spreads on commercial mortgages. Respondents also reported an increase in the average deposit rate. Bankers reported lower delinquency rates across all loan categories.


Financial firms reported modest growth of overall loan volumes (excluding credit cards)–similar to the prior Beige Book period. Loan volumes grew modestly in most categories, including auto loans and other consumer loans, while commercial real estate loans grew slightly. Commercial and industrial loan volumes improved over the period, posting modest growth following declines over the prior Beige Book period. Credit card volumes–which are highly seasonal–continued to grow at a modest rate over the Beige Book period but outpaced growth in the comparable year-ago period. In general, banking contacts tended to describe economic growth as slow and steady.


On balance, business lending grew slightly over the period. Community bankers were more upbeat in their assessment of credit markets than were their counterparts at large banks. A few large bankers reported that loan demand is softening because of political uncertainty, with customers taking a wait-and-see approach. Consumer lending was largely stable. Fixed-rate purchase mortgages were in high demand, while credit card lending has softened, a situation one banker attributed to seasonal factors. Bankers reported improving loan quality. Loan application standards were little changed other than some easing in auto lending.


Overall, loan demand rose moderately in recent weeks. Reports on residential mortgage demand varied by location but was generally described as stable to increasing modestly. On the commercial side, real estate loan demand strengthened moderately, with a notable uptick reported in the greater Raleigh, North Carolina area. Business lending improved slightly, on balance. Deposits grew moderately as bankers reported growth in both CDs and checking accounts. Short term interest rates were reported as unchanged to up slightly. Competition among banks remained aggressive with some reports of extended term durations and non-recourse loans being offered, which led to concerns about softening credit standards. Credit quality remained stable at strong levels. Late payments and delinquency rates trended lower.


Credit remained readily available for most qualified borrowers, although some small and minority-owned businesses experienced difficulty obtaining credit. Liquidity was plentiful, but competition restrained lending at some banks. Auto dealer contacts described a slowdown in auto lending due to slowing sales and rising interest rates. Credit remained widely available to businesses seeking operating and expansion capital.


Financial conditions were little changed on balance over the reporting period. Market participants noted that equity prices remained high and volatility remained low. Business loan demand increased slightly, with growth coming primarily from higher capital equipment and real estate spending by the manufacturing and construction sectors. Contacts again indicated that robust competition was creating pressure to lower rates and loosen terms. Consumer loan demand increased slightly. Demand for both home and auto loans picked up and quality remained good. That said, an auto dealer indicated that credit continued to tighten for buyers of new cars with low credit scores.

St. Louis

Lending activity in the Eighth District improved moderately. According to a survey of 84 small and mid-sized District banks, outstanding loan volumes grew by 8 percent relative to year-ago levels. Loan growth in the District has been gradually slowing since the start of 2017, but it continues to exceed the national rate. Commercial and industrial loan growth has stabilized at 9 percent after decelerating through the first half of 2017. Meanwhile, consumer and commercial real estate lending grew the fastest among all loan categories, rising by 11 and 10 percent, respectively.

Kansas City

Bankers reported steady overall loan demand since the previous survey, with a majority of respondents indicating stable demand for commercial and industrial, commercial real estate, residential real estate and consumer installment loans. Most bankers reported that loan quality was unchanged compared to a year ago, and expected loan quality to remain essentially the same over the next six months. Credit standards also remained largely unchanged in all major loan categories. Finally, a majority of respondents reported stable deposit levels.


Loan demand continued to increase over the past six weeks, albeit at a more sluggish pace than during the prior period. Growth was led by commercial real estate loans, where volumes continued to rise at a moderate pace. Volume growth abated for commercial and industrial loans as well as for residential real estate loans, and consumer loan volumes declined slightly. Credit standards and terms tightened. Core deposit volumes grew again and net interest margins continued to increase. Outlooks in the financial sector remained optimistic.

San Francisco

Lending activity continued to expand at a moderate pace over the reporting period. Overall loan demand remained moderate. One contact noted that demand from small- and medium-sized businesses slowed to a modest pace. Deposit growth inched up slightly. One contact in the Mountain West observed a slight uptick in deposit rates, indicating an increased demand for liquidity from lenders. Overall credit quality remained strong. However, one contact noted a decline in credit quality in the agriculture industry, as continuing price declines hampered profitability.

Beige Book – October 18, 2017 (full report)