Lending described as ‘moderate’ across Fed districts in latest Beige Book; few trouble signs emerging

Lending was reported on the upswing – but with a level of intensity mostly described as “moderate” – among Federal Reserve Banks reporting economic activity in their districts in the latest Beige Book.

In the 10 (out of 12 total) Federal Reserve Banks reporting on banking, finance or financial services in general, eight reported “moderate” loan growth in their districts during the latest reporting period (which ended July 8; the previous reporting period ended May 24). The New York Fed, however, reported lower loan demand among small- and medium-sized banks, as well as lower refinancing activity. The San Francisco Fed, on the other hand, reported “healthy demand for loans, supported by historically low interest rates” and steady credit availability. The Boston and Minneapolis banks did not report on financial institutions and services.

The Fed’s “Summary of Commentary on Current Economic Conditions by Federal Reserve District” (commonly known as the Beige Book), published eight times a year, reports on anecdotal information about current economic conditions in each Federal Reserve district. The information is gathered through reports from Fed bank and branch directors and interviews with key business contacts, economists, market experts, and other sources, according to the Fed. The Beige Book summarizes this information by district and sector.

In other information related to financial institutions by districts reporting, the latest Beige Book notes:

  • New York: Banks noted slightly higher delinquency rates on commercial mortgages but little change in delinquencies across other loan categories.
  • Philadelphia: Banks noted ”overly aggressive loan pricing” and some looser standards, but few credit quality problems. Loan volumes appeared to grow robustly in commercial real estate, home mortgages, and auto lending, but moderately for commercial and industrial lending and home equity lines.
  • Cleveland: Community banks reported loan growth driven by strong economic conditions and business and consumer confidence, with demand for commercial credit remaining stable and strong.
  • Richmond: Residential mortgage demand was reported flat to slightly up in recent weeks, but down slightly compared to last year; commercial lending activity rose modestly in recent weeks.
  • Atlanta: Banks reported loan growth, but at at a slower pace, particularly for consumer and commercial real estate lending.
  • Chicago: Business loan demand rose modestly, led by growth in the construction sector – but loan quality deteriorated slightly, with loosened standards reported as lenders reported strong competition for quality clients.
  • St. Louis: Although outstanding loan volumes grew by 4% relative to year-ago levels in the second quarter, lending was down from the first quarter of 2019. Commercial and industrial lending continued to expand, but growth slowed significantly to 5% year-over-year from 9% in the previous quarter.
  • Kansas City: Bankers indicated slight-to-modest increases in the demand for commercial real estate, commercial and industrial, and consumer installment loans, and a strong increase in the demand for residential real estate loans. Demand for agricultural loans remained steady. Overall, bankers indicated a modest improvement in loan quality compared to a year ago and expected a slight improvement in loan quality over the next six months.
  • Dallas: Loan volumes expanded at a faster pace compared with the previous reporting period. Growth was broad-based, with particular strength in residential real estate and commercial and industrial lending.
  • San Francisco: Mortgage market and refinancing activity increased modestly as rates declined; loan quality remained solid, though a contact in Oregon reported that loan quality in their region’s agriculture industry deteriorated slightly due to declines in profitability in the sector.

Informal review by the Federal Reserve Banks of current economic conditions in their Districts