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Friday, 11 May 2012 13:28

Huntington ahead of goal for small business lending in Mich.

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MICHIGAN — Huntington Bank says it’s surpassed the $1 billion mark and is well ahead of schedule toward lending $2 billion to small and mid-sized businesses in Michigan through a lending commitment made nearly a year ago.

Nearly 2,000 businesses — split equally between West Michigan and southeast Michigan — secured credit under the four-year program the Columbus, Ohio-based Huntington launched last June through the state’s Pure Michigan Business Connect initiative. The program was designed to improve access to credit.

The initiative’s success to date stems from a growing demand for credit as Michigan’s economy improves and coincides with the bank’s move to put additional capital into the market, said Jim Dunlap, the Grand Rapids-based regional president for Huntington in Michigan.

There exists a “believability clients have now, small businesses in particular, that they can lean into sales opportunities,” Dunlap said. “It has to do with the belief that, ‘I can make an investment now with the confidence that the business will come, and I can get access to the capital and I can get orders.’”

Coming out of the recession, many companies are now operating lean, allowing them to stretch their collateral base when they have a growth opportunity and seek to build out their capacity, he said. The situation is the “perfect application for creating jobs, economic capital and lending opportunities supported by these partnership programs.”

“We found ourselves at the right place, at the right time, with the right programs, with the right partnership and the right economic attitude,” Dunlap said. “We’re seeing the fruits of that now.”

Michigan, in fact, is now one of the fastest-growing markets across Huntington’s six-state footprint, with a 17 percent annualized growth rate, Dunlap said. He sees growth continuing in the months ahead in West Michigan.

“We will continue the trajectory that we’re on. I don’t see that being impeded at all by any market condition or other constraints,” Dunlap said. “I’m very comfortable with the pace we’re on.”

Overall, the corporation reported strong loan growth in the first quarter for commercial and industrial lending as the industrial sector in the Midwest continued to rebound. Lending for commercial real estate is expected to continue to decline for Huntington, although at a lesser rate, Chairman, President and CEO Stephen Steinour told brokerage analysts this month.

“We are more bullish on the Midwest, and for a number of reasons,” Steinour said. “It seems to us that there’s much more coordinated economic development activity also occurring now of a strategic nature in Michigan, in Ohio and possibly some of the other states we’re in, which should be very good for us long-term, as well. So we’re bullish on the economic expansion continuing and not just being in a defined early phase.”

The same economic factors for Huntington have also begun to revive business lending at other banks operating in the West Michigan market.

Fifth Third Bancorp said commercial and industrial loans grew 5 percent from the fourth quarter to the first quarter and increased 15 percent from a year earlier, although Chairman and CEO Kevin Kabat sees economic recovery remaining slow across the Cincinnati, Ohio-based bank’s 12-state footprint.

“Companies we call on remain — to a large extent — in a wait-and-see mode. Not on defense, but not yet fully committed to offense either,” Kabat said in a conference call with brokerage analysts. “As the year progresses, we expect to see continued improvement in the economy and in the business environment, but the pace of the recovery is very likely to remain slower than what we would like.”

Midland-based Chemical Financial Corp. said commercial loans at the end of the first quarter had grown 10.1 percent from a year ago, while commercial real estate loans were up just 1 percent.
Mercantile Bank Corp. generated $13.4 million in new commercial and industrial loans and $23 million in owner-occupied commercial real estate loans.

Still, the Grand Rapids-based Mercantile’s overall loan portfolio declined another 1.9 percent in the first quarter from a year ago to $1.02 million, although quarterly decreases are subsiding.

Chairman and CEO Mike Price said the declines should soon reverse as the bank focuses on building client relations and bringing in new commercial customers, although “we don’t think it’s going to be a huge growth scenario for us.”

“I would expect from the way it kind of feels out there right now that this quarter, the second quarter here, would probably be a breakeven or a slight gain in the portfolio. And we’d like to think the way things are going now, the third quarter and fourth quarter would also be slight gains,” Price told analysts in a conference call after Mercantile reported significantly improved quarterly net income.

The bank posted net income of $2.6 million, or 28 cents per share, for the first quarter, versus income of $1.1 million, per 12 cents per share, a year earlier.

Price said the pricing environment for commercial lending is getting more competitive as demand returns, citing some of the larger banks in the market that “are in a pretty big push to show balance sheet growth, and they’re out there with some extremely low pricing.”

Mercantile will not follow suit, Price said. In the past, he’s cited unsustainable commercial loan pricing for generating some of the problems from which Mercantile is now recovering.

“So we’ve seen a lot of deals where we’ve just walked away from it because the pricing just doesn’t make sense. We’ve worked really hard to get the margin back to where we wanted it and where it should be, and we’re not going back,” Price said.

Huntington’s Dunlap shares that view, saying his bank seeks to avoid competing on loan price.

“Our client selection is relationship-oriented, period. If clients don’t value that, they’re not right for us,” Dunlap said. “We will not fight for a prospect that is focused on that ‘bidding’ type of environment.”

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