Jan. 26--Lewis Spellman made a rather bold prediction over lunch last April.
By that spring, a lukewarm recovery had started nudging the U.S. economy upward, and most of the country's banks had regained their balance following the crises that battered the industry in 2008.
Yet despite the optimistic signs, Spellman suggested traditional bank lending was on the front end of what would become a slow, inexorable decline. Non-bank lenders would secure an ever-increasing share of the market for business and consumer loans, the University of Texas finance professor said.
Asked last week if his views had softened -- if the rise of alternative lenders had slowed -- Spellman held firm: "No," he said, "it's ramping up."
Constrained by tighter regulations and still suffering the aftereffects of the financial turmoil, banks have had little choice but to keep lending standards conservative, he said, With that supply of capital declining, more and more consumers and businesses have turned to alternative sources of credit and capital during the downturn.
Few people have as pessimistic an outlook on traditional bank lending as Spellman, particularly folks in the industry itself. They note that underwriting standards at many banks, while still tight, have loosened somewhat over the past year -- and that bank lending, while still lower than pre-recession peaks, has started to grow again.
Since a sharp decline in 2009, lending at federally insured banks has increased each year, albeit at less than 2 percent annually, according to data from the FDIC. Texas banks had a slight dip in 2010 but have picked up since.
"Traditional lending is still alive and well ...," said John Heasley, executive vice president and general counsel of the Texas Bankers Association. "I think there will always be a place for loans from traditional deposit takers and for small and midsize business lenders in a community. I have a hard time seeing what would take its place."
But many bankers and industry proponents conceded that non-bank lending has expanded in recent years -- growth that might continue even if traditional bank lending rebounds to its pre-recession growth rates.
Credit unions have stepped up their lending. In Austin and across the country, many of these cooperatives have posted record lending growth in recent years and are pushing for the ability to do more. Meanwhile, forthcoming crowdfunding rules could open up a new, multibillion-dollar pipeline between small businesses and the investing public at large.
Credit Unions
San Antonio residents have known about Randolph-Brooks Federal Credit Union for decades, but more recently it has made a strong push in the Austin market. It now has eight branches in the Austin metro area, and as of September it was the area's third-largest credit union by membership and lending volume.
In four of the past five years, its lending totals have increased more than 20 percent in and around Austin -- the only exception was 2009, when loan growth was 15 percent.
"We are a fairly old-fashioned, conservative lender from the standpoint that, prior to the recession, we were lending the way we'd always lent, not taking on a more aggressive stance," said Mark Sekula, the credit union's executive vice president and chief lending officer.
The Randolph-Brooks' story is far from exclusive. Credit unions in Texas and across the country saw considerable gains coming out of the financial crisis, in part due to tighter lending standards at banks.
