February 1, 2012

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Banking And Finance

Utah Business Staff

February 1, 2012

With Utah’s economy finally showing signs of growth and recovery, banking officials and experts discuss the challenges of new federal regulations on the industry and give advice to business execs who are wondering if now is the right time to finance expansion. Capital is available, say the experts, and banks are eager to work with qualified borrowers.


We would like to thank Hal Heaton, professor of finance at Brigham Young University, for moderating the event.


What is your outlook on Utah’s economy, specifically, but also the broader regional and national economy?


THREDGOLD: Right now Utah ranks third in the country in terms of percentage growth of employment. We’ve added about 31,000 jobs for a 2.6 percent increase. We’ve recovered half of the 80,000 jobs we lost in 2009 and 2010. Our outlook will remain about the same, in that two-and-a-half percent range.

            Our biggest weakness is the national economy, which is characterized by what I call a recession of confidence. We’re officially celebrating two and a half years now of U.S. economic recovery statistically, certainly not emotionally, but it’s all about a lack of confidence at this point in both the eyes of the business sector and the consumer.


HUNTER: TAB Bank does a lot of national lending. We’ve historically focused on the transportation industry. We’ve seen that very slowly but very steadily increase over the last couple of years as far as freight volumes, and that bodes well overall. But the numbers have certainly not been significant enough to say that there’s a bullish feel.

            The biggest concern we have is the same one that Jeff mentioned—the national economy and where it’s headed. People just don’t think that we’re in a recovery.


SUTTON: Our sense is there is a lot of pent-up demand. We’re seeing spending sort of holding where it is, but we’re seeing a lot of shrinkage in our loan portfolio. People are paying off their credit. They seem to be very nervous about what the future holds, so they’re holding back. And as long as they’re concerned about all that, they’re trying to keep their bills paid down. That’s the trend we see right now.


Do you expect the de-leveraging to continue during 2012?


SUTTON: It depends on both the European political situation and what’s going on in Washington. If things finally steady out and stabilize, then you’ll see a lot of activity emerge. But if it doesn’t, people are going to hunker down even more.


PACKARD: At Central Bank, we’re involved in real estate quite a bit. And in Utah Valley as well as in Utah as a whole, there’s a lot of family creation—people getting married and having families. So we’re watching a lot of the surplus homes slowly get absorbed into the marketplace, and that’s a very healthy sign.

            One of the big challenges moving forward is the fact that we’ve pretty well wrung out anybody who possibly could afford a home loan. Four percent is a pretty low interest rate, and when you move it to six, people are going to go into convulsions.


HEADLEE: My perspective is a little bit different. I’m not making loans every day. But from my view at the association, it’s a bit daunting from a regulatory vantage point. And there’s more regulations to be drafted. I don’t need to tell your readers that it’s not just the banking industry. Whether it’s the EPA or the CFPB or the bank regulators and the Dodd-Frank Act or the Healthcare Reform Act, there’s still a ton of regulation that has to work its way through the system.

            And regulation matters. A lot of what people are frustrated with initiated in some well-intentioned yet misguided regulation. While it makes for a real warm and fuzzy political sound bite, when it’s actually promulgated and deployed it has a real impact on the economy. And, unfortunately, a lot of times people don’t understand the root of what they’re upset with, and so they tend to point fingers and cast blame in areas that are logical but not accurate.

            I don’t see that ending, and it’s very discouraging to me. I think it explains a lot of the reason why, whether real or perceived, this economy is moving forward so slowly. There’s a lot of uncertainty associated with the regulations still to be promulgated, so people are just waiting and seeing.

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