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Those Optimistic Loan and Profitability Projections Might Not Apply to You

Date:

By Dennis Child

Screen Shot 2014-11-25 at 3.50.03 PMRecent economic news indicates that the long loan drought may be coming to an end for financial institutions. Indeed, many reports state that in the spring and summer of 2013, some institutions experienced loan growth equivalent to that just prior to the 2008 crash.

Whether or not loan growth continues at the recent pace remains to be seen. Nevertheless, there are some realities the financial industry should not lose grasp of.

In general, smaller financial institutions are not enjoying the same loan growth as their larger peers

Financial institutions continue to focus their lending efforts on low-risk borrowers

Few institutions (particularly smaller ones) use stochastic methods to develop their risk based loan pricing models

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