Image of young couple talking to loan officer. Male client and financial advisor are shaking hands.

New data from the Federal Reserve shows that bank loans to businesses grew 1.1 percent from a year ago as of Dec. 20, the lowest growth rate since spring 2011.

But while the growth rate of business loans has slowed nationally, growth has trended positively in Massachusetts over the past few years.

According to FDIC data, all state-chartered banks in Massachusetts collectively grew commercial and industrial loan growth by 10.3 percent between Sept. 30, 2015, and Sept. 30, 2016. Then commercial and industrial loan growth grew at an even faster pace over the following 12 months at 12.5 percent.

Looking at all Massachusetts banks, the growth numbers are similar, around 10 percent between Sept. 30, 2015, and Sept. 30, 2016, and 12.5 percent over the following 12 months.

Bram Berkowitz

Comparatively, all banks nationally grew commercial and industrial loans at 7.6 percent between Sept. 30, 2015, and Sept. 30, 2016, but then only 3 percent growth over the following 12 months.

“The Massachusetts economy continues to run faster than the national economy and that accounts for some of the difference,” Chistopher Geehern, executive vice president of marketing and communications at Associated Industries of Massachusetts, told Banker & Tradesman.

According to Geehern, gross domestic product in Massachusetts grew 5.9 percent in the third quarter of 2017, nearly double the national rate.

Wage growth was also growing at a much faster clip than the national pace in the third quarter, and Massachusetts employers for 94 months in a row have expressed more optimism about the state’s economy than the national economy, according to AIM’s Business Confidence Index.

Greater Boston Supports the State

The success of the Massachusetts economy can be most heavily attributed to the favorable conditions in Boston.

“Based on anecdotal things I hear from bankers, what is happening inside I-495 and Worcester is different than the rest of New England and the rest of the state,” said Brian Clarke, senior financial institution relation manager at the Federal Reserve Bank of Boston. “There are such better business conditions and economic growth in and around Boston and smaller cities than anywhere else.”

Clarke said he thinks it is possible that Boston’s economic conditions are skewing economic conditions in the state as a whole, although he said he has no data to prove that.

Throughout the year, banks have been putting more emphasis on the Boston market.

Brookline Bank announced a new lending office in Wakefield that will focus on the bank’s commercial and industrial clients. Berkshire Bank recently moved its headquarters from Pittsfield to Boston. And East Boston Savings Bank recently announced it would be adding six new branches in and around Boston in 2018.

Not only has total loan volume by Massachusetts state-chartered banks grown each year since 2014, but the rate of growth has remained steady at around 10 percent, according to FDIC data.

Not all banks across the board have done well in commercial and industrial lending; in fact, the results at the 10 largest community banks in Massachusetts vary.

For instance, Rockland Trust between September 2015 and September 2017 saw loan volume decline. Between the second and third quarter of 2017, three of the 10 largest community banks in Massachusetts also saw declines in commercial and industrial loan volumes, while others in the top 10 only saw marginal growth.

Rockland Trust CEO Christopher Oddleifson has previously attributed the drop to uncertainty about tax reform, as have other bankers.

Massachusetts as Microcosm

Clarke said the Massachusetts economy – where conditions are extremely good in Boston and other smaller cities, but not quite as good in rural areas – might be a microcosm of what is going on nationally.

He also pointed to the Federal Reserve’s 2016 national Small Business Credit Study, where 44 percent of all firms participating in the survey listed credit availability or securing funds for expansion as their top financial challenge.

“Expansion is a little more difficult to finance from a bank’s perspective,” he said. “If the collateral and cash flow is not there, the bank is [likely] not going to do the deal.”

But Clarke said he doesn’t think banks are necessarily holding back on the lending side; banks need to lend to make money.

He said likely scenarios include businesses doing better as the economy improves and using their earnings to expand their business, or businesses turning to online and fintech lenders.

Still, respondents in the small business survey said large and small banks remain the most common source of credit, and the Federal Open Mark Committee, according to its most recent meeting minutes, said business sentiment remains upbeat.