For the last 18 months, ClearRidge has published reports projecting that business lending will continue to worsen long after the end of the recession. History shows that to be true after every recession in the last century.

Despite the fact that the recession “officially ended” nearly a year ago, loan origination has continued to decline at the fastest pace on record. Last month, Commercial & Industrial lending declined 19.5% year-over-year, compared to the previous worst decline of only 9.3% in 1949.

Greenwich Associates just came out with a new study reporting that 86% of commercial banks are moving away from commercial real estate lending, which still represents 46% of their loan books. Banks themselves are forecasting that C&I loans will grow to 25% of their portfolios in 2010, up from 22.5% last year. That, however, would likely mean an increase in C&I lending this year, which would go against historical trends. History suggests that C&I lending could continue to decline through 2012.

Interestingly, the Greenwich goes on to highlight some of the obstacles for banks: i) Many bankers have been so focused on real estate lending for the last decade, that they have little C&I lending experience, which is a very different skill set; ii) many community and smaller regional banks already lack capital to increase lending, and most have little access to fresh capital; iii) there are fewer creditworthy businesses seeking loans. The strong companies aren’t taking on new debt and the weaker companies aren’t able to access traditional bank loans. Catch 22.

Greenwich’s report also projected that 10% of US banks will close or be acquired by the end of 2011. And by the middle of this decade, they predict that there will be 20% fewer banks than in 2007.

Fortunately for Oklahomans, our bankers have, for the most part, taken less risk and are in better shape than our East and West coast compatriots. It is great to see the flagship banks in our state posting strong results. Perhaps the rest of the US should take note. Smart lending practices in good times and bad = stronger banks. As a result, we anticipate that Oklahoma’s businesses may suffer from a weaker strain of this banking flu. However, as every year goes by, we all seem to become more closely tied and increasingly co-dependent, so let’s hope that the US banking system as a whole figures out how to get healthy again.