Question-and-Answer Session
Operator
Thank you. (Operator instructions) The first question comes from the line of Craig Siegenthaler with Credit Suisse. Please go ahead
Craig Siegenthaler - Credit Suisse
Thanks and good morning.
Gerald Lipkin
Good morning, Craig.
Craig Siegenthaler - Credit Suisse
Gerry, can you comment on loan growth in your core New Jersey footprint? We’ve seen modest declines now over the last year, not unlike many year periods in other regions, but can you provide an outlook for the C&I and CRE commercial real estate market specifically?
Gerald Lipkin
Well, loan growth is impacted in several net ways. For one thing, it’s impacted by line usage. Our borrowers, as Alan pointed out, have utilized their lines of credit less this year than they have in past periods. In fact, considering the time of the year that we’re in now, the amount of line usage is extremely low. We would expect our line usage at this time of the year to be peaking with somewhere in the high 40 percentile and it’s actually coming in the mid to high 30 percentile. So that’s down significantly.
The second area that Alan commented on was the fact that we are selling a sizeable portion of our residential mortgage production. In fact, if we would have retained just the mortgages that we sold, we would not have gone down on our loan growth. The effect on the loans would have been flat. But as Alan correctly pointed out, we feel that holding loans with an interest rate of sub-5% long term is not advisable. We also have very strict credit criteria for what we want to hold. Of course there's always uncertainties of the future of the marketplace on appraised values, so we make sure that if we’re going to hold it we have to have a very substantial equity position.
That all being said, we are seeing very strong loan activity application in the commercial side. Not all, in fact most of which, doesn’t end up passing our credit criteria muster. Our people are out making record number of calls. Our branches, for example, did over 55,000 calls so far this year-to-date on prospecting for loan business. And that’s just in our branches. That doesn’t count the commercial lenders who obviously make a lot of calls and a lot of referrals that we get from our professionals groups.
So I’m really not concerned with the decrease in loans because I think we are actually getting our fair share. I would be happy, obviously, we saw a growth in our loans. But considering the state of the economy, the fact that we’re relatively flat is actually something to be expected. I think once the economy turns around, as Alan correctly pointed out, we’re going to see a big rise in our loans because a lot of the borrowers that we share with other banks are quite displeased with how they’ve been treated at other banks at this time. And I think that in the future, as they look to do increased borrowing, they’re going to come to Valley first.
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