With the financial markets in turmoil, businesspeople here will be watching to see whether their friendly banker still will be so chummy, but bankers here say that while they might be a bit more cautious, they're not going to snub solid would-be borrowers.

Peter Stanton, chairman and CEO of Washington Trust Bank, says he's heard little worry expressed by the Spokane bank's customers thus far about available credit.

"We've made it clear, inside and outside the bank, that taking care of the customer is what the bank will concentrate on doing," says Stanton. "Banks are guarding their capital more closely, but they're not chasing off good customers. Our lending standards are our lending standards, whether it's boom times or a recession."

Randall L. Fewel, president and CEO of Inland Northwest Bank, says he believes that all of Spokane's banks are prepared and ready to make loans to small businesses, although loan demand is down right now.

"I've talked to a half-dozen business owners in the last two weeks," Fewel says. "Every one of them is having a good year, however, they're all, for want of a better word, hunkered down."

Businesses have been "jerked around" so badly this year by oil prices and have seen so much upheaval in the financial markets that right now they're not looking to expand, whether it's to build an addition or to add to their product lines, Fewel says.

As for INB, he says, "We're not interested in making income-property loans, for hotels, motels, strip malls, or apartment buildings. We're not interested in land-acquisition and development loans. The regulators are looking very hard at that kind of lending and at what part of your portfolio that makes up. When the economy is tough, income property can really be stressed."

That represents a change in strategy for INB, and comes after the bank had done "a fair amount" of income-property, land-acquisition, and land-development lending while construction and development were hot, Fewel says.

"It was too good to not participate in it to some degree," Fewel says.

Now, banks are interested in generating core deposits and in making "traditional commercial loans," such as business lines of credit, equipment loans, inventory loans, and loans backed by accounts receivable, Fewel says.

"We are still very much in that market. I don't know anybody who isn't," Fewel says. "That's our bread and butter."

To be sure, banks won't ignore the current shaky economic environment as they evaluate loan applications or monitor businesses that already have loans.

"Companies that suffer because of conditions today, you're going to take that into account," Stanton says. "With a brand-new borrower that we don't know very well, we'll price within the risk, and might not be as competitive as we were."

Fewel says INB's loan officers are making sure they have current financial statements from their customers, and are finding out if their customers businesses are under stress.

The bank is more focused on administering the accounts of the borrowers it already has than it is on seeking new accounts.

Larry Shintani, vice president of business services for Spokane-based Numerica Credit Union, says the market for U.S. government-guaranteed Small Business Administration loans continues to be fairly strong. On the conventional lending side, Numerica is requiring "strong pro formas," or financial sheets that include projections.

"We're being careful in the dollars we're committing" to loan, Shintani says.

Credit unions, which have been involved in commercial lending for a relatively brief period, typically serve smaller business borrowers, and because of that they're already seeing one effect of the uncertain times, Shintani says.

"When times get tough, a lot of people want to run their own businesses," which brings in more customers who're looking for quite small loans, he says.

Numerica has little interest in making loans to borrowers who want to buy or develop income-producing properties, Shintani says.

"We just kind of stay away from those," he says. "The more established developers, they have their track records. They have their preferred lenders. We're a niche lender. A $250,000 loan is good for us," although in some cases Numerica has loans that are much bigger than that.

"We go after underserved markets," he adds.

Still, Numerica does extend operating lines, sometimes for as much as $600,000 to $800,000, to small businesses, and makes some multimillion-dollar real estate-backed loans because of the collateral involved, Shintani says.

Many bigger institutions don't like to make small loans because it takes just as much time and energy to make and oversee a small loan as it does to deal with a large loan, although the return from the smaller loan is much lower, Shintani says.

While banks such as Washington Trust and INB focus on serving small and regional businesses, and credit unions hone in on smaller commercial borrowers, the credit markets that serve larger businesses have been far more riled up recently than those that serve smaller and midsize concerns.

Malyn Malquist, an executive vice president at Avista Corp. who until recently was the Spokane utility's chief financial officer, says the bond markets that utilities like Avista tap are even more volatile now than when inflation raged relentlessly in 1979 and 1980, helping Ronald Reagan wrest the White House away from Jimmy Carter.

"In my career, I've issued bonds at 17 percent," which is more than twice as high as the prevailing annual interest rates of today, says Malquist. "That was when I was with San Diego Gas & Electric in 1979 or 1980. Inflation was high then, but you didn't have the volatility you have now."

That volatility shows up in the spreads, over and above the interest rates U.S. Treasury issues yield, that private bond issuers like Avista must pay to obtain credit, Malquist says.

Those spreads, normally in the neighborhood of 2 percentage points, currently are at 4 percentage points, and the difference can cost a bond issuer a lot of money, he says.

For example, Avista was planning to go to market in November with a 10-year, $100 million bond issue, but the added 2 percentage points in interest "would have cost an additional $2 million a year for 10 years," Malquist says. "We're going to wait for a better time."

He adds, "We have the good fortune of having a pretty good (credit) line, with a lot of room left on it," and Avista will tap that line if it needs capital before the bond market improves. He says the company has a $90 million balance on its $320 million credit line, already has $40 million in bank letters of credit for additional financing, and has been talking to banks about extending its credit line. Some other borrowers, however, aren't so fortunate, Malquist says.

"If they have any concern about their lines, they're trying to tap them and keep cash on hand in case they need it," even though borrowers must pay interest on cash hordes built in such fashion, he says. "If you have a Washington Mutual or a Wachovia in your line, or a Lehman Bros., which I think was in some utility lines of credit, you're going to want to take some action," Malquist says. Washington Mutual and Wachovia have been taken over, and Lehman Bros has filed bankruptcy.

In the current environment, Malquist says that if he were a small-business owner or manager, "I'd make sure that where I had cash, I could tap that cash, and that I was in a liquid position."

Despite the rockiness of the past few weeks, and the numerous actions government has attempted to undergird commercial lending, Stanton believes that confidence in the financial sector is coming back.

While things are slowing down in the Pacific Northwest, it's hard to tell how much of that slowness is attributable to the national financial crisis, and how much is attributable to a normal downturn in the business cycle after 15 or 16 good years, Stanton says.

Washington Trust, he says, is still expecting loan growth this year in the high single digits, rather than in the low double digits, and relationships between banks and their customers still matter.

Says Stanton, "I've had customers whose grandfathers banked with my grandfather."