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Banks increase lending, great time for IPOs

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San Diego continues a steady recovery that has, in many aspects, beat expectations. Unemployment is down and household net worth is up. The IPO market is strong, retail sales are on the rise and bank performance has improved, paving the way for greater small-business lending. Still, many experts agree that the economy, housing markets and labor situation remain fragile.

Economy

The local unemployment rate fell below 6 percent for the first time in almost six years, and local employment figures are on the rise. Yet some economists say the recovery has failed to create the number of jobs necessary to lift the economy to where it should be. Although the construction sector has seen several consecutive months of employment gains, a true rebound in construction hiring remains elusive.

Retail and auto sales have posted gains in the first half of the year, as a healing job market and rising home values boost consumers’ balance sheets. Consumer spending represents two-thirds of the nation’s economic activity.

Banks and lending

With the economy continuing to improve, banks and credit unions throughout San Diego County revved up their lending last year, with loan volume increasing an average of 9.5 percent at the 14 banks headquartered in San Diego County and 9.9 percent at the county's 22 credit unions.

The trend seems to be continuing in 2014.

Commercial loan officers say the major banks have money to infuse into the marketplace, so small businesses should reap the benefits. San Diego had the second-largest volume of commercial Small-Business Administration 504 loans in the state, at $40 million through May of this year.

Small businesses are also more optimistic about the future, according to the latest Wells Fargo/Gallup Small Business Index. Overall, optimism among small-business owners has reached the highest level in six years.

IPOs

The second quarter of 2014 was the strongest in decades for companies entering the stock market, with 91 initial public offerings filed raising $23 billion, according to a report released by the Ernst & Young consulting firm.

In San Diego, there have been five IPOs in the first half of 2014 worth $283.5 million, compared with just two in the first half of 2013 that raised $148 million.

The IPOs came from life sciences companies Auspex Pharmaceuticals ($96 million), Vital Therapies ($62 million), Ignyta Corp. ($55.2 million), Celladon Corp. ($50.6 million) and Biocept Inc. ($19 million).

San Diego-based biotech Ambrx Inc. was also slated to go public in June, but withdrew its IPO citing adverse market conditions.

Venture capital

The local venture capital environment took a tumble in 2013, but so far has improved this year. In the first quarter of 2014, there were 23 deals totaling $242.98 million in San Diego, compared with 27 deals and $203.41 million in the first quarter of 2013 and 26 deals valued at $382 million in the first quarter of 2012, according to PricewaterhouseCoopers National Venture Capital Association MoneyTree Report.

Longtime venture capitalist Thomas Gephart and civic leader Malin Burnham, in partnership with government and business leaders in the Chinese export center of Dalian, are aiming to bring up to $1 billion in venture capital funds to high-tech projects in the United States over the next decade, mostly in San Diego and Orange counties.

Gephart has identified 13 companies for the $200 million first phase of the deal, including eight in San Diego County, involved in such diverse areas as pharmaceutical testing, diagnostic devices, green fuels, cloud-based medical communications and anti-pollution technology.

Three Orange County firms are also on the list for the first wave, as well as one each in Oregon and Minnesota.

-- By Jennifer Chung Klam. Klam is a San Diego-based freelance writer.

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