The refinancing boom could end by the middle of this year, forcing many banks to find new ways to expand and diversify their loan portfolios.

That was the message that Richard Hunt, president and chief executive of the Consumer Bankers Association, had for attendees of a Tuesday morning meeting with the media. He estimated that up to 70% of the mortgage volume handled by banks involves refinancing.

"That has to come to an end" unless interest rates for mortgages manage to decline, Hunt said.

Still, Hunt said he was bullish on the banking industry, noting that banks are on a more solid foundation compared to a few years earlier. But he conceded that bankers still face significant uncertainty and competition from nonbanks.

"The greatest challenge in the economy is providing certainty and stability in the market place," he said. Owners of small businesses "cannot plan for the future until they know their taxation rate or their health care costs."

Lending to small businesses has improved somewhat from low levels of activity, but remains far below the volumes that existed before the last economic downturn, said Bob Kottler, the association's chairman and the director of retail and small business lending at IberiaBank (IBKC).

The smallest businesses, or those with less than $1 million in annual revenue and fewer than five employees, face the toughest recovery, Kottler said. More small businesses are borrowing to buy buildings or acquire competitors, but it remains challenging finding companies that want working capital to increase production, he said.

"One of the things that has happened as a result of all of the uncertainty — whether it is health care or the fiscal cliff or general confidence — is we aren't seeing businesses coming to us to borrow to expand," Kottler said. "I think that's really what we are hoping to see. … If we continue to get the economy to a better replace and reduce the uncertainty I think we'll see that."

During the economic downturn, banks ramped up efforts to improve lending to small businesses, Kottler said. Many banks implemented second-look programs, where another employee is charged with evaluating applications that were rejected the initial review.

Banks have also turned more to U.S. Small Business Administration loans. The agency reported in October that its programs supported more than $30 billion of loans in the fiscal year that ended Sept 30.

Bankers also have added new lenders to reach out to small businesses with revenue of less than $10 million a year, Kottler said.

Bankers must do more to reach so-called Millennials, loosely defined as adults in their 20s. That demographic doesn't "look at the banking system like their parents did," and they are more willing to look at alternatives, such as prepaid cards, Hunt said. The Consumer Financial Protection Bureau must make sure that "a level playing field" exists as more nonbanks start offering financial services products, he said.

"I don't believe a bank's competitor is another bank," Hunt said. "I believe it is the prepaid cards or these new 21st century entities that we are coming across."

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