Mish, as you stated there used to be only two premisses. Today there is a third.
They are not capital impaired
They have credit-worthy borrowers willing to borrow.
They deem any risk worth taking due to the intrusive regulatory burden created and being created by Dodd-Frank.
Today many banks are only doing "Government lending". Because, it generates fee income with far less risk. Each day compliance gets new rules to follow and implement, so how is one to figure out what may be acceptable to the regulators tomorrow. For small banks EVERY loan is being reviewed by three to five regulators, so where is the incentive to take any risk at all, to be criticized? Much less the risk of getting paid back.