Oct. 24--Despite worries about frozen credit markets, Philadelphia-area banks boosted their lending in the third quarter. Some are thinking about taking a federal investment to be able to lend even more.

"We see the potential for significant growth in this market and want to be adequately positioned, from a capital perspective, to act on the opportunities that become available," Glenn Moyer, National Penn Bancshares Inc.'s chief executive officer, said yesterday.

National Penn, of Boyertown, said it experienced a pickup in demand for loans last month, as borrowers started migrating from bigger banks that were having troubles. The bank had net loan growth of $74 million, or 1.2 percent.

Among small and midsize banks with between $1 billion and $12 billion in loans, Wilmington Trust Corp. led the way by posting a net gain of nearly $300 million in loans -- or 3.2 percent -- from July through September.

Ted Cecala, the Wilmington bank's chairman and chief executive, attributed the better-than-expected growth to the Mid-Atlantic region's broad range of industries.

"That diversification continues to provide opportunities," he said.

At the same time, bank executives said, they are being cautious about lending, as is always the case during cyclical economic downturns when bad loans mount. The great uncertainty is just how many borrowers are going to fail to make their payments.

The current downturn is different from others because it has been accompanied by extraordinary problems at the highest levels of finance and at the biggest banks, leading to unprecedented interventions by the Federal Reserve and the U.S. Department of the Treasury.

In most economic cycles, the largest banks are seen as the stable ones. In this case, the opposite may be true. "Psychologically," Cecala said, "that's had a real impact on the marketplace."

Beyond the psychological impact that caused debilitating uncertainty, some of the biggest banks have been forced to shrink their balance sheets because of losses on loans and investments. In some cases, that means they sever relationships with customers, creating opportunities for others.

"We're getting some market share because some other banks aren't lending," said R. Scott Smith, chairman and chief executive of Fulton Financial Corp., of Lancaster. "We're trying to manage that because we don't have unlimited capital or funding."

New business is coming not so much from companies that are expanding, but from companies that were rebuffed by other lenders trying to conserve capital, Smith said.