By Motley, Apryl
Independent Banker , Vol. 61, No. 1
Cautiously optimistic about the future, community bankers project a slow but steady economic recovery that presents new challenges and opportunities
"The reports of my demise are greatly exaggerated." Attributed to Mark Twain after he read his own obituary in the newspaper, this expression might be the new mantra for community banks. Certainly, it's been a tough couple of years, but community bankers across the nation are adamant about their ability to not only survive the recession but to thrive in spite of it.
"The brightest spot in the whole financial industry is community banks," says R. Van Bogan, chairman of Florida Bank of Commerce in Orlando, Fla. "Community banks represent a great opportunity for our financial system over the next five years. We have a chance to move forward."
At the same time, Robert Barsness, chairman and president of Prior Lake State Bank in Prior Lake, Minn., acknowledges that a number of community banks have failed, and some are still struggling. However, he says, "People see us as the strength of our communities. Community banks will continue to be a major force in the U.S. economy."
Even so, "it's a very difficult outlook for community banks," observes Robert A. Catanzaro, co-founder and president of East Greenwich, R.I.-based Independence Bank. "The economy is still challenging, and the regulatory environment is onerous."
Steven R. Gardner, president and CEO of Pacific Premier Bank in Costa Mesa, Calif., sees the potential for community banks to benefit from regulatory reform: "Compliance with the new regulations will be a bigger burden for larger banks, which will affect their profitability and drive more customers to community banks."
If that's the case, community banks must start planning. From east to west, here's a look at how six are positioning themselves for success in 2011.
Banking on business
"Our local economy is still in tough shape," says Catanzaro, who serves as the Rhode Island state director for ICBA. "Historically, Rhode Island has been the first in and last out when it comes to recessions. We tend to have higher unemployment for a longer period of time."
According to Catanzaro, the state's unemployment rate reached 11.4 percent but is trending downward. "The bottom did not fall out, and that's a good thing," he says. "However, small businesses are still struggling, and it's probably going to be a long time before we get the jobs back that we've lost during the last couple of years."
On the other hand, Catanzaro doesn't believe that retail and manufacturing, the foundation for the state's economy, are dead by any means. "We have a good mix of industries for a small state," he says. "We're not dependent upon one industry, and we have a lot of small businesses."
Lending to smaller businesses is where the $70 million-asset community bank has found its niche. Independence Bank participates in the Small Business Administration's preferred lenders program and has been active in all facets of SBA lending: 7(a), 504, LowDoc, Express and CapLines. Recent loans include those to a coffee-roasting company and a firm that specializes in geothermal work for schools and municipal buildings. The bank is also working with export businesses through SBA's Export Working Capital Program.
Some new customers are coming to Independence Bank from big banks that are not renewing the lines of credit for businesses that have shown losses during the past of couple years. "Some of the loans we can't do, but if we feel the situation was temporary due to economic circumstances and the business is still viable, we'll make the loans," Catanzaro says.
"We look at each loan individually and at the overall cash management of that business," he continues. "Companies are showing losses, but there are a lot of viable businesses that may have had a one- or two-year loss."
Further, Catanzaro says, there continues to be a demand for commercial credit in Independence Bank's market. …