Academic journal article ABA Banking Journal

It's Not All Gloom and Doom: Media's Broad Portrayal of Banks and Economy Irks Bankers. but Everybody's Challenged to Some Degree in 2009

Academic journal article ABA Banking Journal

It's Not All Gloom and Doom: Media's Broad Portrayal of Banks and Economy Irks Bankers. but Everybody's Challenged to Some Degree in 2009

Article excerpt

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It really is gloomy where Gary Fox does business. His Bartow County Bank is based in Cartersville, Ga., about 40 miles north of hard-hit Atlanta, and banks in the area are getting hammered, he says. The $427.4 million-assets bank, founded 35 years ago, has its own share of challenges.

"In our area, lending's pretty well ceased," said Fox, president and CEO. "Banks are trying to run customers off. Everyday I have people come in my bank saying, 'I've never missed a payment, but so-and-so bank wants me to move all my loans.' And it's strictly because of the risk-based capital standards. The banks are trying to get their capital levels up."

"Of course," Fox continues, "we can't take in these borrowers, because everybody's kind of in the same shape. We're all trying to reduce loan outstandings to increase our capital ratios."

That's not Bartow County Bank's only challenge. Fox says that deposits have become very expensive. Area bankers have started cutting back on reliance on out-of-market deposit sources, so local funds command a higher premium. And correspondent banks that used to be reliable standbys can't be counted on.

"They're drawing back just as much," says Fox. He adds that the real estate market is frozen, and the only properties that move are foreclosed ones where the selling bank is glad to finance the buyer.

So 2008 net income was down for Fox's bank, and he anticipated a challenging 2009. And many bankers share a piece of the angst Atlanta has seen in buckets. Some were part of the same roundtable discussion group that Fox and some fellow members of the America's Community Bankers Council participated in during early December.

But while many of those bankers fit the pattern frequently portrayed in the media as the whole picture for banks, other roundtable bankers from other parts of the country objected to reporters' habit of portraying the entire industry and the entire economy in a uniform shade of black.

"No offense to the journalism business," one banker observed, "but part of the problem is 24-hour cable news."

Success amidst horror

Even where things are admittedly awful, not all banks can be put in the same convenient box. Take the experience of de novo banker Greg Patton, president of Sierra Vista Bank, Folsom, Calif.

"Folsom has a prison [immortalized by Johnny Cash], a dam, and Intel," said Patton of the bedroom community of Sacramento, the state capital. Patton noted that the immediate market is actually quite stable, because Folsom was "pretty much built out ten years ago." Employment has been steady, with some losses due to a falloff in regional construction being compensated for by rising government employment. Further from the city center, he said, housing prices have fallen significantly.

"We're not making many home construction loans right now," said Patton, "though a few strays have walked in the door" with the right attributes.

Patton's bank enjoys the advantage of having only opened its doors in early 2007, so it has no legacy of troubled loans in its portfolio. Many borrowers, invited to leave by capital-hungry banks, shop for new lenders, and have come looking for credit to Patton's institution.

"We have some capacity," says Patton, "so we are actually making loans." In December, the bank was running a 100% loan-to-deposit ratio.

This is not to say that Sierra Vista does business in some protected bubble--just that sometimes corporate youth has its advantages. Challenges continue. While his bank has picked up some good lenders from other community banks that are out of the lending business for now ("we've seen senior vice-presidents standing on street corners, literally, with cardboard placards, looking for a job"), there are problems related to the increased credit opportunities.

"We can't find anybody to participate loans to, even on the solid gold deals," said Patton. …

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