ABA Banking Journal - January 2010 - (Page 10)
Community Banking sides of mountains,” said McClure. “When things were strong enough, we certainly participated in that, but it started to get crazy, to us. You begin to see these things coming. So we started backing off.” Further south, “loan demand is better than it was six months ago, but nowhere near where it needs to be,” said Patti Steele, president and CEO, at $630.7 million-assets First Volunteer Bank of Tennessee, Chattanooga. Steele’s bank serves multi-county markets through 25 branches. “We’re up almost 8% year over year, on both the lending and deposit side,” said Randy Ferrell, president and CEO at Fauquier Bank, Warrenton, Va. Ferrell said that the $548.2 million-assets institution has watched major regional banks such as PNC and BB&T exit his bank’s markets. “As a result, we’ve been able to pick up some very good, creditworthy customers on the commercial side,” said Ferrell. significant participation. “We all learned more about participations than we ever thought we would want to know,” said Carson with an ironic chuckle. in CRE. “I know he’s having trouble,” said Cleven, but the bank is monitoring the underlying properties, and, “they’re still performing.” National trends, local variations Turbulence in sky hits aircraft makers “Competition’s pretty fierce for good loans,” said Frank Carson, president and CEO of $81.3 million-assets Carson Bank, Mulvane, Kan. Carson noted that in his market, just south of Wichita in south central Kansas, business conditions, somewhat insulated from other parts of the country, nosedived when Washington declared war on corporate jets. “Our aircraft industry just shut off when President Obama said that nobody could fly planes anymore,” said Carson. “Within weeks, we saw an industry that had backlogged orders—running up to five years—become decimated. So now we’re living with the kinds of conditions that many other bankers have been living with for the last couple of years.” Carson said Kansas banks also have had their troubles as a result of investments in loan participations. Because the state was historically a unit banking jurisdiction, he explained, the banks tend to be smaller, with corresponding loan limits. Institutions with participations have had the greatest problems, said Carson. His own bank was coming off a year of rebuilding from a 10 JaNUaRy 2010/ABA BANKING JOURNAL Commercial real estate, not surprisingly, continues to be of concern in many markets. Kentucky’s Billie Wade said that pressured commercial landlords slashed pricing by as much as 25% to hold onto tenants, sometimes offering discounts before leases even expired. The surplus of commercial space, he said, drives them to it. “They know that if they don’t do it, other landlords will,” said Wade. In urban New Mexico markets, CRE likewise is taking a hit, according to Ron Wiser, president and CEO of Bank of the Southwest. The $150 million bank, headquartered in Roswell, chiefly does business in non-metropolitan areas and in those markets CRE is doing somewhat better. “Loan demand is still steady in most of our areas,” said Wiser. There’s been some decline in consumer appetite for credit, and residential borrowing is down. “But commercially we’re doing OK,” he said. One factor that has helped with CRE performance is the use of federal guarantees from the Small Business Administration and U.S. Department of Agriculture. In an economy like this, there’s usually at least a bit of the current major pain around for everyone, and Chicago certainly hasn’t been left out. Dane Cleven’s Community Savings Bank, which mostly specializes in residential mortgages, in a classical thrift model, has had its share of home-lending angst. “We’re doing OK this year,” said Cleven in the late 2009 roundtable discussion. “We put a great deal of money aside for troubled debt restructuring and helped many of our customers get through tight spots. But we were well capitalized.” Cleven, chairman, president, and CEO at the $409.2 million-assets thrift, said that, while residential is its specialty, that it does have one large customer involved Loan pricing realities Pricing loans, especially commercial loans, for the risk they represent to the bank can be a difficult affair. In some markets, during the boom times, pricing higher than the competition wasn’t the best way to build market share. On the other hand, pricing too low could build share that wasn’t so good to have when the music stopped. Even now, with credit generally tighter, in some markets sufficient competition remains that risk-based pricing continues to be a goal, rather than a reality. Kansan Frank Carson, for instance, finds competition for loans still sufficient to hold rates down somewhat. “There are some good credits out there Frank L. Carson III Carson Bank Mulvane, Kan. Dane Cleven Community Savings Bank Chicago, Ill. Randy Ferrell Fauquier Bank Warrenton, Va. Stewart McClure, Jr. Somerset Hills Bank Bernardsville, N.J. Patti Steele First Volunteer Bank of Tennessee Chattanooga, Tenn. Billie Wade Citizens Union Bank Shelbyville, Ky. Ron Wiser Bank of the Southwest Roswell, N.M. Subscribe at www.ababj.com
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