Psst! Have you heard? There’s a recession. Pass it on.
And if you haven’t heard, you’ve been living on the moon for the last 18 months. Thing is, around the Northshore the recession is… well… as they say, not so much. Unemployment hereabouts is lower than in the region, state and nation. Building permits and home sales are inching upward. And while tax revenue is down from last year, it’s still up-up-up from 2004 – you remember: the pre-Katrina, pre-false economy days when things were normal?
No doubt there have been job losses, a foreclosure or three, and businesses failing. But jobs always get lost, foreclosures always happen, and businesses always fail. It is what it is. So what’s a banker to do?
“We believe there has been an economic downturn and it has affected the industry,” said Laura Brandt, vice president and director of Citizens Bank and Trust Company.
But, Brandt was quick to add, for most consumers the impact isn’t severe.
“Customers that have performed on-credit and are performing on their loans are not going to feel an impact at all,” she said.
And smaller banks maintain a commitment to the local community, while also remaining highly competitive with others who don’t dream of an 80-story tower on Wall Street.
“We are a local community bank,” Brandt said. “There are 23 other banks, so we’ve got a lot of competition. We try to serve our local community. We have customers who have been with us from the beginning and we have a strong core deposit base.”
When the sub-prime loan collapse/crisis/brouhaha erupted a few years back, it was a shot heard ‘round the world of banking. Although few loans in Louisiana – and few banks, too – were involved or affected, the bad practice of making large loans to customers who really shouldn’t have qualified was the tip of the iceberg of the credit market crunch. And local banks are taking the hit.
“Because of the sub-prime situation, some of the smaller community banks are feeling the impact,” Brandt said. “The banks with the sub-rpime loans were the large banks. But the regulators have shifted focus and it trickles down to the local banks. The president has been trying to champion banks to lend and we have regulators saying to toughen credit standards. We try to find a balance.”
At Metairie Bank in Mandeville – the 60-year-old institution’s first Northshore venture – Vice President Ferd Marsolan said things are looking pretty good, particularly as Metairie Bank focuses a good deal of its St. Tammany business on commercial lending and refinancing.
“We’re a very conservative, very solid bank,” Marsolan said. “We haven’t changed a thing and we’re continuing to grow. We’re keeping steady on the same approach we’ve had for years.”
What they have changed, though, is the emphasis on commercial lending and products.
“Metairie Bank has been a consumer bank, and got into commercial lending five years ago,” he said. “Commercial lending has been a big part of the growth in our Mandeville office. We’re probably more into consumer lending than commercial, but we’re a little heavier in this branch on the commercial side.”
Among things making Metairie Bank an attractive lender is the institution’s willingness to fix a commercial loan as far out as 15 years – three times as long a term as what many lenders offer.
“We are fairly new to St. Tammany,” Marsolan said. “This our second year of operations in this permanent building. I cannot be more pleased with the reception we’ve had and our profitability year two. We had a good first year. This past year was even better. We’re a little bank, but our bread and butter is small commercial loans, under $2 million.”
No matter how you slice it, though, there’s a perception that the “sub-prime lending crisis” has tainted the whole industry – or perhaps painted it with a broad brush.
“Sub-prime lending dealt with mortgage companies and financial institutions which kept those loans on the books,” said Matt Faust, president of First Community Bank, headquartered in Hammond. “From a regulatory standpoint, the government is scrutinizing those types of loans and putting more restrictions on lenders.”
Like Metairie Bank, the decade-old First Community Bank focuses heavily on commercial products and lending.
“It’s mostly a commercial bank,” Faust said. “We have two branches and $130 million in assets.”
Compare First Community’s asset info with the competition and it still looks pretty strong. Citizens Bank and Trust, founed in 1945, boasts $120 million in assets, and Metairie Bank holds $333 million.
“It’s a pretty young bank,” said Faust of First Community. “It’s doing all right. Like most banks, as goes the economy, so goes the banking industry. Dealing mostly with real estate, we’ve felt the impact like most other banks. We’ve seen an increase in past-dues.”
Daryl Ferrara, vice president & branch manager of Hancock Bank’s Hammond location said his bank has actually grown in this economy.
“We just acquired 33 branches in Florida, which brings our assets to over $8 billion,” he said. Of course Hancock has been around for a much longer time, too, and operates in Louisiana, Mississippi, Alabama and Florida.
“It started in Hancock County, Mississippi, in 1899, and has never changed hands,” Ferrara said.
No matter the experiences of individual bankers or institutions, local banks seem bullish on the coming year.
“Right now, we have excess funds to lend,” said Marsolan. “I’m very excited. I do a post-year analysis in December and I’m very pleased with the numbers. We have had growth in depositors and growth in loans. I’m very, very pleased.”
Marsolan’s optimism isn’t unique.
“We’re in an economic business cycle” said Brandt. “We’ve been through it before and we’ll get through it again. I’m hoping 2010 is pretty stable.”
And as the housing and commercial real estate markets stabilize from both the post-Katrina boom/false economy and the sub-prime crisis/credit crunch, things can only get better.
“It (2010) will be, in general, an improving year,” said Faust. “But it will still be a slow year for banking. It will challenge banks’ profitability. We’ll slowly start seeing improvements in home values. I think it will be a better year than 2009, for sure.”
“I’ve got the St. Tammany Economic Development Foundation outlook from the third quarter of 2009 on my desk,” Marsolan said. “It’s not great, but it’s not gloomy. I hope that turns around by summer. I’m just very optimistic.”
And if the success of banks both old and young, large and small during the worst economic downturn in 80 years is any indication, he has reason to be.
“In Tangipahoa Parish, the economy here is good,” said Ferrara. “The people and businesses have not been affected like the rest of the country. Sales tax revenues are slightly down, but it’s not drastic. Our outlook for Tangipahoa and the rest of the Northshore for 2010 is bright. We have a bright future.”
“I’m really excited about what 2010 holds for us,” Marsolan said. “We’re very optimistic. Even though you read and see some signs (of downturn), it has not created problems for Metairie Bank.”