Coast banks alive and well, but still picky about loans
By ROYCE ARMSTRONG
Banks along the Mississippi Gulf Coast have money to lend — to the right customers.
Across the country banks are failing at an alarming rate and the Federal Deposit Insurance Corporation is preparing for an even worse year in 2010. As 2009 came to a close, 133 state and nationally chartered banks had failed through the middle of December. That compares with 25 in 2008, three in 2007 and no banks failures for either 2005 or 2006.
Not a single Mississippi state or national bank has closed its doors.
Nor does state banking Commissioner John Allison anticipate any Mississippi bank closures for the coming year. He believes that in Mississippi, where assets in state banks outnumber national banks by a margin of two or three to one, banks have been stronger through this recession for a couple of reasons.
“The bankers in Mississippi lean toward the conservative side,” Allison said. “We also didn’t have the real go-go areas of growth and exponential values moving up and things of that nature that really caught a lot of banks in Florida, Arizona, Nevada and California.
“I think that it will be more back to the basics lending with banks working to help restructure their communities; helping those communities,” Allison said. “Our banks have always done that.”
Allison said that as the economy pulls out of this recession, banks in South Mississippi stand ready to make loans. Holt McMullen, the president of Trustmark Bank in Hattiesburg, agreed.
“The main revenue stream for a bank is loans,” McMullen said. “That is what we do. We are looking for loans, but the numbers (on customer financial statements) aren’t looking quite as good as they used to look. There may be a tendency to draw in just a little bit, but if a good loan comes in, we are interested.”
Technological innovation and the continued conversion to paperless electronic transactions will continue to develop, said Dennis Burke, the vice president of business development for the People’s Bank in Pascagoula.
On the deposit side, remote check capture is a couple of years old, but just now gaining widespread acceptance with South Mississippi businesses, Burke said.
“Remote capture is a product where the merchant or business scans checks received from customers though a machine and the balance is instantaneously posted to the merchant’s bank account,” Burke said. “The merchant keeps the check for a specified period, such as 60 days and then destroys it.
“This works for companies, which have really scaled down the number of people that work in an office,” Burke added. “With remote capture, you don’t have to pay someone to leave the office to go make the deposit.
“It works well for those people where it is not convenient to get to a bank because of hours or if the company has offices in several counties. These companies might previously have been depositing to a local bank and then transferring through an automated clearing house transaction to their main bank.”
While online banking is and will continue to be a rapidly growing part of the business, there may be few new electronic products.
“I don’t see a lot of new online banking products for the coming year,” Allison said. “There are a lot of innovative products out there that some of the banks are not using now. What we may see is discounts for using online services.”
As Mississippi banks continue their more conservative ways, sweeping regulatory changes proposed in Washington D.C. could wind up being detrimental for banks and businesses in Mississippi.
“There are a lot of gyrations going on with reforming the banking system and nobody knows how that is going to shake out,” Allison said. “It could be very detrimental in some of the things that are presented, not necessarily in products but with regulation. In a worst case, these changes could result in a monolithic federal regulator leaving the states with a very limited scope of authority. That would be very detrimental to communities and businesses because we are the boots on the ground and we see what is going on.”
Allison said that some of the federal regulations being proposed would supersede state laws and state charters. Those pushing these changes envision a Canadian or a European banking system where there are only three or four huge banks heavily regulated by the government.
“A bank that size won’t have much interest in lending $75,000 to a small business in Gulfport,” Allison said. “Under this type of system, there will be banking out there but it won’t be hands on at the community level. We have been fighting it for a while, and I think that we are gaining traction. We will just have to see.”
Correspondent Royce Armstrong may be reached at rarmstrong@hughes.net or by telephone at (601) 766-9624.
Small businesses feel lending pinch
McClatchy Newspapers
FORT WORTH, Texas — Small businesses have felt the pinch as banks have been extra careful in the wake of the financial industry’s near meltdown — billions in loans were made to poor credit risks, sometimes bundled as packaged investments with fancifully high ratings. Now banks are demanding heightened creditworthiness and more collateral.
A December survey by the National Federation of Independent Business found that borrowing conditions continue to be difficult, with 15 percent of respondents reporting that loans were harder to get in their last attempt.
“Twenty-four months of recession have sapped the financial strength of many small firms,” the group said. A third maintained regular borrowing.
Whether or not big banks have been put on the defensive by public opinion and the White House, ad campaigns have been launched and statements issued saying they are ready to lend. On Nov. 9, Chase said it will increase small-business loans by $4 billion in 2010. On Dec. 14, the day President Barack Obama met with top bankers, CIT Group publicly committed $500 million in new small-business loans and waived $1,000 “packaging fees” on some products.
“Lending had been looser than it should have been, and now the pendulum has swung the other way,” said Scott MacDonald, director of the Southwestern Graduate School of Banking at Southern Methodist University.
“I say the spigots are open, but not as open as they were two years ago,” MacDonald said. “Big banks just don’t have the capital levels, and some regional banks are lent-out. They’re maxed, maxed. They can’t make many more loans.”
Before, banks were criticized for making loans with zero collateral. Now, they are criticized for demanding that borrowers put more skin in the game. “This means fewer and fewer people can qualify,” he said. “That’s just realism.
“I am going to argue that banks are doing the absolute best they can to get money out there,” he added. “Some are just coming up against brick walls.”
The Federal Deposit Insurance Corp. has released figures indicating possible increases in new loan activity in the third quarter ending Sept. 30. Loan balances were up at 66 percent of Texas community banks, defined as lending institutions with assets of less than $1 billion. By comparison, 56 percent of community banks throughout the country reported higher loan balances and just 34 percent of U.S. banks with more than $1 billion in assets.