Amid the tumult, reassess your banking needs
One of my Saturday morning routines these days is to visit the home page of the FDIC’s Web site, www.fdic.gov. I’m curious to see which banks were closed the previous evening. Banking regulators have closed at least one bank in our country on nearly every Friday evening since the last quarter of 2008.
My curiosity is as much personal as it is business. Several of my former associates and friends run community banks in
some of the most distressed economies in our country. I hope to not see one of their banks listed on the FDIC’s site.
These are indeed turbulent times for many bankers and their customers. Regulators have closed 81 banks nationwide this
year, well ahead of the pace for 2009, when 140 banks were closed. An additional 775 banks have been identified as troubled institutions. Sadly, bank closings will not likely end soon.
Regional banking strengths
In the Kansas City area, six banks have been closed in the past two years. The closing of any bank in this region is troubling. Comparatively speaking, however, most area bankers—and their customers alike—have been fortunate for several reasons.
First, our economy did not contract as much as in other parts of the country. Second, Kansas City has a diversified employment base, and unemployment levels were lower than in most parts of the country. Third, our real estate values did not decline as much as in other areas.
For these reasons, the loan portfolios of many local banks remain solid. It must be added that many local banks adhered to strong risk-analysis practices, avoided real-estate concentrations, did business with local customers and maintained asset quality as the No. 1 focus.
A changing landscape
Certainly, most banks have been at least minimally impacted by the recession and the real-estate stress. No bank I know of has been immune. However, the Kansas City area really is fortunate to have several well-capitalized, well-managed, long-standing financial institutions that have the ability and desire to continue to serve their clients quite well.
I’m often asked, “When will banks start to lend again?” I submit that strong banks didn’t cease lending. On the heels of a recession and continued stress in real-estate values, bankers are going to be cautious. And recent experiences with real-estate collateral devaluations and stress in earnings throughout the industry mean that bankers are likely going to stick to tried-and-true practices.
Money to lend, but . . .
From my perspective, however, the fact that the industry’s loan totals have dropped so much is due mostly to reduced demand from existing loan customers. The reality is that many of us have abundant liquidity (i.e. cash) to lend and would like to do so.
If you are looking for a loan or a bank relationship, here are some suggestions. Seek out a bank that fits you and your business. Key variables, for example, might be the size of the bank, lending capacity, access to decision makers, stability and SBA expertise. Be prepared to undergo a thorough personal, financial and strategic exam.
A relationship banker is going to want to thoroughly understand your business model and your financial position.
Perhaps most important, invest time to get to know the bank and your banker. Understand a bank’s past, such as its earnings history, lending practices and community support. The past is a great predictor of the future. Forging a long-term relationship built on trust and understanding between you and your banker is key to your financial health. 
Stan Ricketts is the regional president of INTRUST Bank in northeast Kansas.
P | 913.385.8200
E | stan.ricketts@intrustbank.com
Return to Ingram's June 2010